SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999.
-------------------
OR
[ ] 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 0-14697
-------------
HARLEYSVILLE GROUP INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0241172
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
355 MAPLE AVENUE, HARLEYSVILLE, PENNSYLVANIA 19438-2297
-----------------------------------------------------------
(Address of principal executive offices, including zip code)
(215) 256-5000
-------------------------------------------------
(Registrant's telephone number, including area code)
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 .
----- -----
At May 3, 1999 29,295,525 shares of common stock of
Harleysville Group Inc. were outstanding.
1
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
INDEX
Page Number
-----------
Part I - Financial Information
Consolidated Balance Sheets - March 31, 1999
and December 31, 1998 3
Consolidated Statements of Income - For the
three months ended March 31, 1999 and 1998 4
Consolidated Statement of Shareholders' Equity -
For the three months ended March 31, 1999 5
Consolidated Statements of Cash Flows -
For the three months ended March 31, 1999
and 1998 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Results
of Operations and Financial Condition 12
Part II - Other Information 16
2
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
(Unaudited)
ASSETS
------
Investments:
Fixed maturities:
Held to maturity, at amortized
cost (fair value $665,285
and $680,371) $ 632,350 $ 638,319
Available for sale, at fair
value (amortized cost $719,898
and $716,325) 745,326 751,293
Equity securities, at fair value
(cost $99,561 and $95,797) 188,127 174,932
Short-term investments, at cost,
which approximates fair value 13,660 15,022
---------- ----------
Total investments 1,579,463 1,579,566
Cash 4,129 3,799
Receivables:
Premiums 91,322 91,256
Reinsurance 85,276 84,179
Accrued investment income 21,482 22,134
---------- ----------
Total receivables 198,080 197,569
Deferred policy acquisition costs 81,571 78,984
Prepaid reinsurance premiums 11,384 12,108
Property and equipment, net 25,270 25,051
Deferred income taxes 5,265 3,604
Other assets 34,727 33,816
---------- ----------
Total assets $1,939,889 $1,934,497
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Unpaid losses and loss
settlement expenses $ 888,992 $ 893,420
Unearned premiums 327,307 317,772
Accounts payable and accrued expenses 83,763 83,735
Debt 97,140 97,140
Due to affiliate 2,741 12,772
---------- ----------
Total liabilities 1,399,943 1,404,839
---------- ----------
Shareholders' equity:
Preferred stock, $1 par value, authorized
1,000,000 shares; none issued
Common stock, $1 par value, authorized
80,000,000 shares; issued and
outstanding 29,270,538 and
29,150,518 shares 29,271 29,151
Additional paid-in capital 121,338 119,302
Accumulated other comprehensive income 74,096 74,167
Retained earnings 315,241 307,038
---------- ----------
Total shareholders' equity 539,946 529,658
---------- ----------
Total liabilities and
shareholders' equity $1,939,889 $1,934,497
========== ==========
See accompanying notes to consolidated financial statements.
3
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(dollars in thousands, except per share data)
1999 1998
--------- --------
Revenues:
Premiums earned $169,827 $162,632
Investment income, net of
investment expense 21,526 21,235
Realized investment gains 4,810 3,648
Other income 3,513 2,990
-------- --------
Total revenues 199,676 190,505
-------- --------
Losses and expenses:
Losses and loss settlement expenses 119,846 116,291
Amortization of deferred policy
acquisition costs 43,551 41,112
Other underwriting expenses 15,358 13,298
Interest expense 1,561 1,640
Other expenses 1,149 885
-------- --------
Total expenses 181,465 173,226
-------- --------
Income before income taxes and
cumulative effect of accounting
change 18,211 17,279
Income taxes 3,446 3,377
-------- --------
Income before cumulative effect
of accounting change 14,765 13,902
Cumulative effect of accounting change,
net of income tax (2,904)
-------- --------
Net income $ 11,861 $ 13,902
======== ========
Per common share:
Basic:
Income before cumulative effect of
accounting change $ .51 $ .48
Cumulative effect of accounting
change, net of income tax (.10)
-------- --------
Net income $ .41 $ .48
======== ========
Diluted:
Income before cumulative effect of
accounting change $ .50 $ .47
Cumulative effect of accounting
change, net of income tax (.10)
-------- --------
Net income $ .40 $ .47
======== ========
Cash dividend $ .125 $ .115
