SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
June 30, 1996 No. 1-1569
AMERICAN PREMIER UNDERWRITERS, INC.
Incorporated under IRS Employer I.D.
the Laws of Pennsylvania No. 23-6000765
One East Fourth Street, Cincinnati, Ohio 45202
(513) 579-6600
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No ___
As of August 1, 1996, there were 47,000,000 shares of the
Registrant's Common Stock outstanding, all of which were owned by
American Financial Group, Inc.
Page 1 of 13
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
PART I
FINANCIAL INFORMATION
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars In Millions)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Assets
Cash and short-term investments $ 73.3 $ 116.4
Investments:
Bonds and redeemable preferred stocks:
Held to maturity - at amortized cost
(market - $316.4 and $342.7) 318.7 332.8
Available for sale - at market
(amortized cost - $1,504.5 and $1,468.5) 1,498.2 1,536.9
Other stocks - principally at market
(cost - $3.7 and $4.2) 3.3 3.7
Investment in investee 43.7 41.0
Loans receivable 30.3 39.8
Real estate and other investments 12.1 20.4
Total investments 1,906.3 1,974.6
Accrued investment income 33.4 33.8
Agents' balances and premiums receivable 303.0 326.9
Amounts due from affiliates, net 579.2 554.4
Recoverables from reinsurers and prepaid
reinsurance premiums 69.8 65.3
Other receivables 33.0 38.0
Deferred acquisition costs 84.2 89.6
Cost in excess of net assets acquired 384.1 389.9
Deferred tax asset 176.1 200.4
Other assets 155.5 165.9
$3,797.9 $3,955.2
Liabilities and Shareholder's Equity
Unpaid losses and loss adjustment expenses $1,133.0 $1,194.9
Unearned premiums 408.0 437.0
Policyholder dividends 37.3 52.5
Long-term debt:
Parent Company 256.4 320.6
Subsidiaries 8.7 9.1
Accounts payable and other liabilities 373.6 389.2
Total liabilities 2,217.0 2,403.3
<PAGE>
Shareholder's equity:
Common Stock, $1 par value - outstanding
47,000,000 shares 47.0 47.0
Capital surplus 579.1 579.1
Retained earnings 961.5 881.8
Net unrealized gain (loss) on marketable
securities, net of deferred income
taxes (6.7) 44.0
Total shareholder's equity 1,580.9 1,551.9
$3,797.9 $3,955.2
</TABLE>
2
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income:
Property and casualty insurance
premiums $337.7 $377.5 $677.5 $759.4
Net investment income 55.7 53.6 109.5 101.7
Realized gains on sales of securities 1.9 1.6 6.7 1.4
Equity in net earnings of investee 1.8 1.6 3.0 1.6
Gain (loss) on sales of subsidiaries .1 (.2) 53.1 (.2)
Other income 2.7 3.1 6.6 6.1
399.9 437.2 856.4 870.0
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses 250.3 308.7 512.3 595.7
Commissions and other underwriting
expenses 82.6 81.4 161.2 167.4
Policyholder dividends (.5) (1.9) .4 5.1
Interest charges on borrowed money 10.6 13.1 20.4 26.3
Other operating and general expenses 13.1 13.8 22.8 27.2
356.1 415.1 717.1 821.7
Earnings before income taxes and
extraordinary item 43.8 22.1 139.3 48.3
Provision for income taxes 17.1 8.5 55.0 18.4
Earnings before extraordinary item 26.7 13.6 84.3 29.9
Extraordinary item - loss on prepayment
of debt (2.7) (4.1) (4.6) (4.1)
Net Earnings $ 24.0 $ 9.5 $ 79.7 $ 25.8
</TABLE>
3
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
<S> <C> <C>
Operating Activities:
Net earnings $ 79.7 $ 25.8
Adjustments:
Deferred Federal income tax 50.6 15.9
Extraordinary loss on prepayment of debt 4.6 4.1
Depreciation and amortization 14.8 13.0
Equity in net earnings of investee (3.0) (1.6)
Realized gains on investing activities (59.7) (.8)
Decrease (increase) in receivables 23.9 (12.9)
Decrease (increase) in other assets 5.5 (4.2)
Increase (decrease) in unpaid losses and loss
adjustment expenses (62.0) 25.8
Decrease in policyholder dividends (15.2) (23.2)
Increase (decrease) in unearned premiums (29.0) 33.7
Decrease in other liabilities (14.4) (9.7)
Dividends from investee .3 .2
Other, net (.1) 3.2
(4.0) 69.3
Investing Activities:
Purchases of and additional investments in:
Fixed maturity investments (194.9) (211.2)
Equity securities (.2) (.1)
Affiliates and subsidiaries - (57.1)
Property and equipment (3.1) (6.9)
Maturities and redemptions of fixed maturity
investments 57.5 49.9
Sales of:
Fixed maturity investments 134.0 646.0
Equity securities 1.0 2.1
Affiliates and subsidiaries 66.2 20.7
Real estate, property and equipment 1.3 .1
Cash of subsidiaries sold (4.6) -
Decrease (increase) in other investments (.1) .1
57.1 443.6
<PAGE>
Financing Activities:
Reductions of long-term debt (123.4) (89.4)
Additional long-term borrowings 52.0 -
Purchases of Common Stock - (87.6)
