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, 1997
( ) 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
---- ----
27,537,405 shares of Common Stock, $1.00 par value, of the registrant
were outstanding on July 29, 1997.
Page 1 of 28
Exhibit Index Appears at Page 24
<PAGE>
ORION CAPITAL CORPORATION
FORM 10-Q INDEX
For the Quarter Ended June 30, 1997
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet at June 30, 1997
(Unaudited) and December 31, 1996....................... 3 - 4
Consolidated Statement of Earnings for the three and six-
month periods ended June 30, 1997 and 1996 (Unaudited).. 5
Consolidated Statement of Stockholders' Equity for the
six-month periods ended June 30, 1997 and 1996
(Unaudited), and for the year ended December 31, 1996 .. 6
Consolidated Statement of Cash Flows for the six-month
periods ended June 30, 1997 and 1996 (Unaudited) ....... 7 - 8
Notes to Consolidated Financial Statements (Unaudited) ... 9 - 11
Independent Accountants' Review Report ................... 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............... 13 - 20
PART II. OTHER INFORMATION .................................. 21
Page 2
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(000s omitted)
June 30, 1997 December 31,
(Unaudited) 1996
------------- ------------
<S> <C> <C>
Investments:
Fixed maturities at amortized cost
(market $331,164 - 1997 and $334,755 -
1996) .................................. $ 324,640 $ 326,841
Fixed maturities at market (amortized
cost $1,305,556 - 1997 and
$1,169,812 - 1996) ..................... 1,342,885 1,205,308
Common stocks at market (cost $135,582 -
1997 and $136,631 - 1996) .............. 212,947 209,281
Non-redeemable preferred stocks at
market (cost $161,107 - 1997 and
$151,439 - 1996) ....................... 169,317 152,312
Other long-term investments .............. 87,104 90,129
Short-term investments ................... 375,073 325,896
---------- ----------
Total investments ..................... 2,511,966 2,309,767
Cash ....................................... 13,598 11,607
Accrued investment income .................. 28,282 25,724
Investment in affiliate .................... 22,735 22,170
Accounts and notes receivable .............. 198,840 181,495
Reinsurance recoverables and prepaid
reinsurance .............................. 500,595 517,209
Deferred policy acquisition costs .......... 141,732 136,168
Property and equipment ..................... 68,785 68,763
Excess of cost over fair value of net
assets acquired .......................... 79,700 81,198
Deferred federal income taxes .............. 20,887 23,554
Other assets ............................... 90,173 86,702
---------- ----------
Total assets .......................... $3,677,293 $3,464,357
========== ==========
<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, 1997 December 31,
(Unaudited) 1996
------------- ------------
<S> <C> <C>
Liabilities:
Policy liabilities -
Losses ...................................... $1,407,056 $1,421,920
Loss adjustment expenses .................... 386,302 363,744
Unearned premiums ........................... 502,800 496,249
Policyholders' dividends .................... 21,465 22,489
---------- ----------
Total policy liabilities .................. 2,317,623 2,304,402
Notes payable ................................. 310,565 310,904
Other liabilities ............................. 243,049 227,087
---------- ----------
Total liabilities ......................... 2,871,237 2,842,393
---------- ----------
Contingencies (Note F)
Minority interest in subsidiary ................. 50,238 45,231
---------- ----------
Company-obligated mandatorily redeemable
capital securities of subsidiary trust
holding solely the Junior Subordinated
Debentures of Orion ........................... 125,000 -
---------- ----------
Stockholders' equity:
Preferred stock, authorized 5,000,000 shares -
issued and outstanding - none
Common stock, $1 par value; authorized
50,000,000 shares; issued 30,675,000 shares.. 30,675 15,338
Capital surplus ............................... 142,856 158,587
Net unrealized investment gains, net of
federal income taxes of $35,867 - 1997 and
$31,674 - 1996 .............................. 80,207 72,260
Net unrealized foreign exchange translation
losses, net of federal income taxes of
$216 - 1997 and $414 - 1996 ................. (2,531) (2,164)
Retained earnings ............................. 417,386 370,793
Treasury stock, at cost (3,141,844 shares -
1997 and 3,138,230 shares - 1996) ........... (35,268) (34,980)
Deferred compensation on restricted stock ..... (2,507) (3,101)
---------- ----------
Total stockholders' equity ................ 630,818 576,733
---------- ----------
Total liabilities and stockholders' equity. $3,677,293 $3,464,357
========== ==========
<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,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .............................. $335,226 $319,109 $659,189 $621,511
Net investment income ........................ 41,316 36,291 81,537 70,793
Realized investment gains .................... 8,358 5,761 24,147 11,126
Other income ................................. 5,180 6,011 10,119 11,533
-------- -------- -------- --------
390,080 367,172 774,992 714,963
-------- -------- -------- --------
Expenses:
Losses incurred .............................. 173,532 174,004 343,547 342,804
Loss adjustment expenses ..................... 52,162 45,329 101,149 88,506
Amortization of deferred policy acquisition
costs ...................................... 93,277 86,810 188,075 165,249
Other insurance expenses ..................... 10,500 6,697 16,619 15,533
Dividends to policyholders ................... 4,804 4,946 9,868 8,892
Interest expense ............................. 6,179 6,143 12,302 12,318
Other expenses ............................... 10,633 12,451 21,662 23,155