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(dollars in thousands)
<TABLE>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
PAID-IN COMPREHENSIVE RETAINED
SHARES AMOUNT CAPITAL INCOME EARNINGS TOTAL
---------- ------- ---------- ------------- -------- --------
<CAPTION>
<S>
Balance,
Dec. 31,
<S> <C> <C> <C> <C> <C> <C>
1998 29,150,518 $29,151 $119,302 $74,167 $307,038 $529,658
--------
Net income 11,861 11,861
Other compre-
hensive income,
net of tax:
Unrealized
investment
losses, net of
reclassi-
fication
adjustment (71) (71)
--------
Comprehensive
income 11,790
--------
Issuance of
common stock 120,020 120 2,036 2,156
Cash dividend
paid (3,658) (3,658)
---------- ------- -------- ------- -------- --------
Balance,
Mar. 31,
1999 29,270,538 $29,271 $121,338 $74,096 $315,241 $539,946
========== ======= ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(in thousands)
1999 1998
-------- --------
Cash flows from operating activities:
Net income $ 11,861 $ 13,902
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cumulative effect of accounting
change, net of income tax 2,904
Change in receivables, unearned
premiums, prepaid reinsurance
and due to affiliate (283) (4,177)
Increase (decrease) in unpaid
losses and loss settlement
expenses (4,428) 12,632
Deferred income taxes 565 (1,520)
Increase in deferred policy
acquisition costs (2,587) (1,592)
Amortization and depreciation 683 618
Gain on sale of investments (4,810) (3,648)
Other, net (6,202) 16,146
Cash from change in intercompany
pooling agreement 14,962
-------- --------
Net cash provided (used) by
operating activities (2,297) 47,323
-------- --------
Cash flows from investing activities:
Fixed maturity investments:
Purchases (44,205) (81,890)
Sales or maturities 47,542 40,961
Equity securities:
Purchases (6,781) (9,097)
Sales 7,040 8,711
Net sales of short-term investments 1,362 17,133
Purchase of property and equipment (829) (396)
-------- --------
Net cash provided (used) by
investing activities 4,129 (24,578)
-------- --------
Cash flows from financing activities:
Issuance of common stock 2,156 2,598
Dividend paid (3,658) (3,328)
-------- --------
Net cash used by
financing activities (1,502) (730)
-------- --------
Increase in cash 330 22,015
Cash at beginning of period 3,799 1,460
-------- --------
Cash at end of period $ 4,129 $ 23,475
======== ========
See accompanying notes to consolidated financial statements.
6
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - Basis of Presentation
The financial information for the interim periods
included herein is unaudited; however, such information
reflects all adjustments which are, in the opinion of
management, necessary to a fair presentation of the
financial position, results of operations, and cash
flows for the interim periods. The results of
operations for interim periods are not necessarily
indicative of results to be expected for the full year.
These financial statements should be read in
conjunction with the financial statements and notes for
the year ended December 31, 1998 included in the
Company's 1998 Annual Report filed with the Securities
and Exchange Commission on Form 10-K.
2 - Changes in Accounting Principles
(a) Guaranty-Fund and Other Insurance-Related Assessments
In 1997, the American Institute of Certified
Public Accountants (AICPA) issued Statement of Position
(SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments," which
provides guidance for determining when to recognize,
and how to determine, a liability for guaranty-fund and
other insurance-related assessments. Effective January
1, 1999, the Company adopted SOP 97-3 and recorded a
charge of $2,904,000, net of a tax benefit of
$1,564,000, as the cumulative effect of the accounting
change. Prior period financial statements have not
been restated and pro forma effects of retroactive
application are not material.
(b) Costs of Internal Use Software
In March 1998, the AICPA issued SOP 98-1,
"Accounting for Costs of Computer Software Developed or
Obtained for Internal Use." The SOP requires that
certain costs related to the development or purchase of
internal-use software be capitalized and amortized over
the estimated useful life of the software. This SOP
also requires that costs related to the preliminary
project stage and the post implementation/operations
stage in an internal-use computer software development
project be expensed as incurred. Effective January 1,
1999, the Company adopted SOP 98-1 and accordingly has
capitalized costs of $144,000 in the first quarter of
1999. Prior period financial statements have not been
restated.