Cash dividends paid - (21.7)
Net advances to affiliates (24.8) (523.2)
Other, net - .1
(96.2) (721.8)
Net Decrease in Cash and Short-term Investments (43.1) (208.9)
Cash and short-term investments at beginning
of period 116.4 287.5
Cash and short-term investments at end of
period $ 73.3 $ 78.6
</TABLE>
4
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Mergers
In April 1995, American Premier Underwriters, Inc. ("APU")
became a wholly-owned subsidiary of American Financial Group,
Inc. ("AFG"), a new corporation formed by APU for the purpose
of acquiring all of the common stock of APU and American
Financial Corporation (the "Mergers"). Under the terms of
the Mergers, each share of APU Common Stock then outstanding
was converted into one share of AFG common stock, and all
shares of American Financial Corporation ("AFC") common stock
were exchanged for 28.3 million shares of AFG common stock.
As a result, all of the common stock of APU and AFC is owned
by AFG and AFG is APU's successor as the issuer of publicly
held common stock.
B. Accounting Policies
Basis of Presentation The accompanying consolidated
financial statements for APU are unaudited; however,
management believes that all adjustments (consisting only of
normal recurring accruals unless otherwise disclosed herein)
necessary for fair presentation have been made. The results
of operations for interim periods are not necessarily
indicative of results to be expected for the year. The
financial statements have been prepared in accordance with
the instructions to Form 10-Q and therefore do not include
all information and footnotes necessary to be in conformity
with generally accepted accounting principles.
Certain reclassifications have been made to prior years to
conform to the current year's presentation. All significant
intercompany balances and transactions have been eliminated.
All acquisitions have been treated as purchases. The results
of operations of companies since their formation or
acquisition are included in the consolidated financial
statements.
The preparation of the financial statements requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Changes in circumstances could cause actual results
to differ materially from those estimates.
<PAGE>
Investments Debt securities are classified as "held to
maturity" and reported at amortized cost if APU has the
positive intent and ability to hold them to maturity. Debt
and equity securities are classified as "available for sale"
and reported at fair value with unrealized gains and losses
reported as a separate component of shareholder's equity if
the securities are not classified as held to maturity or
bought and held principally for selling in the near term.
Only in certain limited circumstances, such as significant
issuer credit deterioration or if required by insurance or
other regulators, may a company change its intent to hold a
certain security to maturity without calling into question
its intent to hold other debt securities to maturity in the
future.
Premiums and discounts on mortgage-backed securities are
amortized over their expected average lives using the
interest method. Gains or losses on sales of securities are
recognized at the time of disposition with the amount of gain
or loss determined on the specific identification basis.
When a decline in the value of a specific investment is
considered to be other than temporary, a provision for
impairment is charged to earnings and the carrying value of
that investment is reduced.
APU's investments in equity securities of companies that are
20%-to 50%-owned by AFG and its subsidiaries are carried at
cost, adjusted for a proportionate share of their
undistributed earnings or losses.
5
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APU's investment in investee corporation reflects APU's 6%
ownership (3.2 million shares) of the common stock of
Chiquita Brands International, Inc. ("Chiquita") which is
accounted for under the equity method. AFG and its other
subsidiaries own an additional 37% of the common stock of
Chiquita. Chiquita is a leading international marketer,
producer and distributor of bananas and other quality fresh
and processed food products. The market value of APU's
investment in Chiquita was approximately $42.1 million at
June 30, 1996.
Short-term investments are carried at cost; loans receivable
are stated primarily at the aggregate unpaid balance.
Cost in Excess of Net Assets Acquired The excess of cost of
subsidiaries over APU's equity in the underlying net assets
("goodwill") is being amortized over 40 years.
