AMERICAN PREMIER UNDERWRITERS, INC.
One East Fourth Street
Cincinnati, Ohio 45202
Telephone (513) 579-6660
Facsimile (513) 579-0110
Robert F. Amory
Vice President and Controller
November 14, 1994
1934 Act Filing Desk
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: American Premier Underwriters, Inc.
Form 10-Q Quarterly Report for the Quarter
Ended September 30, 1994
Dear Sir or Madam:
Transmitted for filing on behalf of American Premier
Underwriters, Inc. is Form 10-Q Quarterly Report for the Quarter
Ended September 30, 1994.
If you have any questions concerning this filing, please
telephone the undersigned at the number indicated above.
Very truly yours,
Robert F. Amory<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN PREMIER UNDERWRITERS, INC. AND CONSOLIDATED SUBSIDIARIES
INCOME STATEMENT
(In Millions, Except Per Share Amounts)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Insurance operations
Premiums earned $ 412.2 $ 337.2 $1,160.9 $ 921.2
Net investment income 32.4 29.1 94.6 84.1
Net realized gains (losses) (1.0) .3 .8 14.0
Other operations
Net sales 22.4 54.0 97.5 154.9
Interest and dividend income 10.6 13.0 26.2 40.5
Loss on sale of General
Cable Corporation securities - - (75.8) -
Net realized gains - 10.1 .1 25.8
476.6 443.7 1,304.3 1,240.5
Expenses:
Insurance operations
Losses 250.7 188.6 685.2 524.2
Loss adjustment expenses 40.2 32.1 113.8 94.5
Commissions and other insurance
expenses 91.1 76.7 260.9 208.2
Policyholder dividends 15.7 29.2 67.6 70.2
Other operations
Cost of sales 18.1 23.5 53.9 70.0
Operating expenses 3.4 28.8 42.4 82.2
Corporate and administrative expenses 4.6 4.0 14.8 13.5
Interest and debt expense 13.1 15.0 39.9 49.4
Realized loss on sale of subsidiaries - 10.0 - 11.7
Other expense (income), net 4.9 .6 9.4 9.1
441.8 408.5 1,287.9 1,133.0
Income (loss) from continuing
operations before income taxes 34.8 35.2 16.4 107.5
Income tax (expense) benefit (9.6) 51.0 (30.5) 84.8
Income (loss) from continuing operations 25.2 86.2 (14.1) 192.3
Discontinued operations:
Income from discontinued operations - - - 2.8
Gain (loss) on disposal .9 (4.1) (.5) (4.1)
Net income (loss) $ 26.1 $ 82.1 $ (14.6) $ 191.0
Earnings(loss) per share data:
Continuing operations $ .52 $ 1.77 $ (.29) $ 4.00
Discontinued operations .02 (.09) (.01) (.03)
$ .54 $ 1.68 $ (.30) $ 3.97
Weighted average number of common
shares 48.1 48.8 48.2 48.1
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
1PAGE
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(In Millions)
<TABLE>
<CAPTION>
September 30, December 31,
Assets: 1994 1993
<S> <C> <C>
Investments held by insurance operations
Fixed maturity securities
Held for investment-stated at amortized
cost (market $1,228.0 and $1,173.0) $1,276.8 $1,113.0
Available for sale-stated at market
(cost $456.6 and $408.7) 442.6 432.8
Short-term investments 53.9 56.9
1,773.3 1,602.7
Parent Company investments
Fixed maturity securities
Held for investment-stated at amortized
cost (market $295.2 and $251.7) 301.7 248.9
Available for sale-stated at market
(cost $275.5 and $ - ) 274.3 -
Short-term investments 299.7 387.9
General Cable Corporation notes - 286.8
Equity in affiliates 11.1 20.1
886.8 943.7
Cash 32.9 32.4
Accrued investment income 47.1 43.4
Agents' balances and premiums receivable 355.2 289.9
Reinsurance receivable 51.5 47.6
Other receivables 42.2 51.4
Deferred policy acquisition costs 88.8 77.4
Property, plant and equipment 64.8 95.2
Cost in excess of net assets acquired 397.4 406.8
Deferred tax asset 277.3 295.8
Net assets of discontinued operations - 9.8
Other assets 150.3 153.5
Total $4,167.6 $4,049.6
Liabilities And Common Shareholders' Equity:
Unpaid losses and loss adjustment expenses $1,087.1 $ 961.4
Policyholder dividends 120.0 111.8
Unearned premiums 432.8 352.3
Debt 503.6 523.2
Minority interests in subsidiaries 4.8 15.1
Accounts payable and other liabilities 394.0 363.5
Total liabilities 2,542.3 2,327.3
Common Stock 47.6 47.4
Capital surplus 729.4 746.2
Retained earnings (from October 25, 1978) 864.1 912.3
Net unrealized gains (losses) on investments (15.8) 16.4
Total common shareholders' equity 1,625.3 1,722.3
Total $4,167.6 $4,049.6
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2PAGE
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION> Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Cash flows of operating activities:
Income (loss) from continuing operations $(14.1) $ 192.3
Adjustments to reconcile income from continuing
operations to net cash provided by continuing
activities
Deferred Federal income tax 26.8 (87.4)
Depreciation, depletion and amortization 21.3 24.4
Net (gain) loss on disposals of businesses, investments
and property, plant and equipment 71.5 (27.6)
Changes in assets and liabilities, excluding effects of
acquisitions and divestitures of businesses
Increase in receivables (69.3) (100.8)
Increase in other assets (3.3) (12.4)
Increase (decrease) in accounts payable and
other liabilities (2.1) 10.0
Increase in unpaid losses and loss
adjustment expenses 122.8 79.3
Increase in policyholder dividends 8.3 28.0
Increase in unearned premiums 74.4 92.3
Litigation settlement - 15.6
Other, net 1.7 9.1
Net cash flows of operating activities 238.0 222.8
Cash flows of investing activities:
Purchases of available for sale investments (375.0) (105.4)
Maturities and sales of available for sale investments 68.7 133.7
Purchases of held for investment securities (305.5) (448.0)
Maturities and sales of held for investment
securities 107.0 314.8
Net (increase) decrease in temporary investments 122.2 (26.4)
Proceeds from sale of businesses 32.9 89.7
Proceeds from sale of General Cable Corporation
securities 176.7 -
Acquisitions of businesses, net of cash acquired - (41.7)
Capital expenditures (18.3) (10.5)
Other, net (1.4) (.3)
Net cash flows of investing activities (192.7) (94.1)
Cash flows of financing activities:
Repayment of debt (17.1) (135.0)
Common Stock dividends (30.4) (28.6)
Exercise of stock options and conversion of
Career Shares 15.0 21.0
Purchases of Company Common Stock (16.3) (1.9)
Other, net 4.0 -
Net cash flows of financing activities (44.8) (144.5)
Net cash flows from continuing operations .5 (15.8)
Net cash from discontinued operations - 8.3
Increase (decrease) in cash .5 (7.5)
Cash - beginning of year 32.4 36.2
Cash - end of period $ 32.9 $ 28.7
</TABLE> SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Effective March 25, 1994, the Company changed its corporate
name from The Penn Central Corporation to American Premier
Underwriters, Inc. in order to better reflect its new identity as
a property and casualty insurance specialist.