7
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3 - Earnings Per Share
The computation of basic and diluted earnings per
share is as follows for the three months ended March
31:
1999 1998
---------- ----------
(dollars in thousands,
except per share data)
Numerator for basic
and diluted earnings
per share:
Net income $ 11,861 $ 13,902
======== ========
Denominator for basic
earnings per share --
weighted average
shares outstanding 29,236,828 28,912,067
Effect of stock
incentive plans 399,468 556,009
---------- ----------
Denominator for
diluted earnings
per share 29,636,296 29,468,076
========== ==========
Basic earnings
per share $ .41 $ .48
======= ========
Diluted earnings
per share $ .40 $ .47
======= ========
8
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4 - Reinsurance
Premiums earned are net of amounts ceded of $11,233,000 and
$9,870,000 for the three months ended March 31, 1999 and 1998,
respectively. Losses and loss settlement expenses are net of
amounts ceded of $10,589,000 and $10,539,000 for the three months
ended March 31, 1999 and 1998, respectively. Such amounts do not
include the reinsurance transactions with Mutual under the
pooling arrangement.
Harleysville Group has a reinsurance agreement with
Harleysville Mutual Insurance Company (Mutual) whereby Mutual
reinsures accumulated catastrophe losses in a quarter up to
$14,400,000 ($16,200,000 in 1998) in excess of $3,600,000
($1,800,000 in 1998) in return for a reinsurance premium. The
agreement excludes catastrophe losses resulting from earthquakes
or hurricanes, and supplements the existing external catastrophe
reinsurance program. Harleysville Group ceded premiums earned of
$1,596,000 and $684,000 and losses incurred of $6,092,000 and
$4,607,000 to Mutual for the three months ended March 31, 1999
and 1998, respectively.
Harleysville Group cedes business to and assumes business
from Mutual under a reinsurance pooling agreement. Because this
agreement does not relieve Harleysville Group of primary
liability as the originating insurer, there is a concentration of
credit risk arising from business ceded to Mutual. However, the
reinsurance pooling agreement provides for the right of offset
and the net balance with Mutual is a liability at March 31, 1999
and December 31, 1998. Mutual has an A. M. Best rating of "A"
(Excellent) and, in accordance with certain state regulatory
requirements, maintained $345.7 million (fair value) of
investments in a trust account to secure liabilities under the
reinsurance pooling agreement at March 31, 1999.
5 - Cash Flows
There were cash tax payments of $1,273,000 in the first
quarter of 1999. There were no cash tax payments in the first
quarter of 1998. Cash interest payments of $239,000 and $311,000
were made in the first quarter of 1999 and 1998, respectively.
9
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6 - Segment Information
The performance of the personal lines and commercial lines
is evaluated based upon underwriting results as determined under
statutory accounting practices (SAP) for the total pooled
business of Harleysville Group and Mutual. The following tables
reflect the total pooled business. The eliminations reflect the
share of the total pooled business not retained by Harleysville
Group and the effect of the catastrophe reinsurance agreement
between Harleysville Group and Mutual.
Financial data by segment is as follows for the three months
ended March 31, 1999 and 1998:
1999 1998
-------- --------
(in thousands)
Revenues:
Premiums earned:
Commercial lines $147,477 $135,157
Personal lines 90,610 91,670
Eliminations (68,260) (64,195)
-------- --------
Total premiums earned 169,827 162,632
Net investment income 21,526 21,235
Realized investment gains 4,810 3,648
Other 3,513 2,990
-------- --------
Total revenues $199,676 $190,505
======== ========
Income before income taxes and
cumulative effect of accounting
change:
Underwriting loss:
Commercial lines $(18,276) $(19,870)
Personal lines (3,829) 2,001
Eliminations 10,992 8,972
-------- --------
SAP underwriting loss (11,113) (8,897)
GAAP adjustments 2,185 828
-------- --------
GAAP underwriting loss (8,928) (8,069)
Net investment income 21,526 21,235
Realized investment gains 4,810 3,648
Other 803 465
-------- --------
Income before income taxes and
cumulative effect of accounting
change $ 18,211 $ 17,279
======== ========
10
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7 - Comprehensive Income
Comprehensive income for the three months ended March 31,
1999 and 1998 consisted of the following (all amounts are net of
taxes):
1999 1998
-------- --------
(in thousands)
Net income $11,861 $13,902
Other comprehensive income:
Unrealized investment holding
gains arising during period 3,037 10,856
Less:
Reclassification adjustment
for gains included in net
income (3,108) (2,328)
------- -------
Net unrealized investment
gains (losses) (71) 8,528
------- -------
Comprehensive income $11,790 $22,430
======= =======
11
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Premiums earned increased $7.2 million during the three
months ended March 31, 1999 as compared to the three months ended
March 31, 1998. The increase is primarily due to an increase in
premiums earned for commercial lines partially offset by a
decline in personal lines premiums earned and a $0.9 million
increase in premiums ceded under the catastrophe reinsurance
agreement with Mutual.