-------- -------- -------- --------
351,087 336,380 693,222 656,457
-------- -------- -------- --------
Earnings before equity in earnings (loss) of
affiliate, federal income taxes and
minority interest expense .................... 38,993 30,792 81,770 58,506
Equity in earnings (loss) of affiliate ......... 322 119 909 (721)
-------- -------- -------- --------
Earnings before federal income taxes and
minority interest expense .................... 39,315 30,911 82,679 57,785
Federal income taxes ........................... 10,042 7,701 20,791 13,767
Minority interest expense:
Subsidiary net earnings ...................... 2,120 2,637 3,719 5,558
Subsidiary trust preferred securities, net of
federal income taxes ....................... 1,772 - 3,310 -
-------- -------- -------- --------
Net earnings ................................. $ 25,381 $ 20,573 $ 54,859 $ 38,460
======== ======== ======== ========
Net earnings per common share ................ $ .91 $ .74 $ 1.97 $ 1.38
======== ======== ======== ========
<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,
------------------- ------------
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Common stock:
Balance, beginning of period ................ $ 15,338 $ 15,338 $ 15,338
Stock issued in 2-for-1 common stock split .. 15,337 - -
-------- -------- --------
Balance, end of period ...................... $ 30,675 $ 15,338 $ 15,338
======== ======== ========
Capital surplus:
Balance, beginning of period ................ $158,587 $146,658 $146,658
Exercise of stock options and issuance /
cancellation of restricted stock .......... (394) (335) 29
Recognition of pre-reorganization
federal income tax benefits ............... - - 11,900
Stock issued in 2-for-1 common stock split .. (15,337) - -
-------- -------- --------
Balance, end of period ...................... $142,856 $146,323 $158,587
======== ======== ========
Net unrealized investment gains:
Balance, beginning of period ................ $ 72,260 $ 63,255 $ 63,255
Change in unrealized investment gains,
net of taxes .............................. 7,947 (16,344) 9,005
-------- -------- --------
Balance, end of period ...................... $ 80,207 $ 46,911 $ 72,260
======== ======== ========
Net unrealized foreign exchange translation
losses:
Balance, beginning of period ................ $ (2,164) $ (3,935) $ (3,935)
Change in unrealized foreign exchange
translation losses, net of taxes .......... (367) 340 1,771
-------- -------- --------
Balance, end of period ...................... $ (2,531) $ (3,595) $ (2,164)
======== ======== ========
Retained earnings:
Balance, beginning of period ................ $370,793 $298,452 $298,452
Net earnings ................................ 54,859 38,460 86,631
Dividends declared .......................... (8,266) (6,911) (14,290)
-------- -------- --------
Balance, end of period ...................... $417,386 $330,001 $370,793
======== ======== ========
Treasury stock:
Balance, beginning of period ................ $(34,980) $(26,534) $(26,534)
Exercise of stock options and issuance /
cancellation of restricted stock .......... 563 414 2,702
Acquisition of treasury stock ............... (851) (9,611) (11,148)
-------- -------- --------
Balance, end of period ...................... $(35,268) $(35,731) $(34,980)
======== ======== ========
Deferred compensation on restricted stock:
Balance, beginning of period ................ $ (3,101) $ (2,331) $ (2,331)
Issuance / cancellation of restricted stock.. 167 170 (1,827)
Amortization of deferred compensation on
restricted stock .......................... 427 480 1,057
-------- -------- --------
Balance, end of period ...................... $ (2,507) $ (1,681) $ (3,101)
======== ======== ========
<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,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums collected ............................. $ 667,713 $ 646,044
Net investment income collected ................ 69,180 65,407
Losses and loss adjustment expenses paid ....... (429,896) (395,065)
Policy acquisition costs paid .................. (207,874) (195,278)
Dividends paid to policyholders ................ (10,892) (7,061)
Interest paid .................................. (12,000) (11,982)
Federal income tax payments .................... (18,004) (16,146)
Other payments ................................. (23,286) (10,144)
--------- ---------
Net cash provided by operating activities .... 34,941 75,775
--------- ---------
Cash flows from investing activities:
Maturities of fixed maturity investments ....... 62,819 96,058
Sales of fixed maturity investments ............ 158,338 139,777
Sales of equity securities ..................... 95,525 60,352
Investments in fixed maturities ................ (342,134) (190,483)
Investments in equity securities ............... (79,550) (43,583)
Effect on cash of consolidating Guaranty
National ..................................... - 6,794
Net purchases of short-term investments ........ (49,369) (91,058)
Other receipts (payments) ...................... 6,634 (10,587)
--------- ---------
Net cash used in investing activities ........ (147,737) (32,730)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of trust preferred
securities ................................... 123,036 -
Proceed from exercise of stock options ......... 275 -
Repayment of notes payable ..................... (375) (938)
Dividends paid to stockholders ................. (7,712) (6,684)
Dividends paid to minority stockholders ........ (733) (1,909)
Purchases of common stock ...................... (687) (9,439)
Other receipts ................................. 995 42
--------- ---------
Net cash provided by (used in) financing
activities ................................. 114,799 (18,928)
--------- ---------
Effect of foreign exchange rate changes on cash... (12) (957)
--------- ---------