In the opinion of management, the accompanying unaudited
financial statements of American Premier Underwriters, Inc. and
Consolidated Subsidiaries (the "Company") include all adjustments,
which are of a normal recurring nature, necessary to present fairly
the Company's results of operations, financial position and cash
flows. As permitted by the rules and regulations of the Securities
and Exchange Commission ("SEC"), the financial statements do not
include all of the accounting information normally included with
financial statements prepared in accordance with generally accepted
accounting principles. Accordingly, these financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993. Results for the three months
and nine months ended September 30, 1994 are not necessarily
indicative of the results for any other interim period or for the
year as a whole. Certain amounts for the three months and nine
months ended September 30, 1993 have been reclassified to conform
to the current presentation.
Accounting for Certain Investments in Debt and Equity Securities
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The adoption
of SFAS No. 115 did not have a material effect on the Company's
financial position or results of operations.
2. ACQUISITIONS AND DIVESTITURES
On June 9, 1994, as part of an agreement for the purchase of
all of the outstanding shares of General Cable Corporation
("General Cable") by Wassall PLC ("Wassall"), the Company sold to
Wassall the $253.5 million principal amount of General Cable
subordinated notes (the "Notes") and the 1.15 million shares of
General Cable common stock owned by the Company for $169.8 million
and $6.9 million, respectively. Also as part of the agreement, the
Company assumed responsibility for certain actual and potential
environmental and other liabilities principally associated with
General Cable's recent sales of Marathon LeTourneau Company and
Indiana Steel and Wire Company, in consideration of a payment from
Wassall of $19.2 million (the "Indemnity Payment"). For further
information regarding such liabilities, see Note 9. Immediately
prior to the sale of General Cable to Wassall, American Financial
Corporation ("AFC"), which owned 40.5% of the Company's common
stock, also owned 45.6% of the outstanding common stock of General
4PAGE
<PAGE>
Cable. The Chairman of the Board and Chief Executive Officer of
the Company was the Chairman of the Board of General Cable. The
transaction was approved by the Company's Board of Directors based
on the recommendation of a special committee of the Company's
independent directors. In making its recommendation, the special
committee relied on an opinion from Donaldson, Lufkin & Jenrette
Securities Corp. that the aggregate consideration to be received by
the Company in the transaction was fair to the Company from a
financial point of view. The Company recorded a pre-tax loss of
approximately $75.8 million in the first quarter of 1994 for the
anticipated disposition of the Notes and General Cable stock, and
the Company did not accrue interest income on the Notes during the
nine months ended September 30, 1994.
On February 14, 1994, General Cable delivered to the Company
cash and promissory notes issued by a subsidiary of Rowan
Companies, Inc. ("Rowan") totalling $52.1 million as a partial
payment of the General Cable Notes. The cash portion of the
payment was $10.4 million. The Rowan notes, which are guaranteed
by Rowan, have a face value of $41.7 million, an interest rate of
7 percent and are due in 1999. Quarterly interest payments are
payable in cash beginning March 31, 1994. The receipt of the cash
and Rowan notes resulted from the sale by General Cable of its
Marathon LeTourneau unit to Rowan. As a result of these receipts,
the Company credited General Cable with $48.1 million of principal
and interest payments on the General Cable Notes. The non-cash
portion of this transaction is not included in the statement of
cash flows.
The intended divestitures of businesses announced in December
1992 included five small diversified industrial companies, two of
which were sold during 1993. Two of such companies were sold
during the first nine months of 1994 for aggregate proceeds of
$22.9 million resulting in a pre-tax gain of $3.2 million. The
results for the three and nine month periods ended September 30,
1994 include sales of $17.5 million and $49.7 million,
respectively, and pre-tax losses of $1.3 million and $7.8 million,
respectively, from the operations sold during 1994 and the
remaining operation to be sold. At September 30, 1994, the
aggregate book value of the business remaining to be sold was $20.8
million.
On June 2, 1994, the Company sold its 53.5 percent interest in
operations which provide onshore oil and gas contract drilling and
well workover services for $14.5 million in cash. No gain or loss
was recognized on the transaction.
5<PAGE>
3. INSURANCE OPERATIONS
Investments of Insurance Operations
Amortized cost, gross unrealized gains and losses and market
values of the insurance operations' investments in fixed maturity
securities are presented in the table below.