Investment income increased $0.3 million for the three
months ended March 31, 1999 resulting from an increase in
invested assets partially offset by a lower yield on the
investment portfolio.
Realized investment gains were $1.2 million higher for the
three months ended March 31, 1999 compared to the same prior year
quarter primarily resulting from sales of equity securities at
greater gains.
Income before income taxes and cumulative effect of
accounting change increased $0.9 million for the three months
ended March 31, 1999, primarily due to higher investment income
and higher realized gains partially offset by a higher
underwriting loss. Harleysville Group's statutory combined ratio
increased to 104.5% for the three months ended March 31, 1999
from 104.0% for the three months ended March 31, 1998 primarily
due to greater net catastrophe losses. Losses ceded under the
aggregate catastrophe reinsurance agreement with Mutual increased
by $1.5 million for the three months ended March 31, 1999 and net
catastrophe losses increased $1.8 million due to the higher
retention on such agreement.
The income tax expense for each of the three month periods
ended March 31, 1999 and 1998 includes the tax benefit of tax-
exempt investment income of $3.0 million and $2.7 million,
respectively.
The cumulative effect of accounting change reflects the
effect of adopting a new accounting standard related to the
treatment of insurance-related assessments as described in Note 2
of Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Operating activities used $2.3 million of net cash and
provided $47.3 million of net cash for the three months ended
March 31, 1999 and 1998, respectively. The change primarily is
from a decline of $20.6 million in cash held as collateral for
security lending transactions, and by the effect of the
1998
12
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
amendment to the pooling agreement with Mutual. A cash transfer
of $15.0 million was received, effective January 1, 1998, by
Harleysville Group related to the various liabilities assumed in
connection with such amendment.
Investing activities provided $4.1 million of net cash and
used $24.6 million of net cash for the three months ended
March 31, 1999 and 1998, respectively. The change is primarily
due to the change in cash used by operating activities.
Net cash used by financing activities increased $0.8 million
for the three months ended March 31, 1999 primarily due to a
decrease in the issuance of common stock and an increase in
dividends paid.
Harleysville Group Inc. maintained $4.7 million of cash and
investments at the holding company level at March 31, 1999 which
are available for general corporate purposes including dividends,
debt service, capital contributions to subsidiaries and
acquisitions. The Company has no material commitments for
capital expenditures as of March 31, 1999.
Year 2000
Harleysville Group began assessing its information
technology (IT) systems in 1996 and developed plans to ensure
their functionality with respect to the year 2000 millennium
change. These plans contain four major phases: remediation,
certification testing, enterprise testing and street testing.
The major part of the remediation phase involved modifying
our basic transaction processing systems that include the policy
issuance, billing and claims systems. The remediation phase was
completed during the fourth quarter of 1998.
The certification testing phase began in the third quarter
of 1998 and was essentially completed in the first quarter of
1999. This phase involved testing each system using aged data and
critical future dates in a separate year 2000 compliant
environment and remediating any problems that arise.
Harleysville Group did not encounter any significant problems
during certification testing and all problems identified have
been remediated.
The enterprise testing phase is scheduled to begin in the
second quarter of 1999 and involves testing hardware and
operating system software running in concert with each other
using critical future dates. It is expected to be essentially
completed during the second quarter of 1999.
13
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
The street testing phase involves testing Harleysville
Group's IT systems with third parties and is scheduled for the
second quarter of 1999, but the exact timing is dependent upon
the readiness of the third parties. Harleysville Group has
identified and communicated with all of the third parties
identified.
Harleysville Group has non-IT systems that include embedded
technology such as office equipment and building systems.
Harleysville Group has inventoried the non-IT systems and has
either tested or communicated with vendors and landlords
regarding year 2000 readiness for essentially all of the non-IT
systems. Harleysville Group currently does not expect any
material impact to its business, results of operations or
financial condition from the failure of non-IT systems.
Harleysville Group's expenses since 1996 to address year
2000 issues were approximately $3.4 million as of March 31, 1999
and consisted primarily of costs of internal resources.
Estimated remaining costs to complete the year 2000 work are
currently $0.2 million.
Harleysville Group's year 2000 plans provide for time to
correct problems encountered in the testing phases. Harleysville
Group is continually assessing the most reasonably likely worst
case year 2000 scenario, which is currently believed to be that
problems encountered in the remaining testing are worse than
expected and systems readiness is delayed. Under such a
scenario, the contingency plan is to devote more internal
resources to solving such problems in a timely manner so that
delays in processing transactions are avoided or minimized.