Net increase in cash ......................... 1,991 23,160
Cash balance, beginning of period ................ 11,607 3,584
--------- ---------
Cash balance, end of period ...................... $ 13,598 $ 26,744
========= =========
<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,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings ...................................... $ 54,859 $ 38,460
-------- --------
Adjustments:
Depreciation and amortization ................... 6,051 5,515
Amortization of excess of cost over fair
value of net assets acquired .................. 1,498 1,576
Deferred federal income taxes ................... (1,862) (523)
Amortization of fixed maturity investments ...... (1,155) (1,363)
Non-cash investment income ...................... (9,210) (5,542)
Equity in (earnings) loss of affiliate .......... (909) 721
Dividends received from affiliate ............... 171 137
Realized investment gains ....................... (24,147) (11,126)
Foreign exchange translation adjustment ......... 116 696
Minority interest in subsidiary earnings ........ 3,719 5,558
Other ........................................... 19 1,693
Change in assets and liabilities (net of effects
of consolidating Guaranty National in 1996):
Decrease (increase) in accrued investment
income ........................................ (2,558) 114
Decrease (increase) in accounts and notes
receivable .................................... (17,326) 3,730
Decrease (increase) in reinsurance recoverables
and prepaid reinsurance ....................... 16,614 (23,106)
Increase in deferred policy acquisition costs.... (5,564) (12,390)
Increase in other assets ........................ (4,469) (9,136)
Increase (decrease) in losses ................... (14,864) 38,839
Increase in loss adjustment expenses ............ 22,558 12,940
Increase in unearned premiums ................... 6,551 40,375
Increase (decrease) in policyholders' dividends.. (1,024) 1,831
Increase (decrease) in other liabilities ........ 5,873 (13,224)
-------- --------
Total adjustments and changes ................. (19,918) 37,315
-------- --------
Net cash provided by operating activities ......... $ 34,941 $ 75,775
======== ========
<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, 1997 and 1996
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 investment in its unconsolidated
affiliate is 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 1996 annual report on Form 10-K.
Note B - Investments in Affiliate
As of June 30, 1997 the Company owned 24.8% of the common stock of
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, 1997 and 1996 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
(000s omitted)
Revenues:
Premiums earned .................... $ 13,725 $ 14,740 $ 30,082 $ 36,368
Investment and other income ........ 1,256 1,163 5,007 3,414
-------- -------- -------- --------
14,981 15,903 35,089 39,782
-------- -------- -------- --------
Expenses:
Insurance expenses ................. 13,626 14,915 31,327 42,780
Interest ........................... 184 217 449 499
-------- -------- -------- --------
13,810 15,132 31,776 43,279
-------- -------- -------- --------
Earnings (loss) before equity in
earnings of affiliate and federal
income taxes ....................... 1,171 771 3,313 (3,497)
Equity in earnings of affiliate ...... 967 552 1,952 552
Federal income (taxes) benefit ....... (343) (207) (607) 422
-------- -------- -------- --------
Net earnings (loss) .................. $ 1,795 $ 1,116 $ 4,658 $ (2,523)
======== ======== ======== ========
The Company's proportionate share,
including amortization of goodwill.. $ 322 $ 119 $ 909 $ (721)
======== ======== ======== ========
Page 9
<PAGE>
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. 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,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
(000s omitted)
Direct premiums written ........... $376,782 $350,457 $748,293 $698,316
Reinsurance assumed ............... 29,986 47,292 55,228 94,336
-------- -------- -------- --------
Gross premiums written ............ 406,768 397,749 803,521 792,652
Reinsurance ceded ................. (66,534) (72,667) (129,062) (146,624)
-------- -------- -------- --------
Net premiums written .............. $340,234 $325,082 $674,459 $646,028
======== ======== ======== ========
Direct premiums earned ............ $372,038 $342,488 $734,157 $670,698
Reinsurance assumed ............... 29,042 42,887 62,564 84,262
-------- -------- -------- --------
Gross premiums earned ............. 401,080 385,375 796,721 754,960
Reinsurance ceded ................. (65,854) (66,266) (137,532) (133,449)
-------- -------- -------- --------
Net premiums earned ............... $335,226 $319,109 $659,189 $621,511
======== ======== ======== ========
Loss and loss adjustment expenses
recoverable from reinsurers ..... $ 41,616 $ 35,591 $ 74,192 $ 59,011
======== ======== ======== ========
Note D - Trust Preferred Securities
On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior
Subordinated Deferrable Interest Debentures due January 1, 2037 (the
"Debentures") to Orion Capital Trust I (the "Trust"), a Delaware statutory
business trust sponsored by Orion. The Trust simultaneously sold $125,000,000
of 8.73% Capital Securities (the "Trust Preferred Securities") which have
substantially the same terms as the Debentures. The Trust Preferred
Securities are subordinate to all liabilities of the Company, and may be
redeemed without premium on or after January 1, 2007. Orion registered the
Trust Preferred Securities under the Securities Act of 1933 in April 1997.
The Trust is wholly owned by Orion and the sole assets of the Trust are
the Debentures issued by Orion. Orion has provided a full and unconditional
guaranty of the Trust's obligations under the Trust Preferred Securities,
including all costs, expenses, debts and liabilities of the Trust.