At September 30, 1994, the insurance operations' investments
included unrated or less than investment grade corporate securities
with a carrying value of $124.4 million (market value $118.3
million). Investments of insurance operations include a net
payable for securities purchased but not settled of $1.9 million at
September 30, 1994.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
September 30, 1994 Cost Gains Losses Value
(In Millions)
<S> <C> <C> <C> <C>
Held for investment
Corporate securities $ 972.8 $ 7.4 $ 42.5 $ 937.7
Public utilities 207.6 .8 12.6 195.8
Mortgage-backed securities 81.8 .4 2.4 79.8
State and local obligations 8.2 .7 - 8.9
Foreign securities 6.4 - .6 5.8
Total held for investment 1,276.8 9.3 58.1 1,228.0
Available for sale
Corporate securities 272.4 3.8 12.2 264.0
Public utilities 16.8 .1 1.0 15.9
Mortgage-backed securities 55.8 .5 2.1 54.2
U.S. government securities 69.2 .5 2.2 67.5
State and local obligations 2.8 - - 2.8
Foreign securities 41.5 - 1.4 40.1
Total available for sale 458.5 4.9 18.9 444.5
Total fixed maturity
securities $1,735.3 $ 14.2 $ 77.0 $1,672.5
</TABLE>
At September 30, 1994, the carrying value of short-term
investments, principally U.S. Treasury securities and commercial
paper, approximates market value.
6<PAGE>
Investment Income of Insurance Operations
Investment income consists of the following:
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Income from fixed maturity
securities $ 33.2 $ 30.1 $ 97.1 $ 86.0
Income from equity
securities - - - .5
Gross investment income 33.2 30.1 97.1 86.5
Investment expenses (.8) (1.0) (2.5) (2.4)
Net investment income $ 32.4 $ 29.1 $ 94.6 $ 84.1
Income from fixed maturity securities includes income from
short-term investments.
Realized gains (losses) consist of the following:
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Gross realized gains on:
Fixed maturity
securities $ - $ .4 $ 2.7 $11.5
Equity securities - - - 2.8
Gross realized losses on:
Fixed maturity
securities (1.0) (.1) (1.9) (.3)
Equity securities - - - -
Net realized gains
(losses) $ (1.0) $ .3 $ .8 $14.0
7<PAGE>
<PAGE>
For the three months and nine months ended September 30, 1994,
proceeds from sales of fixed maturity securities, excluding
proceeds from sales at or near maturity, totalled $15.5 million and
$55.2 million, respectively. All of such proceeds for the 1994
third quarter were from securities classified as available for
sale. For the nine months ended September 30, 1994, $43.6 million
of proceeds from these sales were from securities classified as
available for sale and $11.6 million were from securities
classified as held for investment. All of the held for investment
securities were sold as a result of deterioration in the issuers'
credit rating. The gross realized gains (losses) attributable to
sales of fixed maturity securities, excluding sales at or near
maturity, were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1994 September 30, 1994
Available Held For Available Held for
for Sale Investment for Sale Investment
<S> <C> <C> <C> <C>
Gross realized gains $ .1 $ - $ .9 $ 1.3
Gross realized losses (.8) - (1.5) (.1)
Net realized gains (losses) $(.7) $ - $ (.6) $ 1.2
</TABLE>
Proceeds from sales of investments in fixed maturity
securities for the nine months ended September 30, 1993, excluding
proceeds from sales at or near maturity, totaled $133.8 million.
8<PAGE>
<PAGE>
Reinsurance
The insurance operations assume and cede a portion of their
written business with other insurance companies in the normal
course of business. To the extent that any reinsuring companies
are unable to meet their obligations under agreements covering
reinsurance ceded, the Company's insurance subsidiaries would
remain liable. Amounts deducted from insurance losses and loss
adjustment expenses and net written and earned premiums in
connection with reinsurance ceded to affiliates and non-affiliated
companies, as well as amounts included in net written and earned
premiums for reinsurance assumed from affiliates and non-affiliated
companies, were as follows:
<TABLE>
<CAPTION>
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Reinsurance ceded:
Premiums written $ 6.3 $ 2.8 $ 16.2 $ 7.1
Premiums earned 4.8 3.0 14.3 6.8
Incurred losses and loss
adjustment expenses 4.0 (1.2) 11.5 (2.3)
Reinsurance assumed:
Premiums written 56.3 48.7 161.2 124.8
Premiums earned 48.1 35.5 135.8 92.5
</TABLE>
Substantially all of the premiums written in the workers'
compensation insurance operations during 1994 and 1993 were from
policies eligible for policyholder dividend consideration.
4. PARENT COMPANY INVESTMENTS
Amortized cost, gross unrealized gains and losses and market
values of the Parent Company investments in fixed maturity
securities held for investment are presented in the table below.
At September 30, 1994 the carrying value and market value of
unrated or less than investment grade corporate securities, other
than the Rowan notes, totalled $21.2 million.
9PAGE
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
September 30, 1994 Cost Gains Losses Value
(In Millions)
<S> <C> <C> <C> <C>
Held for investment
Corporate securities $ 226.9 $ - $ 5.6 $ 221.3
Public utilities 23.0 - .5 22.5
Mortgage-backed securities .5 - - .5
U.S. government securities 51.3 - .4 50.9
State and local obligations - - - -
Foreign securities - - - -
Total held for investment 301.7 - 6.5 295.2
Available for sale
U.S. government securities 275.5 - 1.2 274.3
Total fixed maturity
securities $ 577.2 $ - $ 7.7 $ 569.5
At September 30, 1994, the carrying value of short-term
investments, principally U.S. Treasury securities and commercial
paper, approximates market value.
5. DEBT
On March 25, 1994, the Company redeemed all of the outstanding
$16.2 million principal amount of its 9 1/2 percent subordinated
debentures due August 1, 2002 at the redemption price of 100
percent of the principal amount of each debenture plus accrued and
unpaid interest to the redemption date.
