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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 16, 1998
FRONTIER INSURANCE GROUP, INC.
(Exact name of registrant as specified in charter)
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<S> <C> <C>
DELAWARE 0-15022 14-1681606
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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195 Lake Louise Marle Road, Rock Hill, New York 12775-8000
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (914) 796-2100
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 2 Pages
Exhibit Index Located on Page 2
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ITEM 5. OTHER EVENTS
On December 16, 1998, Frontier Insurance Group, Inc. issued a press release
announcing reserve strengthening, reinsurance and restructuring charges
aggregating $150,000,000 pre-tax. A copy of the press release is attached
hereto as Schedule A.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRONTIER INSURANCE GROUP, INC.
(Registrant)
By: /s/ Harry W. Rhulen
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Harry W. Rhulen
President and Chief Executive Officer
Dated: December 16, 1998
(2)
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NEWS
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[LOGO] Rock Hill, NY 12775-8000 (914) 796-2100
http://www.ftr.com
FOR IMMEDIATE RELEASE
CONTACT: PATRICK KENNY, Executive Vice President--Finance
1-800-836-2100, Ext. 5872
FRONTIER ANNOUNCES RESERVE, REINSURANCE AND RESTRUCTURING CHARGES
Rock Hill, New York, December 16, 1998...Frontier Insurance Group, Inc.
(Frontier) (NYSE-FTR) today announced a $139 million pre-tax reserve
strengthening charge, an $8 million reinsurance charge and a $3 million charge
for restructuring health care operations. These charges, totaling $150 million
pre-tax ($2.18, net of tax, diluted loss per share), will be realized in the
fourth quarter of 1998 and will result in a loss for the year.
RESERVE STRENGTHENING
The reserve strengthening charge of $139 million relates to the medical
malpractice operations and consists of $22.0 million for increased loss
adjustment expense reserves for 1994 and prior years, $69.5 million for
increased loss reserves over the amounts available under the Centre Re Stop
Loss Treaties for the years 1995 through 1997, and $47.5 for increased loss
reserves over the amounts available under the Centre Re Treaty for 1998.
REINSURANCE CHARGE
The reinsurance related charge of $8 million is attributable to the termination
at midnight, December 31, 1998 of the Centre Re 1998-1999 Stop Loss Treaty.
The Treaties for 1995 through 1998 will remain in runoff under existing terms
and conditions.
RESTRUCTURING
The $3 million charge for restructuring the health care operation reflects
anticipated costs from the closing of the Bedford Hills, New York office.
As previously disclosed, 35 persons have been terminated. Continuing health
care operations will be concentrated in the Rock Hill and Houston offices to
improve efficiencies and more closely control underwriting.
Chief Executive Officer, Harry Rhulen, stated, "With these charges, we have
'paid the bill' for past over emphasis on growth. Importantly, we have
provided further evidence of our commitment to maintain reserves at the best
estimate and produce a strong balance sheet with quality earnings. We are
-more-
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determined to position Frontier to be the finest specialty insurance group
in the country. We have a superior strategy, have attracted top level
management, have implemented strong financial controls and look to the future
with confidence."
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1996: The statements which are not historical facts contained in this report
are forward looking statements that involve risks and uncertainties, including,
but not limited to, product and policy demand and market response risks, the
effect of economic conditions, the impact of competitive products, policies
and pricing, product and policy development, regulatory changes and conditions,
rating agency policies and practices, development of claims and the effect on
loss reserves, the performance of reinsurance companies under reinsurance
contracts with the company, investment portfolio developments and reaction
to market conditions, the results of financing efforts, the actual closing of
contemplated transactions and agreements, the effect of the company's
accounting policies, and other risks detailed in the company's Securities and
Exchange Commission filings. No assurance can be given that the actual results
of operations and financial condition will conform to the forward-looking
statements contained herein.
Frontier is an insurance holding company, which through its subsidiaries, is
a national underwriter and creator of specialty insurance products serving
the needs of insureds in niche markets.
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