Page 10
<PAGE>
Note E - Stockholders' Equity and Earnings Per Common Share
On June 5, 1997 the Company declared a 2-for-1 split of its common stock
payable on July 7, 1997 to shareholders of record on June 23, 1997. All
common stock and per common share data presented in the financial statements
has been restated to give effect to this stock split.
The Company repurchased 26,854 shares of its common stock at an aggregate
cost of $851,000 in the first six months of 1997. The remaining authorization
for the stock repurchase program from the Company's Board of Directors' was
$4,017,000 as of June 30, 1997.
Earnings per common share was computed using the weighted average common
and dilutive common equivalent shares outstanding for the three-month and six-
month periods ended June 30, 1997 and 1996. The weighted average common
shares amounted to 27,803,000 and 27,698,000 shares for the three months ended
June 30, 1997 and 1996, and 27,801,000 and 27,846,000 shares for the six
months ended June 30, 1997 and 1996, respectively.
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.
Note G - Accounting Standards Not Yet Adopted
In February 1997 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share" which establishes new guidelines for the computation and disclosure of
earnings per share. SFAS No. 128 is required to be adopted at the end of
1997. Current earnings per share ("EPS") disclosures will be replaced by
Basic EPS and Diluted EPS as defined in SFAS No. 128. Pro forma Basic EPS and
Diluted EPS computed in accordance with SFAS No. 128 would be $.93 and $.91
for the second quarter of 1997 and $.75 and $.74 for the second quarter of
1996, respectively. The pro forma six-month Basic EPS and Diluted EPS would
be $2.01 and $1.97 for 1997 and $1.40 and $1.38 for 1996, respectively.
In June 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for periods beginning after
December 15, 1997. Management is currently evaluating the effects of this
change on the Company's financial statements.
In June 1997 the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which changes the way public companies
report information about segments. This statement is effective for financial
statements for periods beginning after December 15, 1997. Management is
currently evaluating the effects of this change on the Company's financial
statements.
Page 11
<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, 1997, and
the related consolidated statements of earnings for the three-month and six-
month periods ended June 30, 1997 and 1996 and the statements of stockholders'
equity and cash flows for the six-month periods ended June 30, 1997 and 1996.
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, 1996, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the year then ended; and in our report dated February 14, 1997, we expressed
an unqualified opinion on those consolidated financial statements. The
consolidated statements of earnings and cash flows for the year ended
December 31, 1996 are not presented herein. In our opinion, the information
set forth in the accompanying consolidated balance sheet as of December 31,
1996 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 23, 1997
Page 12
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Six Months Ended June 30, 1997 and 1996
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. In addition, 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 three insurance segments are as
follows:
Regional Operations - this segment includes the workers
compensation insurance products and services sold by the EBI
Companies.
Special Programs - this segment is comprised of several parts
- DPIC Companies, which markets professional liability
insurance;
- Connecticut Specialty, which writes specialty insurance programs;
- Wm. H. McGee, an underwriting management company that specializes
in ocean marine, inland marine and commercial property insurance;
and
- the Company's 24.8% interest in Intercargo Corporation, which
sells insurance coverages for international trade.
Guaranty National - this segment specializes primarily in non-standard
automobile insurance and other property insurance.
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, 1997 and 1996:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
(000s omitted)
Regional Operations ............... $16,763 $17,286 $37,461 $30,101
Special Programs .................. 11,051 12,514 27,956 24,461
Guaranty National ................. 15,256 6,945 26,310 14,186
------- ------- ------- -------
Total ........................... 43,070 36,745 91,727 68,748
Other ............................. (3,755) (5,834) (9,048) (10,963)
------- ------- ------- -------
$39,315 $30,911 $82,679 $57,785
======= ======= ======= =======
Page 13
<PAGE>
REVENUES
Premiums written and premiums earned
- ------------------------------------
Net premiums written for the Company by segment are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
(000s omitted)
Regional Operations ........... $ 90,013 $ 87,553 $177,795 $179,158
Special Programs .............. 110,317 116,787 218,463 222,515
Guaranty National ............. 139,904 120,742 278,201 244,355
-------- -------- -------- --------
$340,234 $325,082 $674,459 $646,028
======== ======== ======== ========
Regional Operations' net premiums written increased 2.8% in the second
quarter of 1997 over the second quarter of 1996, and decreased .8% in the
first half of 1997 as compared to the first half of 1996. The increase in
premiums written for the second quarter of 1997 was from EBI Companies'
selective geographic expansion and penetration, including the opening of
five branch offices in 1997 and seven in 1996 in territories where the
Company believes it will benefit from its service oriented approach. The
increase in premiums was mitigated in part by the effects of legislative
reforms in certain states that have led to an increasingly competitive
workers compensation marketplace with lower premium rates commensurate with
reduced benefit levels. Commission expenses were proportionately reduced
by the lower rates. The slight decrease in year-to-date net premiums
written was also attributable to the impact of these legislative reforms.
Special Programs' net premiums written decreased 5.5% during the
second quarter of 1997 and 1.8% in the first half of the year in comparison
to the respective periods in 1996. In November 1996, the Company sold the
renewal book of business of its reinsurance operations to concentrate on
businesses where the Company can better service specialized niche markets.