10<PAGE>
6. CHANGES IN COMMON SHAREHOLDERS' EQUITY
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Gains On
(Dollars in Millions) Common Stock Capital Retained (Losses)
Shares Amount Surplus Earnings Investments Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 47,446,094 $ 47.4 $746.2 $912.3 $16.4 $1,722.3
Net income (loss) - - (14.6) - (14.6)
Dividends declared on
Common Stock - - (31.4) - (31.4)
Purchases of Company
Common Stock (590,543) (.6) (15.7) - - (16.3)
Exercise of stock options 712,462 .7 13.9 - - 14.6
Issuance of Common Stock
under ESPP and employee
stock bonus 33,378 - .9 - - .9
Change in net unrealized gains
(losses) on investments - - - (32.2) (32.2)
Adjustment to estimated pre-
reorganization liabilities - (17.0) - - (17.0)
Adjustment to distribution
of equity to shareholders
from spin-off of General
Cable Corporation - - (2.2) - (2.2)
Other, net .1 1.1 - - 1.2
Balance,
September 30, 1994 47,601,391 $ 47.6 $729.4 $864.1 $(15.8)$1,625.3
</TABLE>
During the second quarter of 1994, the Company settled a
dispute with former employees of a business that was acquired in
1990 and subsequently included in the spin-off of General Cable to
shareholders in July 1992.
During the third quarter of 1994, the Company increased its
accruals for its net probable liability for claims and
contingencies arising from events and circumstances preceding the
Company's 1978 reorganization. In accordance with the Company's
reorganization accounting policy, the Company recorded a net charge
of $17.0 million to capital surplus consisting of pre-
reorganization environmental and personal injury claims and related
expenses offset by a credit representing the net present value of
installment payments to be paid by Chicago Union Station ("CUSCO")
to the Company resulting from a judgment against CUSCO in favor of
the Company. See Note 9 of Notes to Financial Statements and "Item
1. Legal Proceedings" in Part II of this Quarterly Report.
11<PAGE>
7. EARNINGS PER SHARE
Earnings per share for the three and nine month periods ended
September 30, 1994 and September 30, 1993 are calculated on the
basis of the weighted average number of shares of common stock
outstanding during the period and the dilutive effect of assumed
conversion of common stock equivalents (stock options and career
shares).
8. INCOME TAXES
The Company has reported as of the beginning of its 1994 tax
year, an aggregate consolidated net operating loss carryforward for
Federal income tax purposes of approximately $645 million, which
will expire at the end of 1996 unless previously utilized, and a
$252 million capital loss carryforward, which will expire in
various amounts between 1995 and 1997, unless previously utilized.
The Company's substantial tax loss carryforwards and temporary
differences give rise to deferred tax assets. Based on an analysis
of the likelihood of realizing the Company's gross deferred tax
asset (taking into consideration applicable statutory carryforward
periods), the Company has determined that the recognition criteria
set forth in SFAS No. 109, "Accounting For Income Taxes", are not
met for the entire gross deferred tax asset and, accordingly, the
gross deferred tax asset is reduced by a valuation allowance. The
analysis of the likelihood of realizing the gross deferred tax
asset is reviewed and updated periodically. Any required
adjustments to the valuation allowance are made in the period in
which the developments on which they are based become known.
Results for the three and nine months ended September 30, 1993
include tax benefits of $65 million and $125 million, respectively,
attributable to such adjustments.
Components of the provision for income tax benefit (expense)
were as follows:
<TABLE>
<CAPTION>
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Current
Federal $ (.8) $ (.7) $ (2.1) $ (2.1)
Foreign, state & local (.5) - (1.6) (.5)
Total current (1.3) (.7) (3.7) (2.6)
Deferred
Federal (8.3) 51.7 (26.8) 87.4
Foreign, state & local - - - -
Total deferred (8.3) 51.7 (26.8) 87.4
Total $ (9.6) $ 51.0 $(30.5) $ 84.8
</TABLE>
12<PAGE>
Consolidated income tax benefit (expense) differs from the
amount computed using the United States statutory income tax rate
for the reasons set forth in the following table:
<TABLE>
<CAPTION>
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Income (loss) before income
taxes $ 34.8 $ 35.2 $ 16.4 $107.5
Expected tax benefit (expense)
at U.S. statutory income
tax rate $(12.1) $(13.0) $ (5.7) $(37.6)
Amortization of goodwill (.9) (.9) (2.9) (2.6)
Revision to valuation
allowance - 65.0 - 125.0
Loss disallowance - - (20.0) -
Other, net 3.4 (.1) (1.9) -
Consolidated income tax
benefit (expense) $ (9.6) $ 51.0 $(30.5) $ 84.8
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
For a description of certain lawsuits filed against the
Company in May 1994 by USX Corporation and its former subsidiary,
Bessemer and Lake Erie Railroad Company, see "Item 1. Legal
Proceedings" in Part II of this Quarterly Report.
For a description of certain claims pending against the
Company for reimbursement of clean-up costs under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
for alleged contamination at the Paoli, Pennsylvania railroad yard
and two other railroad sites that were transferred to Consolidated
Rail Corporation in 1976 by the Company's predecessor, Penn Central
Transportation Company ("PCTC"), see "Item 1. Legal Proceedings"
in Part II of this Quarterly Report.
In addition to the foregoing claims, there are certain other
claims involving the Company, relating to the generation, disposal
or release into the environment of allegedly hazardous substances
and personal injury claims, that allege or involve amounts that are
potentially substantial in the aggregate. The Company has
established loss accruals in its financial statements that it
believes are adequate to cover its anticipated liability for such
claims.
The USX and Paoli Yard litigations and the preponderance of
the other claims arose out of railroad operations disposed of by
PCTC prior to its 1978 reorganization and, accordingly, any
ultimate liability resulting therefrom in excess of previously
established loss accruals would be attributable to such pre-
reorganization events and circumstances. In accordance with the
Company's reorganization accounting policy, any such ultimate
liability will reduce the Company's capital surplus and
shareholders' equity, but will not be charged to income.
13PAGE
<PAGE>
In an environmental matter arising out of the Company's post-
reorganization operations, the Company's potential exposure could
exceed its related loss accruals by $1 million to $4 million, which
range depends upon the method of remediation, if any, required.
The Company believes that the relevant regulatory authority will
permit such remediation to be deferred until there is a change in
the use of the facility, which the Company believes is unlikely to
occur.