APU's management continually monitors whether significant
changes in certain industry and regulatory conditions or
prolonged trends of declining profitability have occurred
which would lead APU to question the recoverability of the
carrying value of its goodwill. APU's evaluation of its
recorded goodwill would be based primarily on estimates of
future earnings, as well as all other available factors which
may provide additional evidence relevant to the assessment of
recoverability of its goodwill.
Insurance As discussed under "Reinsurance" below, unpaid
losses and loss adjustment expenses and unearned premiums
have not been reduced for reinsurance recoverable.
Reinsurance In the normal course of business, APU's
insurance subsidiaries cede reinsurance to other companies to
diversify risk and limit maximum loss arising from large
claims. To the extent that any reinsuring companies are
unable to meet obligations under the agreements covering
reinsurance ceded, APU's insurance subsidiaries would remain
liable. Amounts recoverable from reinsurers are estimated in
a manner consistent with the claim liability associated with
the reinsurance policies. APU's insurance subsidiaries
report as assets (a) the estimated reinsurance recoverable on
unpaid losses, including an estimate for losses incurred but
not reported, and (b) amounts paid to reinsurers applicable
to the unexpired terms of policies in force. APU's insurance
subsidiaries also assume reinsurance from other companies.
Income on reinsurance assumed is recognized based on reports
received from ceding reinsurers.
<PAGE>
Deferred Acquisition Costs Policy acquisition costs
(principally commissions, premium taxes and other
underwriting expenses) related to the production of new
business are deferred ("DPAC"). The deferral of acquisition
costs is limited based upon their recoverability without any
consideration for anticipated investment income. DPAC is
charged against income ratably over the term of the related
policies.
Unpaid Losses and Loss Adjustment Expenses The net
liabilities stated for unpaid claims and for expenses of
investigation and adjustment of unpaid claims are based upon
(a) the accumulation of case estimates for losses reported
prior to the close of the accounting period on the direct
business written; (b) estimates received from ceding
reinsurers and insurance pools and associations; (c)
estimates of unreported losses based on past experience; (d)
estimates based on experience of expenses for investigating
and adjusting claims, and (e) the current state of the law
6
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and coverage litigation. These liabilities are subject to
the impact of changes in claim amounts and frequency and
other factors. In spite of the variability inherent in such
estimates, management believes that the liabilities for
unpaid losses and loss adjustment expenses are adequate.
Changes in estimates of the liabilities for losses and loss
adjustment expenses are reflected in the Statement of
Earnings in the period in which determined.
Premium Recognition Premiums are earned over the terms of
the policies on a pro rata basis. Unearned premiums
represent that portion of premiums written which is
applicable to the unexpired terms of policies in force. On
reinsurance assumed from other insurance companies or written
through various underwriting organizations, unearned premiums
are based on reports received from such companies and
organizations.
Policyholder Dividends Dividends payable to policyholders
represent management's estimate of amounts payable on
participating policies which share in favorable underwriting
results. The estimate is accrued during the period in which
the related premium is earned. Changes in estimates are
included in income in the period determined. Policyholder
dividends do not become legal liabilities unless and until
declared by the boards of directors of the insurance
companies.
Income Taxes APU files a consolidated income tax return
which includes all 80%-owned U.S. subsidiaries and its parent
company, AFG. Deferred income taxes are calculated using the
liability method. Under this method, deferred income tax
assets and liabilities are determined based on differences
between financial reporting and tax bases and are measured
using enacted tax rates. Deferred tax assets are recognized
if it is more likely than not that a tax benefit will be
realized. An analysis of the likelihood of realizing tax
benefits is reviewed and updated periodically. Any
adjustments to deferred tax assets are made in the period in
which developments on which they are based become known.
Benefit Plans APU provides retirement benefits, primarily
through contributory and noncontributory defined contribution
plans. In addition, APU sponsors employee savings plans
under which APU matches a specified portion of contributions
made by eligible employees. Contributions to benefit plans
are charged against earnings during the period in which
employee wages, upon which the amount of such contributions
are based, are earned.
<PAGE>
Capital Surplus Adjustments to claims and contingencies
arising from events or circumstances preceding APU's 1978
reorganization are reflected in capital surplus if the
adjustments are not clearly attributable to post-
reorganization events or circumstances. Such pre-
reorganization claims and contingencies consist principally
of personal injury claims by former employees of APU's
predecessor and claims relating to the generation, disposal
or release into the environment of allegedly hazardous
substances arising out of railroad operations disposed of
prior to the 1978 reorganization.