Excluding premiums from the assumed reinsurance business, this segment's
net premiums written increased 11.5% for the second quarter and 13.9% for
the six-month period ended June 30, 1997. Premiums written by DPIC
Companies for professional liability insurance increased 2.8% to
$90,955,000 in the first six months of 1997 from $88,492,000 for the first
half of 1996. The increase is primarily attributable to the continuation
of a high level of policy renewals offset in part by rate reductions in a
very competitive professional liability insurance market. Premium volume
for Connecticut Specialty in the first six months of the year increased
19.4% to $89,961,000 in 1997 from $75,351,000 in 1996. The increase in
premiums was primarily from transportation programs, including truck
liability and physical damage coverages, and from increases in low exposure
professional liability programs. Also, premiums written for most
Connecticut Specialty programs increased in 1997 over the first half of
1996 from higher retentions after a change in reinsurance effective May
1996. Premiums written by Wm. H. McGee increased 42.0% to $28,611,000 for
the first six months of 1997 from $20,146,000 in 1996's first six months.
The increase is principally the result of the Company's greater
participation in the underwriting pools managed by McGee.
Page 14
<PAGE>
Guaranty National's net premiums written for the second quarter of
1997 increased 15.9% and 1997's six-month premiums increased 13.9% over the
same periods in 1996. Net premiums written for personal lines increased
30.4% to $164,444,000 in the first six months of 1997 from $126,137,000 in
the same period of 1996. This premium volume growth was a consequence of
legislation in California which requires all drivers to have liability
insurance. Commercial lines premiums decreased 13.3% to $69,725,000 in
1997 from $80,387,000 during the first half of 1996. The majority of the
decrease for commercial lines was from lower production in the commercial
auto and umbrella programs, increased competition by standard carriers in
the nonstandard marketplace, and the effect of both agent and program
cancellations during 1996. Premiums written by the collateral protection
unit were $44,033,000 for the first six months of 1997, up 16.4% from
$37,831,000 for the comparable period in 1996. The premium volume growth
for this unit comes from increased writing in mortgage fire coverages, and
from a new mechanical breakdown program.
Premiums earned by the Company increased 5.1% to $335,226,000 in the
second quarter of 1997 compared to $319,109,000 in the second quarter of
1996, and 6.1% to $659,189,000 in the first six months of 1997 from
$621,511,000 in 1996. Premiums earned reflects the recognition in income
of the changing levels of net premium writings.
Net investment income
- ---------------------
Pre-tax net investment income increased 13.8% to $41,316,000 for the
second quarter of 1997 versus $36,291,000 for the second quarter of 1996,
and 15.2% to $81,537,000 for the first six months of 1997 as compared to
$70,793,000 for 1996. The pre-tax yields on the average investment
portfolio were 7.1% for the first six months of 1997 and 6.6% for the first
half of 1996, and the after-tax yields were 5.4% and 5.2%, respectively.
The increase in net investment income results from increased earnings both
on a higher investment base and from investments in limited partnerships.
The higher investment base includes the proceeds related to the issuance of
$125,000,000 of trust preferred securities in January 1997 and the effects
of operating cash flow, offset in part by the July 1996 cash outlay of
approximately $88,000,000 for the purchase of Guaranty National common
shares. Limited partnership earnings increased to $3,948,000 and
$8,565,000 for the second quarter and first six months of 1997,
respectively, versus $3,117,000 and $6,072,000 for the respective 1996
periods.
Fixed maturity investments which the Company has both the positive
intent and the ability to hold to maturity are recorded at amortized cost.
Fixed maturity 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. The carrying value of fixed maturity and short-term
investments amounted to $2,042,598,000 and $1,858,045,000, or approximately
80.9% and 80.0% of the Company's cash and investments at June 30, 1997 and
December 31, 1996, respectively.
Page 15
<PAGE>
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. At June 30,
1997 and December 31, 1996, the Company's investments in non-investment
grade and unrated fixed maturity securities were carried at $256,555,000
and $219,473,000, respectively. These investments represented a total of
10.2% and 9.5% of cash and investments and 7.0% and 6.3% of total assets at
June 30, 1997 and December 31, 1996, respectively.
Realized investment gains
- -------------------------
Net realized investment gains increased $2,597,000 and $13,021,000 to
$8,358,000 and $24,147,000 in the second quarter and first six months of
1997, respectively, from net realized investment gains of $5,761,000 and
$11,126,000 in the respective periods of 1996. Realized investment gains
are net of provisions for losses on securities deemed to be other than
temporarily impaired of $1,778,000 for the first six months of 1997, all
from the first three months of the year. Such provisions were $700,000 and
$1,868,000 for the three and six-month periods ended June 30, 1996,
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 following table sets forth certain ratios of insurance operating
expenses to premiums earned for the Company and the ratio of loss and loss
adjustment expenses to premiums earned (the "loss ratio") by segment:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
Loss and loss adjustment expenses.. 67.3% 68.7% 67.5% 69.4%
Policy acquisition costs and other
insurance expenses .............. 31.0 29.3 31.0 29.1
----- ----- ----- -----
Total before policyholders'
dividends ................... 98.3 98.0 98.5 98.5
Policyholders' dividends .......... 1.4 1.6 1.5 1.4
----- ----- ----- -----
Total after policyholders'
dividends ................... 99.7% 99.6% 100.0% 99.9%
===== ===== ===== =====
Loss and loss adjustment expense
ratio by segment:
Regional Operations ........... 59.0% 61.4% 58.8% 63.5%
Special Programs .............. 70.7 72.9 71.8 71.5
Guaranty National ............. 70.0 70.3 69.6 71.9
Page 16
<PAGE>
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. Adverse development of
prior years' losses amounted to $3,695,000 in the first six months of 1997
compared with $3,612,000 in the first half of 1996.