In connection with the Company's sale on June 9, 1994 of its
General Cable Notes and common stock as described in Note 2, the
Company assumed responsibility for certain actual and potential
environmental and other liabilities principally associated with
General Cable's recent sales of Marathon LeTourneau Company and
Indiana Steel and Wire Company, in consideration of the payment to
the Company of an Indemnity Payment of $19.2 million. On June 30,
1994, the Company established a loss accrual in that amount in its
financial statements. Although it is difficult to estimate future
environmental remediation costs accurately, the Company believes
that the Indemnity Payment will provide sufficient funds to permit
the Company to discharge such liabilities as they become payable
over time.
In management's opinion, the outcome of the foregoing matters
will not, individually or in the aggregate, have a material adverse
effect on the financial condition or results of operations of the
Company. In making this assessment, management has taken into
account previously established loss accruals in its financial
statements and probable recoveries from insurance carriers and
other third parties.
10. STATEMENT OF CASH FLOWS
During the nine month periods ended September 30, 1994 and
1993, state and other income taxes paid were $5.5 million and $4.0
million, respectively. For the same periods, interest paid was
$36.6 million and $46.5 million, respectively.
During 1993, General Cable elected to pay 100 percent, or
$31.8 million in the aggregate, of the interest due on its
subordinated note (the "General Cable Note") with additional 9.98
percent subordinated notes ("Interest Notes") in lieu of cash.
These non-cash transactions, which increased the Parent Company's
investments and decreased accrued interest receivable, were not
included in the statement of cash flows.
14PAGE
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis is provided to assist
the reader in understanding the Company's financial condition as of
September 30, 1994 and December 31, 1993 and its results of
operations for the three months and nine months ended September 30,
1994 and 1993. Amounts presented in the discussion and analysis
relate only to continuing operations unless otherwise indicated.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
(Dollars in millions,
except per share amounts)
September 30, December 31,
1994 1993
<S> <C> <C>
Cash, Parent Company short-term investments
and Parent Company fixed maturity securities $ 908.6 $ 669.2
Deduct items not readily available for
corporate purposes:
Cash held by the insurance operations (34.0) (23.2)
Securities held in bank escrow accounts (21.8) (20.2)
Private placement notes (32.8) (14.6)
Cash, temporary investments and marketable
securities $ 820.0 $ 611.2
Total debt as a percentage of total
capital 24% 23%
Book value per share of Common Stock $ 34.14 $ 36.30
</TABLE>
The Company's Federal income tax loss carryforward is
available to offset taxable income and, as a result, the Company's
requirement to pay current Federal income tax is substantially
eliminated. The $208.8 million increase during the nine months
ended September 30, 1994 in the cash, temporary investments and
marketable securities included in the preceding table was
principally attributable to proceeds from the Company's sale of its
General Cable Notes and common stock and proceeds from the
divestiture of three of the Company's non-insurance businesses.
At September 30, 1994, the Company's total debt to total
capital ratio was 24 percent compared with 23 percent at year-end
1993. Total capital as defined for this ratio consists of debt,
minority interests in subsidiaries and common shareholders' equity.
15PAGE
<PAGE>
Net Cash Provided by Operating Activities
During the nine months ended September 30, 1994, cash provided
by continuing operating activities was $238.0 million, an increase
of $15.2 million as compared with the same period in 1993. This
increase resulted primarily from an increase of $26.5 million in
the insurance operations' operating cash flow at the non-standard
private passenger automobile insurance companies (the "NSA Group")
and, to a lesser extent, the workers' compensation insurance
operations ("Republic Indemnity") primarily due to continued growth
in written premiums. Also contributing to the favorable comparison
are the Indemnity Payment received from Wassall in conjunction with
the sale of the General Cable Notes, lower interest payments due to
debt reductions in 1993 and higher interest receipts on the Parent
Company investment portfolio. These favorable variances were
partially offset by lower operating cash flow from the Company's
non-insurance operations. Also, during 1993 the Company received
net proceeds of $15.6 million resulting from the settlement of
certain litigation relating to a previously owned subsidiary which
was included in the General Cable spin-off and repayment of a note
plus accrued interest aggregating $26.0 million relating to the
prior sale of an offshore drilling rig. Management expects that the
Company's operating cash flow and financial resources will continue
to be adequate to meet its operating needs in the short-term and
long-term (i.e. more than twelve months) future. Cash flow of the
Company may be influenced by a variety of factors, including
changes in the property and casualty insurance industry, the
insurance regulatory environment and general economic conditions.
During the nine months ended September 30, 1994, the insurance
operations generated $266.9 million of operating cash flow, 82
percent of which was retained by the insurance companies to
purchase investments, principally marketable debt securities. The
remainder of the cash provided by the insurance operations was paid
to the Parent Company primarily through intercorporate tax
allocation payments. During the same period in 1993, the insurance
operations generated $240.4 million of operating cash flow, 77
percent of which was retained by the insurance companies to
purchase investments and for the acquisition of Leader National
Insurance Company ("Leader"), with the remainder of the cash being
paid to the Parent Company under intercorporate tax allocation
agreements.
The Company's insurance operations are subject to state
regulations which limit, by reference to specified measures of
statutory operating results and policyholders' surplus, the
dividends that can be paid to the Parent Company without prior
regulatory approval. Under these restrictions, the maximum amount
of dividends which can be paid to the Parent Company during 1994 by
these subsidiaries is $96.5 million.
16PAGE
<PAGE>
Investing and Financing Activities
During the nine months ended September 30, 1994, net purchases
of investments for the Parent Company investment portfolio
totalled $184.4 million. The Company also used $16.2 million to
redeem all of its outstanding 9 1/2 percent subordinated
debentures, $16.3 million for purchases of shares of Company Common
Stock and $30.4 million for the payment of Common Stock dividends.
During this same period, the Company received $176.7 million from
the sale of its General Cable Notes and stock to Wassall. For a
description of this transaction, see Note 2 of Notes to Financial
Statements. In addition, the Company received $34.9 million from
the sale of three of its non-insurance businesses and $15.0 million
for shares of Company Common Stock issued pursuant to the exercise
of stock options. The Company's insurance operations made net
purchases of investments of $198.2 million during the first nine
months of 1994.