Statement of Cash Flows For cash flow purposes, "investing
activities" are defined as making and collecting loans and
acquiring and disposing of debt or equity instruments and
property and equipment. "Financing activities" include
obtaining resources from owners and providing them with a
return on their investments, borrowing money and repaying
amounts borrowed. All other activities are considered
"operating". Short-term investments having original
maturities of three months or less when purchased are
considered to be cash equivalents for purposes of the
financial statements.
7
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
C. Divestitures
In March 1996, APU sold the stock of a subsidiary, Buckeye
Management Company ("Buckeye"), to an investment group
consisting of members of Buckeye's management and employees
for approximately $60 million in cash, net of transaction
costs. Buckeye holds, directly and indirectly, a 2% general
partnership interest in Buckeye Partners, L.P. which, through
its subsidiary entities, is an independent pipeline common
carrier of refined petroleum products. APU recorded a pretax
gain of approximately $53 million from the sale. The
Chairman of the Board and Chief Executive Officer of Buckeye
was also a director of APU, until resigning in March 1996.
In February 1995, APU sold its Apparatus unit, which
manufactured aerial lift trucks, for cash and notes of
approximately $13 million, net of expenses and post-closing
adjustments. A provision of $4.0 million for the anticipated
loss on this sale had been recorded in 1994.
<PAGE>
D. Long-term Debt
Long-term debt of APU consisted of the following (in
millions):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Parent Company:
Subordinated notes, 10-7/8%, due 2011 $ 27.8 $ 50.5
Subordinated notes, 10-5/8%, due 2000 95.4 113.0
Subordinated notes, 9-3/4%, due 1999 133.2 157.1
256.4 320.6
Subsidiaries:
Other 8.7 9.1
Total $265.1 $329.7
</TABLE>
During the first six months of 1996, APU repurchased $64.2
million of its subordinated notes for approximately $71.0
million which resulted in an extraordinary loss of $4.6
million.
In December 1995, Pennsylvania Company ("Pennco"), a
wholly-owned subsidiary of APU, entered into a new
collateralized five-year reducing revolving credit
agreement with several banks, under which it can borrow up
to $75 million. There were no borrowings outstanding
under this agreement at June 30, 1996 or December 31,
1995.
8
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
E. Capital Stock
APU is authorized to issue 200,000,000 shares of Common Stock.
At June 30, 1996 and December 31, 1995, there were 47,000,000
shares of Common Stock outstanding, all of which were owned by
AFG.
F. Cash Flows - Fixed Maturity Investments
"Investing activities" related to fixed maturity investments
in APU's Statement of Cash Flows consisted of the following
(in millions):
Held to Available
Maturity for Sale Total
1996
Purchases $ 11.6 $183.3 $194.9
Maturities and redemptions 25.2 32.3 57.5
Sales - 134.0 134.0
1995
Purchases $101.9 $109.3 $211.2
Maturities and redemptions 38.3 11.6 49.9
Sales - 646.0 646.0
G. Contingencies There have been no significant changes to the
matters discussed in Note K - "Contingencies" in APU's Annual
Report on Form 10-K for 1995. See Part II Item 1 - Legal
Proceedings (herein) for an update of the USX Litigation.
9
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
American Premier is organized as a holding company with almost
all of its operations being conducted by subsidiaries. The
parent corporation, however, has continuing cash needs for
administrative expenses, the payment of principal and interest
on borrowings and dividends on Common Stock. Thus, APU relies
primarily on dividends and tax payments from its subsidiaries
for funds to meet its obligations.
LIQUIDITY AND CAPITAL RESOURCES
Ratios The ratio of holding company (APU and Pennco) long-term
debt to total capital was 14% at June 30, 1996 compared to 17% at
December 31, 1995. APU's ratio of earnings to fixed charges on a
total enterprise basis was 4.89 (excluding the gain on sale of
subsidiary) for the first six months of 1996 compared to 3.35 for
the entire year of 1995.
Sources of Funds Management believes APU has sufficient
resources to meet its liquidity requirements through operations
in the short-term and long-term future. If funds generated from
operations, including dividends from subsidiaries, are
insufficient to meet fixed charges in any period, APU would be
required to generate cash through borrowings, sales of securities
or other assets, or similar transactions.
During 1995, APU entered into separate credit agreements with
AFG and AFC. Under such agreements, at June 30, 1996, amounts
receivable from AFC totaled $675 million (plus $19.5 million
of accrued interest), and amounts payable to AFG totaled $154
million (plus $2.6 million of accrued interest).