The current year improvement in the loss ratios for the Regional
Operations segment results from favorable loss experience achieved by EBI
Companies through its service oriented approach of working with its
customers to prevent losses and reduce claim costs.
The increase in the year-to-date loss ratio for the Special Programs
segment is mainly attributable to losses from certain programs cancelled by
Connecticut Specialty. The increase in the loss ratio for this segment was
offset in part by the impact of the change in the mix of business for this
segment, particularly the lower premiums and losses from the assumed
reinsurance business that the Company exited in November 1996.
The improvement in the loss ratios for Guaranty National is primarily
attributable to lower claim frequency for the personal lines and commercial
lines units. The improvement in the loss ratio has been offset in part by
costs incurred to improve claim handling and reduce insurance fraud in the
personal lines unit and by higher estimates for loss adjustment expenses
for the commercial lines unit.
The increase in the ratio of deferred policy acquisition costs and
other insurance expenses to premiums earned (the "expense ratio") is
attributable to the Company's continued investment in building its loss
prevention and claims management competencies as well as the costs of
opening EBI Companies offices in new territories. The increase for 1997
was also the result of the change in Connecticut Specialty's reinsurance in
May 1996, which provides for lower ceding commissions.
Interest expense
- ----------------
Interest expense was $6,179,000 in the second quarter of 1997 compared
to $6,143,000 in 1996, and $12,302,000 in the first six months of 1997
versus $12,318,000 in 1996, reflecting consistent levels of debt
outstanding and interest rates on the Company's debt for the first two
quarters of both years.
Equity in earnings (loss) of affiliate
- --------------------------------------
Equity in earnings (loss) of affiliate includes the Company's portion
of earnings of $322,000 and $119,000 from the Intercargo investment in the
second quarters of 1997 and 1996, respectively, and earnings of $909,000 in
the first six months of 1997 versus a loss of $721,000 recorded in the
first half of 1996. The Company records its share of Intercargo's results
in the subsequent quarter.
Page 17
<PAGE>
Federal income taxes
- --------------------
Federal income taxes on pre-tax operating results and the related
effective tax rates amounted to $10,042,000 (25.5%) and $7,701,000 (24.9%)
in the second quarters of 1997 and 1996, respectively. The corresponding
amounts for the first six months of 1997 and 1996 were $20,791,000 (25.1%)
and $13,767,000 (23.8%), respectively. The Company's effective tax rate is
less than the statutory tax rate of 35% primarily because of income derived
from tax-advantaged securities.
Minority interest expense
- -------------------------
Minority interest in subsidiary earnings of $2,120,000 and $2,637,000
for the second quarters and $3,719,000 and $5,558,000 for the first six
months of 1997 and 1996, respectively, represents the portion of Guaranty
National's earnings, net of federal income taxes, attributable to Guaranty
National's minority shareholders. The 1997 expense was lower due to the
increase in the Company's ownership of Guaranty National in July 1996.
Minority interest in subsidiary trust of $1,772,000 for the second
quarter of 1997 and $3,310,000 year-to-date, represents the financing cost
after the federal income tax deduction on Orion's $125,000,000 of 8.73%
trust preferred securities issued in January 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities decreased by $40,834,000 for the
first six months of 1997 from $75,775,000 in 1996 to $34,941,000 in 1997.
The decrease in operating cash flow for 1997 was the result of higher
payments for losses, policy acquisition costs and policyholders' dividends,
consistent with the Company's growth level in recent years and including
the payment of losses for the assumed reinsurance business the Company
exited in November 1996. Partially offsetting these increased cash
outflows were higher premiums collected, reflective of the Company's
current rate of growth.
Cash used in investment activities increased to $147,737,000 for the
first six months of 1997 from $32,730,000 in 1996. 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 operating cash flows after cash provided by or used in
financing activities. Cash invested in 1997 includes the investment of the
net proceeds from $125,000,000 of trust preferred securities issued by
Orion in January 1997.
Cash provided by financing activities was $114,799,000 for the first
half of 1997 and cash used in financing activities was $18,928,000 for the
same period of 1996. Cash was provided by the net proceeds from the
issuance of $125,000,000 of trust preferred securities by Orion. Cash was
used for dividend payments and the Company's stock repurchase program in
both 1997 and 1996. Orion increased its quarterly dividend rate by 14.3%
in the second quarter of 1997 and by 8.7% and 12.0% in the first and fourth
quarters of 1996, respectively.
Page 18
<PAGE>
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. The insurance subsidiaries held cash and short-term investments
of $211,005,000 and $293,477,000 at June 30, 1997 and December 31, 1996,
respectively. Orion's insurance subsidiaries had combined policyholders'
surplus of $737,149,000 at June 30, 1997 and $670,572,000 at December 31,
1996, and statutory operating leverage ratios based on trailing twelve
months net premiums written to policyholders' surplus of 1.8:1 at June 30,
1997 and 2.0:1 at December 31, 1996.