During the same 1993 period, the sales of the Company's
defense services operations and two of the Company's industrial
businesses, the sale of the Parent Company's limited partnership
units of Buckeye Partners L.P.("Buckeye Units"), the repayment by
General Cable of its short-term note and maturities of the Parent
Company investment portfolio (net of purchases of investments)
provided $117.2 million of cash. In addition, the Company received
$21.0 million for shares of Company Common Stock issued pursuant to
the exercise of stock options. During this same period, the
Company used $133.3 million to redeem all of its outstanding 11
percent subordinated debentures, $38.0 million in cash to acquire
Leader, which was partially funded by a $15 million capital
contribution from the Parent Company to the insurance operations,
$28.6 million for the payment of Common Stock dividends and $3.7
million for the purchase of an investment in an insurance company
located in the United Kingdom. During the first nine months of
1993, the Company's insurance operations made net purchases of
investments of $158.8 million.
At September 30, 1994, the Parent Company investment portfolio
held unrated or less than investment grade corporate debt
securities, excluding the Rowan notes, with a carrying value of
$21.2 million. At that date, the Company's insurance operations
held $124.4 million of such unrated or less than investment grade
debt securities and preferred stocks. The Company continues to
limit its investment in unrated or less than investment grade
securities of any one issuer and regularly monitors the condition
of the issuers and their industries. At September 30, 1994, the
largest investment of the Company and its insurance operations in
such securities of any one issuer, excluding the Rowan notes,
totaled $10.5 million.
During the nine months ended September 30, 1994, the Company's
continuing operations did not have large capital spending
requirements. The Company presently has no plans or commitments
for material capital expenditures.
17PAGE
<PAGE>
RESULTS OF OPERATIONS
Analysis of Continuing Operations
The Company reported income from continuing operations for
the 1994 third quarter of $25.2 million, or $.52 per share, and a
loss from continuing operations for the nine months ended September
30, 1994 of $14.1 million, or $.29 per share. For the nine months
ended September 30, 1994, income from continuing operations
includes a net realized capital loss of $70.3 million, or $1.46
per share, principally from the disposal of the General Cable Notes
which were previously owned by the Company and tax adjustments
related primarily to the disposal of certain subsidiaries. The
Company's 1994 earnings do not include any accrued interest income
on the General Cable Notes. Income from continuing operations for
the three and nine months ended September 30, 1994, excluding net
realized capital gains and losses and the above-mentioned tax
adjustments, was $22.0 million, or $.46 per share, and $56.2
million, or $1.17 per share, respectively.
Income from continuing operations for the 1993 third quarter
was $86.2 million, or $1.77 per share, which included tax benefits
of $65.0 million attributable to an increase in the estimated
realizable value of the Company's net deferred tax asset. Income
from continuing operations for the nine months ended September 30,
1993 was $192.3 million, or $4.00 per share. Results for the nine
months ended September 30, 1993 include net realized capital gains
from sales of investments and subsidiaries of $18.2 million and tax
benefits of $125.0 million attributable to deferred tax asset
adjustments. Net realized gains for 1993 include a pre-tax gain of
$18.5 million from the sale of all of the Company's Buckeye Units.
Excluding realized capital gains and the deferred tax benefits,
income from continuing operations for the three and nine months
ended September 30, 1993 was $21.1 million, or $.43 per share, and
$49.1 million, or $1.02 per share, respectively. In addition, in
the three and nine months ended September 30, 1993, the Company
recognized approximately $6.4 million and $19.1 million,
respectively, of interest on the General Cable Notes.
18<PAGE>
Insurance Segment
Revenues in the Insurance segment of $443.6 million and
$1,256.3 million for the three and nine month periods ended
September 30, 1994, respectively, increased as compared with
revenues of $366.6 million and $1,019.3 million for the same
periods in 1993. The increases were primarily due to an increase in
earned premiums at the NSA Group and, to a lesser extent, at
Republic Indemnity. During the same periods, investment income
before realized gains and losses on sales of investments in the
insurance operations' portfolio also increased due to higher
average investment balances, partially offset by a decrease in the
average yield. Operating income for the three and nine months
ended September 30, 1994 was $45.9 million and $128.8 million,
respectively, as compared with $40.0 million and $122.2 million for
the same periods in 1993. The increase in operating income for
both the third quarter and first nine months of 1994 is primarily
due to higher investment income and underwriting profit, partially
offset by lower net realized gains. The combined ratio for the
Insurance segment was 95.8 percent and 96.4 percent,
respectively, for the three and nine months ended September 30,
1994, respectively, as compared with 96.1 percent and 96.4 percent
for the same periods in 1993.
NSA Group
The following table presents certain information with respect
to the NSA Group's insurance operations.
(Dollars in Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Net Written Premiums $294.5 $242.9 $ 858.9 $652.6
Net Earned Premiums $276.9 $215.3 $ 788.1 $572.5
Loss and Loss Adjustment
Expense ("LAE") 214.4 151.3 595.2 406.4
Underwriting Expenses 63.8 56.0 185.7 147.3
Underwriting Profit (Loss) $ (1.3) $ 8.0 $ 7.2 $ 18.8
GAAP Ratios:
Loss and LAE Ratio 77.4% 70.3% 75.5% 71.0%
Underwriting Expense Ratio 23.1 26.0 23.6 25.7
Combined Ratio 100.5% 96.3% 99.1% 96.7%
19PAGE
<PAGE>
The growth in net written premiums of approximately 21 percent
and 32 percent, respectively, for the three and nine month periods
ended September 30, 1994 as compared to the same 1993 periods was
principally due to increased market penetration in the NSA Group's
existing states. The decline in underwriting profit for the third
quarter and first nine months of 1994 was caused by several
factors, including losses resulting from hailstorm damage in Texas
during the second quarter as well as rate levels in several markets
which have not been adequate to maintain profitable underwriting
results. These factors were partially offset by underwriting
profit from the Company's entry into certain foreign and domestic
markets, as well as improved underwriting margins in several of the
Company's markets where the book of business has matured and a
greater portion of written premium is derived from renewal
policies. The expense ratio for the 1994 periods has declined as
growth in earned premiums continues to outpace associated expenses.