During the first quarter of 1996, APU and Pennco entered into
separate credit agreements with two AFC subsidiaries under
which aggregate loans are available to those subsidiaries of
up to $170 million. Loans made under the credit lines bear
interest at floating rates based on prime or LIBOR. At June
30, 1996, aggregate amounts outstanding under the credit lines
totaled $39.6 million (plus $1.7 million of accrued interest).
APU's federal income tax loss carryforward is available to
offset taxable income and, as a result, APU's requirement to
pay federal income tax for 1996 is substantially eliminated.
<PAGE>
Investments Approximately 94% of the bonds and redeemable
preferred stocks held by APU were rated "investment grade"
(credit rating of AAA to BBB) by nationally recognized rating
agencies at June 30, 1996. Investment grade securities
generally bear lower yields and lower degrees of risk than
those that are unrated and non-investment grade. Management
believes that the high quality investment portfolio should
generate a stable and predictable investment return.
10
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
RESULTS OF OPERATIONS
General Pretax earnings for the six months ended June 30, 1996
were $139.3 million, an increase of $91 million over the
comparable 1995 period. Results for 1996 include a $53 million
gain from the sale of Buckeye Management Company. Excluding the
Buckeye gain and net gains and losses realized on sales of
securities, pretax earnings increased $32.4 million due primarily
to a $12 million improvement in underwriting results, a $9
million increase in investment income (including equity in net
earnings of investee) and a $6 million decrease in interest expense.
Pretax earnings for the second quarter of 1996 increased $21.7
million from the second quarter of 1995, due primarily to a $16
million improvement in underwriting results, a $3 million
decrease in interest expense and a $2 million increase in
investment income.
Property and Casualty Insurance APU manages and operates its
property and casualty business as two major sectors. The
nonstandard automobile insurance companies ("NSA Group")
insure risks not typically accepted for standard automobile
coverage because of the applicant's driving record, type of
vehicle, age or other criteria. Republic Indemnity is engaged
in the sale of workers' compensation insurance in California
and, to a lesser extent, in Arizona. Workers' compensation
policies provide coverage for statutory prescribed benefits
that employers are required to pay employees who are injured
in the course of employment and for an employer's liability
for losses suffered by its employees which are not included
within the statutory prescribed workers' compensation
coverage.
Underwriting profitability is measured by the combined ratio
which is a sum of the ratios of underwriting expenses, losses,
loss adjustment expenses, and policyholder dividends to premiums.
When the combined ratio is under 100%, underwriting results are
generally considered profitable; when the ratio is over 100%,
underwriting results are generally considered unprofitable. The
combined ratio does not reflect investment income, other income
or federal income taxes.
<PAGE>
Results for APU's property and casualty insurance subsidiaries
are as follows (dollars in millions):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Written Premiums (GAAP)
NSA Group $264.3 $320.1 $535.5 $631.1
Republic Indemnity 55.3 72.4 114.7 163.5
Other Lines - - - 1.6
$319.6 $392.5 $650.2 $796.2
Combined Ratios (GAAP)
NSA Group 101.3% 107.3% 101.7% 104.2%
Republic Indemnity 84.4 85.5 88.3 91.3
Aggregate 98.4 102.8 99.5 101.2
</TABLE>
11
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
NSA Group For the second quarter and first six months of 1996,
net written premiums of the NSA Group decreased 17% and 15%,
respectively, from the comparable 1995 periods due primarily to
volume reductions resulting from significant rate increases
implemented in 1995 and early 1996. These rate increases
contributed to an improvement in the 1996 combined ratios over
the comparable 1995 periods. In addition, the 1995 combined
ratios were impacted by weather-related losses, principally from
hailstorms in Texas in late April and early May.
Republic Indemnity Net written premiums for Republic Indemnity
decreased 24% and 30% for the second quarter and first six months
of 1996, respectively, from the comparable 1995 periods due to
the continuing impact of the extremely competitive pricing
environment in the California workers' compensation market
resulting from the recently enacted open rating system. The
improvement in the 1996 combined ratio compared with the
comparable 1995 period was due to a reduction in policyholder
dividends and loss adjustment expenses, partially offset by an
increase in the loss ratio.
Investment Income Average investments declined 16% for the first
six months of 1996 compared with the same period in 1995,
reflecting the use of previously invested funds for advances to
affiliates and repurchases of debt. Investment income, however,
increased $7.8 million (8%) due to the higher rate of return
earned on funds advanced to affiliates compared to the short-term
investments in which they had been invested prior to the Mergers.