Harleysville Group has risk that third parties will suffer
year 2000 problems. As most of Harleysville Group's computer
systems have been internally developed, Harleysville Group is not
significantly dependent on third party vendors for year 2000
compliance. Of the independent agents that interface
electronically with Harleysville Group, almost all either
utilize, or have access to, a system for which the remediation
and certification testing phases are complete. Some information
used in underwriting policies and adjusting claims, such as motor
vehicle reports, rating information and crime data bases, is
generally obtained electronically. Investment portfolio pricing
information and bank statement information is obtained
electronically. Harleysville Group is communicating with and
monitoring the year 2000 progress of such third parties and will
decide on contingency plans in mid-1999.
14
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Harleysville Group is also communicating with and monitoring the
year 2000 readiness of other third parties it does business with
but with which it does not exchange data electronically. To the
extent that any of these third parties appear not to be year 2000
ready, Harleysville Group will make contingency plans dependent
upon the facts and circumstances of each third party.
Harleysville Group has risk that claims related to year 2000
issues will be made under insurance policies that it underwrites.
Harleysville Group has concluded that its policies do not
generally provide coverage for losses relating to year 2000
issues and has issued endorsements further clarifying this
exclusion. However, due in part to the potential for judicial
decisions which expand policies to cover risks that were not
contemplated by the policy, which in turn may produce
unanticipated claims at this point in time, the amount of any
potential year 2000 coverage liabilities is not determinable.
This year 2000 disclosure contains statements which are
forward-looking statements that involve risks and uncertainties
and qualify for the statutory safe harbor under the Private
Securities Litigation Reform Act of 1995. Future year 2000
readiness activities may not adhere to the anticipated schedule
and cost estimations because: more problems may be encountered
than anticipated in the various stages of testing and trained
personnel may not be available to work on internal systems in the
time required; or there may be unexpected problems with the
readiness of third party business partners and vendors who cannot
produce services; or utility companies may not be able to provide
the vital services required to maintain operations.
15
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings - None
ITEM 2. Changes in Securities - None
ITEM 3. Defaults Upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of Harleysville Group
Inc. was held on April 28, 1999 (the "Annual Meeting" or
"Meeting"), with the following result:
The total number of shares represented at the Annual
Meeting in person or by proxy was 28,106,097 of the
29,261,311 shares of common stock outstanding and
entitled to vote at the Meeting.
On the resolution to elect Walter R. Bateman and William
E. Strasburg as class "C" Directors to serve until the
expiration of their respective terms and until their
successors are duly elected, the nominees for Director
received the number of votes set forth opposite their
respective names:
Number of Votes
------------------------
For Withheld
---------- --------
Walter R. Bateman 28,053,386 52,711
William E. Strasburg 28,041,067 65,030
There were no abstentions or broker non-votes recorded.
On the basis of the above vote, Walter R. Bateman and
William E. Strasburg were elected as class "C" Directors
to serve until the expiration of their respective terms
and until their successors are duly elected.
On the resolution to approve the year 2000 Directors'
Stock Option Program, there were 27,118,155 votes for
the resolution, 941,926 votes against the resolution and
46,016 votes abstaining.
16
<PAGE>
HARLEYSVILLE GROUP INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
(Continued)
ITEM 5. Other Information - None
ITEM 6. a. Exhibits - None
b. Reports on Form 8-K - None
SIGNATURE
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.
HARLEYSVILLE GROUP INC.
Date: May 13, 1999 /s/BRUCE J. MAGEE
--------------- -------------------------------
Bruce J. Magee
Senior Vice President and
Chief Financial Officer
(principal financial officer and
principal accounting officer)
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000792013
<NAME> HARLEYSVILLE GROUP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 745,326
<DEBT-CARRYING-VALUE> 632,350
<DEBT-MARKET-VALUE> 665,285
<EQUITIES> 188,127
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,579,463
<CASH> 4,129
<RECOVER-REINSURE> 3,759
<DEFERRED-ACQUISITION> 81,571
<TOTAL-ASSETS> 1,939,889
<POLICY-LOSSES> 888,992
<UNEARNED-PREMIUMS> 327,307
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 97,140
0
0
<COMMON> 29,271
<OTHER-SE> 510,675
<TOTAL-LIABILITY-AND-EQUITY> 1,939,889
169,827
<INVESTMENT-INCOME> 21,526
<INVESTMENT-GAINS> 4,810
<OTHER-INCOME> 3,513
<BENEFITS> 119,846
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