The rate of written and earned premium growth during the third
quarter of 1994 was somewhat lower than such growth rates
experienced during the first half of 1994. Certain rate increases
have been effected in several states during 1994 and management is
assessing possible rate increases in other states. As a result of
these increases and competitive pressures in the non-standard
automobile insurance industry, the rate of written and earned
premium growth during the first nine months of 1994 may not be
sustained for the remainder of 1994 and into the future.
Republic Indemnity
The following table presents certain information with respect
to Republic Indemnity's insurance operations.
<TABLE>
<CAPTION>
(Dollars in Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Written Premiums $130.6 $117.6 $ 374.0 $349.2
Net Earned Premiums $134.8 $119.2 $ 371.2 $340.5
Loss and Loss Adjustment
Expense ("LAE") 76.0 66.6 202.6 203.9
Underwriting Expenses 24.5 18.1 66.4 51.7
Policyholder Dividends 15.7 29.2 67.6 70.2
Underwriting Profit $ 18.6 $ 5.3 $ 34.6 $ 14.7
GAAP Ratios:
Loss and LAE Ratio 56.4% 55.9% 54.6% 59.9%
Underwriting Expense Ratio 18.2 15.2 17.9 15.2
Policyholder Dividend Ratio 11.6 24.5 18.2 20.6
Combined Ratio 86.2% 95.6% 90.7% 95.7%
</TABLE>
20PAGE
<PAGE>
Republic Indemnity has continued to experience growth in
earned and net written premiums due to its favorable competitive
position in the industry. However, the rate of such growth has
declined relative to the 1993 periods partly due to mandatory
premium rate reductions of 7 percent on in-force policies and 12.7
percent on new and renewal policies which took effect July 16, 1993
and January 1, 1994, respectively. Because the January 1, 1994
rate reduction is applicable only to new and renewal policies
entered into on and after January 1, 1994, only a pro rata impact
of this reduction is reflected in the 1994 results to date.
For the nine months ended September 30, 1994, the decrease in
Republic's loss and LAE ratio as compared with the first nine months of
1993 was mainly attributable to favorable loss development relating
to prior years' claims activity as well as an improved loss and LAE
ratio on a current accident year basis. For the 1994 third quarter, the
loss ratio has been adversely affected by the increased impact of
the aforementioned January 1, 1994 rate reduction and an increase
in the frequency of claims. During these same periods, the expense
ratio has increased mainly due to higher commission expenses
coupled with the decline in the earned premium growth rate.
On September 21, 1994, the California Insurance Commissioner
approved a 16 percent minimum premium rate decrease effective
October 1, 1994 for all new and renewal policies with anniversary
dates on or after October 1, 1994 as well as the unexpired portion
of policies incepting on or after January 1, 1994. The
profitability of Republic Indemnity's insurance operations could be
adversely affected by the impact of this premium rate reduction.
Management believes that this effect may be mitigated by Republic
Indemnity's ability to reduce its relatively high policyholder
dividends although a reduction in dividends could affect premium
volumes. Furthermore, management is unable to predict the effects
on the Company of the recently enacted California legislation that
repeals the workers' compensation insurance minimum rate law
effective January 1, 1995. Some of these effects could include
reductions in premium rates, changes in commission rates, as well
as reductions to policyholder dividend accruals. Also, competitive
pressure in the California workers' compensation insurance market
has increased and there can be no assurance that increases in
written and earned premiums will continue in 1994 or after the
repeal of California's minimum premium rate law becomes effective
on January 1, 1995.
Interest and Dividend Income
Interest and dividend income of the Parent Company investments
decreased $2.4 million and $14.3 million for the three and nine
month periods ended September 30, 1994, respectively, as compared
with the same periods in 1993, due primarily to the exclusion of
interest income on the General Cable Notes in 1994 as a result of
their sale. For further information, see Note 2 of Notes to
Financial Statements. Interest income on the General Cable Notes
for the three and nine month periods ended September 30, 1993 was
$6.4 million and $19.1 million, respectively. The decrease in
interest income due to the sale of the General Cable Notes was
partially offset by increased interest from higher average
investment balances as compared with the same periods in 1993.
21<PAGE>
Interest and Debt Expense
Interest expense decreased $1.9 million and $9.5 million for
the three and nine month periods ended September 30, 1994, compared
to the same periods in 1993, primarily due to the Company's
redemption of all $133.3 million principal amount of its 11 percent
subordinated debentures during the 1993 third quarter.
Other expense (income) - net
Other expense (income) - net consists of the following:
(In Millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Settlement of claims and
contingencies, net $ .5 $ (1.4) $ .5 $ .8
Taxes, other than income 1.9 1.7 5.4 5.0
Minority interests in earnings
of consolidated subsidiaries .6 .3 .6 (.7)
Other 1.9 - 2.9 4.0
$ 4.9 $ .6 $ 9.4 $ 9.1
Income Taxes
For the three and nine months ended September 30, 1994, the
Company recorded income tax expense of $9.6 million and $30.5
million, respectively, as compared with an income tax benefit of
$51.0 million and $84.8 million, respectively, for the same periods
in 1993. The tax benefit for the three and nine month periods in
1993 was attributable to an increase of $65.0 million and $125.0
million, respectively, in the Company's net deferred tax asset due
to revisions to the estimated future taxable income during the
Company's tax loss carryforward period.
Management believes that it is more likely than not that the
net deferred tax asset at September 30, 1994 will be realized
primarily through the generation of taxable income during the loss
carryforward period. This belief derives from an analysis of
estimated future taxable income based on certain assumptions
concerning future events during the loss carryforward period. The
estimate of future taxable income used in determining the net
deferred tax asset is not necessarily indicative of the Company's
future results of operations. As is the case with any estimate of
future results, there will be differences between assumed and
actual economic and business conditions of future periods.