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, 1997, 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, 1997, 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
1999 until 2002. Interest is payable quarterly at interest rates based on
the floating LIBOR rate, plus a margin of 0.375% to .75%. Guaranty
National has two interest rate swap agreements which effectively change the
interest rate exposure on $80,000,000 of these borrowings to a fixed rate
of approximately 6.3% through March 31, 1998. Guaranty National is in
compliance with the various covenants and restrictions in its bank loan
agreement.
On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior
Subordinated Deferrable Interest Debentures due January 1, 2037 (the
"Debentures") to Orion Capital Trust I (the "Trust"), a Delaware statutory
business trust sponsored by Orion. The Trust simultaneously sold
$125,000,000 of 8.73% Capital Securities (the "Trust Preferred Securities")
which have substantially the same terms as the Debentures. The net
proceeds from the sale of the Trust Preferred Securities will be used for
general corporate purposes. The Trust Preferred Securities are subordinate
to all liabilities of the Company, and may be redeemed without premium on
Page 19
<PAGE>
or after January 1, 2007. The Company may defer interest distributions on
the Trust Preferred Securities, however, during any period when such
cumulative distributions have been deferred, Orion may not declare or pay
any dividends or distributions on its common stock. Orion registered the
Trust Preferred Securities under the Securities Act of 1933 in April 1997.
On June 5, 1997 the Company declared a 2-for-1 split of its common
stock payable on July 7, 1997 to shareholders of record on June 23, 1997.
All common stock and per common share data presented in the financial
statements has been restated to give effect to this stock split.
The Company repurchased 26,854 shares of its common stock at an
aggregate cost of $851,000 in the first six months of 1997. The remaining
authorization for the sock repurchase program from the Company's Board of
Directors' was $4,017,000 as of June 30, 1997.
FORWARD-LOOKING STATEMENTS
All statements made in this Quarterly Report on Form 10-Q that do not
reflect historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-
looking statements. Such risks, uncertainties and other factors include,
among other things, (i) general economic and business conditions; (ii)
interest rate and financial market changes; (iii) competition and the
regulatory environment in which we operate; (iv) claims frequency; (v)
claims severity; (vi) medical cost inflation; (vii) increases in the cost
of property repair; (viii) the number of new and renewal policy
applications submitted to us; and (ix) other factors over which we have
little or no control. The Company disclaims any obligation to update or to
publicly announce the impact of any such factors or any revisions to any
forward looking statements to reflect future events or developments.
Page 20
<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 May 29, 1997 ("Annual
Meeting"), 13,757,551 shares of Orion Common stock were outstanding and
entitled to vote (the "Outstanding Common Stock"), and 12,419,808 shares of
Outstanding Common Stock (90.3%), consisting of a quorum, were represented
at the Annual Meeting in person or by proxy.
At the Annual Meeting, the directors nominated were elected by the
following votes:
Number of Shares Number of Shares
Voted For Withheld
---------------- ------------------
W. Marston Becker 12,356,406 63,402
Gordon F. Cheesbrough 12,354,452 65,356
Bertram J. Cohn 12,353,281 66,527
John C. Colman 12,353,581 66,227
Victoria R. Fash 12,354,315 65,493
Robert H. Jeffrey 12,356,296 63,512
Warren R. Lyons 12,356,452 63,356
James K. McWilliams 12,356,082 63,726
Ronald W. Moore 12,356,406 63,402
Robert B. Sanborn 12,355,471 64,337
William J. Shepherd 12,353,831 65,977
John R. Thorne 12,354,031 65,777
Roger B. Ware 12,356,094 63,714
No director received fewer than 12,353,281 votes or 89.8% of the
Outstanding Common Stock (99.5% of the shares voted at the Annual Meeting).
There were no broker non-votes on this proposal.
At the Annual Meeting, the approval of an amendment to the Corporation's
Restated Certificate of Incorporation to increase the authorized shares of
Common Stock that the Corporation can issue from 30,000,000 shares to
50,000,000 shares was ratified by a vote of 11,301,099 shares or 82.1% of
the Outstanding Common Stock (91.0% of the shares voted at the Annual
Meeting). Holders of 1,052,996 or 7.7% of the Outstanding Common Stock
voted against the amendment and holders of 65,803 shares or 0.5% of the
Outstanding Common Stock abstained from voting. There were no broker non-
votes on this proposal.
At the Annual Meeting, the Corporation's Equity Incentive Plan ("Equity
Plan"), a new stock benefit plan for key employees of the Corporation, was
approved by a vote of 7,372,927 shares or 53.6% of the Outstanding Common
stock (59.4% of the shares voted at the Annual Meeting). Holders of
2,851,037 shares or approximately 20.7% of the Outstanding Common Stock
voted against the Equity Plan. Holders of 270,089 shares or approximately
2.0% of the Outstanding Common Stock abstained from voting on the Equity
Plan.
Page 21
<PAGE>
There were broker non-votes representing 1,925,755 shares of Common Stock
(approximately 14.0% of the Outstanding Common Stock) on the Equity Plan
proposal.