Investment income includes $41.1 million and $13.4 million earned
in 1996 and 1995, respectively, on amounts due from affiliates.
Investee Corporations Equity in net earnings of investee
corporations (companies in which AFG owns a significant portion
of the voting stock) represents APU's proportionate share of the
earnings of Chiquita Brands. APU purchased 3.2 million shares of
Chiquita common stock from AFC during the second quarter of 1995.
Interest on Borrowed Money Excluding interest expense of $4.9
million in 1996 on amounts due to affiliates, interest expense
decreased by $10.8 million (41%) for the six months ended June
30, 1996 from the comparable 1995 period. The decrease reflects
a 48% reduction in long-term debt resulting from the repurchase
of subordinated notes during the last nine months of 1995 and
first six months of 1996.
12
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
PART II
OTHER INFORMATION
ITEM 1
Legal Proceedings
Reference is made to Item 3 - "Legal Proceedings" of APU's
Annual Report on Form 10-K for 1995 for a description of an
action filed against APU by USX Corporation and one of its former
subsidiaries. In May 1996, the U.S. Supreme Court declined to
hear APU's petition with respect to the bankruptcy bar issue, thereby
permitting USX's lawsuits to proceed. APU and its outside counsel
continue to believe that APU has substantial defenses to these
lawsuits, besides the bankruptcy bar issue, and should not suffer a
material loss as a result of this litigation.
ITEM 6
Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
27 Financial Data Schedule - Included in Report
filed electronically with the Securities and
Exchange Commission.
(b) Report on Form 8-K: None
______________________________________________________________
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, American Premier Underwriters, Inc. has duly caused this
Report to be signed on its behalf by the undersigned duly
authorized.
American Premier Underwriters, Inc.
August 14, 1996 BY: /s/ Fred J. Runk
Fred J. Runk
Senior Vice President and Treasurer
13
<PAGE>
[ARTICLE] 7
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] JUN-30-1996
[DEBT-HELD-FOR-SALE] 1,498,200
[DEBT-CARRYING-VALUE] 318,700
[DEBT-MARKET-VALUE] 316,400
[EQUITIES] 47,000<F1>
[MORTGAGE] 0
[REAL-ESTATE] 8,000
[TOTAL-INVEST] 1,906,300<F2>
[CASH] 73,300
[RECOVER-REINSURE] 5,100
[DEFERRED-ACQUISITION] 84,200
[TOTAL-ASSETS] 3,797,900
[POLICY-LOSSES] 1,133,000
[UNEARNED-PREMIUMS] 408,000
[POLICY-OTHER] 0
[POLICY-HOLDER-FUNDS] 37,300
[NOTES-PAYABLE] 265,100
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 47,000
[OTHER-SE] 1,533,900
[TOTAL-LIABILITY-AND-EQUITY] 3,797,900
[PREMIUMS] 677,500
[INVESTMENT-INCOME] 109,500
[INVESTMENT-GAINS] 6,700
[OTHER-INCOME] 62,700<F3>
[BENEFITS] 512,300
[UNDERWRITING-AMORTIZATION] 0
[UNDERWRITING-OTHER] 161,200
[INCOME-PRETAX] 139,300<F4>
[INCOME-TAX] (55,000)
[INCOME-CONTINUING] 84,300
[DISCONTINUED] 0
[EXTRAORDINARY] (4,600)
[CHANGES] 0
[NET-INCOME] 79,700
[EPS-PRIMARY] 0<F5>
[EPS-DILUTED] 0<F5>
[RESERVE-OPEN] 1,195,000
[PROVISION-CURRENT] 0
[PROVISION-PRIOR] 0
[PAYMENTS-CURRENT] 0
[PAYMENTS-PRIOR] 0
[RESERVE-CLOSE] 0
[CUMULATIVE-DEFICIENCY] 0
<FN>
<F1> Includes an investment in investee of $43.7 million.
<F2> Includes loans receivable of $30.3 million and other investments
of $4.1 million.
<F3> Includes equity in net earnings of investee of $3.0 million,
gain on sale of subsidiry of $53.1 million and other income
of $6.6 million.
<F4> Includes policyholder dividends of $.4 million, interest charges
on borrowed money of $20.4 million and other operating and
general expenses of $22.8 million.
<F5> Not applicable since all common shares are owned by American
Financial Group, Inc.
</FN>
</TABLE>