Moreover, the estimate may also be affected by unpredictable future
events, including but not necessarily limited to changes in the
Company's capital structure and future acquisitions and
dispositions. Therefore, the analysis of estimated future taxable
income will be reviewed and updated periodically, and any required
adjustments, which may increase or decrease the net deferred tax
asset, will be made in the period in which the developments on
which they are based become known.
22PAGE
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Item 1. Legal Proceedings" of the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994 for a description of lawsuits filed against the Company on
May 26, 1994 by USX Corporation ("USX") and its former subsidiary,
Bessemer and Lake Erie Railroad Company ("B&LE"), seeking
indemnification and contribution from the Company, as successor to
the railroad business conducted by Penn Central Transportation
Company ("PCTC") prior to 1976, for all or a portion of the
approximately $600 million that USX paid in satisfaction of a
judgment against B&LE for its participation in an unlawful
antitrust conspiracy among certain railroads commencing in the
1950's and continuing through the 1970's. The lawsuits argue that
USX's liability for that payment was attributable to PCTC's alleged
activities in furtherance of the conspiracy. For the reasons set
forth in such Quarterly Report, the Company believes that these
lawsuits are without merit. On June 23, the Company petitioned the
U.S. District Court for the Eastern District of Pennsylvania for an
order directing USX and B&LE to dismiss their lawsuits because they
violate the 1978 consummation order issued by that Court in the
Company's bankruptcy reorganization proceedings (the "Consummation
Order"), which contains an injunction against the assertion of
claims against the Company based on PCTC's pre-consummation
conduct. On October 13, 1994, the District Court enjoined USX and
B&LE from continuing their lawsuits against the Company, ruling
that their claims are barred by the Consummation Order. The
District Court's ruling is appealable to the U.S. Court of Appeals
for the Third Circuit.
Reference is made to the first paragraph of "Item 3. Legal
Proceedings" of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 for a description of a lawsuit
filed by the Company in March 1992 before the Special Court created
by the Regional Rail Reorganization Act (the "Special Court")
seeking to enjoin the U.S. Government, Consolidated Rail
Corporation ("Conrail") and other parties from asserting claims
against the Company for clean-up costs under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
at a Superfund site at the Paoli, Pennsylvania railyard (the "Paoli
Yard") formerly owned by PCTC. On August 23, 1994, the Special
Court granted summary judgment against the Company, ruling that
the CERCLA claims against the Company are not barred by the "as is"
terms of the 1976 transfer of the Paoli Yard by PCTC to Conrail,
the terms of the Company's 1980 Valuation Case settlement with the
U.S. Government or the U.S. Constitution. The Special Court's
decision has become final. Notwithstanding this decision, the
Company still has other substantial defenses to claims for clean-up
costs at the Paoli Yard and at two other sites that were
transferred to Conrail in 1976, including its position that other
parties are responsible for substantial percentages of such clean-
up costs, and the Company intends to make claims against certain
insurers for reimbursement of any clean-up costs that the Company
23PAGE
<PAGE>
may incur. As a result of the Special Court's decision, the
Company recorded a $19.6 million charge against capital surplus at
September 30, 1994 for potential liability for clean-up costs at
the Paoli Yard and such other two sites. In accordance with the
Company's reorganization accounting policy, such amount was not
charged to income.
In an unrelated matter, on September 27, 1994, the Special
Court entered a judgment ordering Chicago Union Station Company
("CUSCO") to pay the Company $17.5 million in six annual
installments commencing in 1994 and ending in 1999. The judgment
concludes litigation the Company had brought in 1989 seeking a
ruling that advances totalling $17.5 million which were made to
CUSCO by PCTC between 1916 and 1973 represented obligations that
must be repaid to the Company. As a result of this judgment, the
Company recorded a $13.8 million credit to capital surplus
representing the present value of such installment payments. In
accordance with the Company's reorganization accounting policy,
such amount was not credited to income.
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K filed during the quarter ended September
30, 1994:
None
24<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN PREMIER UNDERWRITERS, INC.
(Registrant)
Date: November 14, 1994 By /s/ R. F. Amory
R. F. Amory
Vice President and Corporate Controller
(Principal Accounting Officer and
duly Authorized Signatory)
25<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 716900<F1>
<DEBT-CARRYING-VALUE> 1578500<F2>
<DEBT-MARKET-VALUE> 1523200<F3>
<EQUITIES> 11100<F4>
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2660100<F5>
<CASH> 32900
<RECOVER-REINSURE> 51500
<DEFERRED-ACQUISITION> 88800
<TOTAL-ASSETS> 4167600
<POLICY-LOSSES> 1087100
<UNEARNED-PREMIUMS> 432800
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 120000
<NOTES-PAYABLE> 503600
<COMMON> 0
0
47600
<OTHER-SE> 1577700
<TOTAL-LIABILITY-AND-EQUITY> 4167600
1160900
<INVESTMENT-INCOME> 120800<F6>
<INVESTMENT-GAINS> (74900)<F7>
<OTHER-INCOME> 97500<F8>
<BENEFITS> 799000
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 260900
<INCOME-PRETAX> 16400<F9>
<INCOME-TAX> (30500)
<INCOME-CONTINUING> (14100)
<DISCONTINUED> (500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14600)
<EPS-PRIMARY> (.30)<F10>
<EPS-DILUTED> 0
<RESERVE-OPEN> 961400
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 1087100
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Includes Parent Company investments of $274.3 million
<F2> Includes Parent Company investments of $301.7 million
<F3> Includes Parent Company investments of $295.2 million
<F4> Included in Parent Company investments
<F5> Includes Parent Company investments of $886.8 million
<F6> Includes Parent Company interest and dividend
income of $26.2 million
<F7> Includes Parent Company realized losses of $75.7 million
<F8> Net sales from non-insurance operations
<F9> Includes policyholder dividends of $67.6 million, interest
and debt expense of $39.9 million and other non-insurance
expenses of $120.5 million
<F10> Includes discontinued loss per share of $.01
</FN>
</TABLE>