At the Annual Meeting, the approval of the adoption of certain amendments
to the 1994 Stock Option Plan for Non-Employee Directors ("Directors'
Plan") was ratified by a vote of 9,415,467 shares or 68.4% of the
Outstanding Common Stock (75.8% of the shares voted at the Annual Meeting).
Holders of 799,899 shares or 5.8% of the Outstanding Common Stock voted
against the ratification of the amendments to the Directors' Plan and
holders of 278,688 shares or 2.0% of the Outstanding Common Stock abstained
from voting. There were broker non-votes representing 1,925,754 shares of
Common Stock (approximately 14.0% of the Outstanding Common Stock) on the
Directors' Plan proposal.
At the Annual Meeting, the selection of Deloitte & Touche LLP, independent
certified public accountants, as auditors for the Corporation for the year
1997 was ratified by a vote of 12,364,104 shares or 89.9% of the
Outstanding Common Stock (99.6% of the shares voted at the Annual Meeting).
Holders of 20,380 shares or approximately 0.1% of the Outstanding Common
Stock voted against the ratification of Deloitte and Touche as auditors and
holders of 35,324 shares or approximately 0.3% of the Outstanding Common
Stock abstained from voting. There were no broker non-votes on this
proposal.
Item 5.
- -------
None
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
Exhibit 11: Computation of Earnings Per Common Share.
Exhibit 15: Deloitte & Touche Letter re unaudited
interim financial information.
Exhibit 27: Financial Data Schedule.
(b) Reports on Form 8-K.
None.
Page 22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORION CAPITAL CORPORATION
Date: July 30, 1997 By: /s/ W. Marston Becker
--------------------------------
Chairman of the Board
and Chief Executive Officer
Date: July 30, 1997 By: /s/ Daniel L. Barry
--------------------------------
Senior Vice President and
Chief Financial Officer
Page 23
<PAGE>
EXHIBIT INDEX
Page No.
Exhibit 11: Computation of Earnings
Per Common Share 25
Exhibit 15: Deloitte & Touche Letter
re unaudited interim financial
information 26
Exhibit 27: Financial Data Schedule 27
Page 24
<TABLE>
<CAPTION>
EXHIBIT 11
ORION CAPITAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
(000s omitted - except for per common share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation of weighted average number of
common and equivalent shares outstanding:
PRIMARY -
Weighted average number of shares
outstanding ............................. 27,299 27,324 27,302 27,477
Dilutive effect of stock options and stock
awards .................................. 504 374 499 369
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 27,803 27,698 27,801 27,846
======= ======= ======= =======
Net earnings attributable to common
stockholders .............................. $25,381 $20,573 $54,859 $38,460
======= ======= ======= =======
Net earnings per common share ............... $ .91 $ .74 $ 1.97 $ 1.38
======= ======= ======= =======
FULLY DILUTED
Weighted average number of shares
outstanding ............................. 27,299 27,324 27,302 27,477
Dilutive effect of stock options and stock
awards .................................. 556 415 525 390
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 27,855 27,739 27,827 27,867
======= ======= ======= =======
Net earnings attributable to common
stockholders .............................. $25,381 $20,573 $54,859 $38,460
======= ======= ======= =======
Net earnings per common share ............... $ .91 $ .74 $ 1.97 $ 1.38
======= ======= ======= =======
Page 25
</TABLE>
EXHIBIT 15
July 23, 1997
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, 1997 and 1996, as indicated
in our report dated July 23, 1997; 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, 1997, 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 relating to the
Orion Capital Corporation 1994 Stock Option Plan for Non-Employee
Directors.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of
that Act.
DELOITTE & TOUCHE LLP
Hartford, Connecticut
Page 26
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
EXHIBIT 27
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ORION CAPITAL CORPORATION'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE
30, 1997, 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-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 1,342,885
<DEBT-CARRYING-VALUE> 324,640
<DEBT-MARKET-VALUE> 331,164
<EQUITIES> 382,264
<MORTGAGE> 1,280
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,511,966
<CASH> 13,598
<RECOVER-REINSURE> 420,615
<DEFERRED-ACQUISITION> 141,732
<TOTAL-ASSETS> 3,677,293
<POLICY-LOSSES> 1,793,358
<UNEARNED-PREMIUMS> 502,800
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 21,465
<NOTES-PAYABLE> 310,565
<COMMON> 173,531
0
0
<OTHER-SE> 457,287
<TOTAL-LIABILITY-AND-EQUITY> 3,677,293
659,189
<INVESTMENT-INCOME> 81,537
<INVESTMENT-GAINS> 24,147
<OTHER-INCOME> 10,119
<BENEFITS> 444,696
<UNDERWRITING-AMORTIZATION> 188,075
<UNDERWRITING-OTHER> 26,487
<INCOME-PRETAX> 82,679
<INCOME-TAX> 20,791
<INCOME-CONTINUING> 54,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,859
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.97
<RESERVE-OPEN> 1,368,420
<PROVISION-CURRENT> 441,001
<PROVISION-PRIOR> 3,695
<PAYMENTS-CURRENT> 163,377
<PAYMENTS-PRIOR> 266,521
<RESERVE-CLOSE> 1,383,218
<CUMULATIVE-DEFICIENCY> 3,695
</TABLE>
