<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- --- THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
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 1-7080
RELIANCE FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0113548
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 909-1100
The Registrant meets the requirements and conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with
reduced disclosure as permitted thereunder.
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
--- ---
As of August 1, 1997, 1,000 shares of common stock of Reliance Financial
Services Corporation were outstanding.
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RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
I N D E X
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<TABLE>
<CAPTION>
Page
No.
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statement of Operations for the Quarters and Six-Month
Periods Ended June 30, 1997 and 1996 (Unaudited)............................................ 2
Consolidated Balance Sheet at June 30, 1997 (Unaudited) and
December 31, 1996........................................................................... 3
Consolidated Statement of Changes in Shareholder's Equity for the
Six-Month Period Ended June 30, 1997 (Unaudited)............................................ 4
Consolidated Condensed Statement of Cash Flows for the Six-Month
Periods Ended June 30, 1997 and 1996 (Unaudited)............................................ 5
Notes to Consolidated Financial Statements (Unaudited)........................................... 6
Item 2. Management's Discussion and Analysis of the Consolidated
Statement of Operations ............................................................ 8
PART II. OTHER INFORMATION, AS APPLICABLE............................................................ 12
SIGNATURES................................................................................................ 13
</TABLE>
<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
--------- ----------- ----------- ----------
=======================================================================================================
(In thousands)
<S> <C> <C> <C> <C>
Revenues:
Premiums earned ............................... $ 689,929 $ 636,752 $ 1,332,124 $1,246,619
Net investment income ......................... 70,644 70,443 144,923 141,160
Gain on sales of investments .................. 13,431 18,936 28,735 23,404
Interest income from parent company ........... 2,424 5,144 8,219 10,098
Other ......................................... 63,705 40,048 112,198 77,597
--------- ----------- ----------- ----------
840,133 771,323 1,626,199 1,498,878
--------- ----------- ----------- ----------
Claims and expenses:
Policy claims and settlement expenses ......... 326,036 440,360 645,262 757,067
Policy acquisition costs ...................... 116,663 104,449 223,063 200,019
Interest ...................................... 5,066 5,084 10,158 10,208
Other insurance expenses ...................... 243,003 230,246 466,065 440,171
Other ......................................... 63,610 39,573 112,590 76,719
--------- ----------- ----------- ----------
754,378 819,712 1,457,138 1,484,184
--------- ----------- ----------- ----------
Income (loss) before income taxes and equity
in investee company ....................... 85,755 (48,389) 169,061 14,694
Income tax (provision) benefit ................ (27,200) 19,800 (53,600) 100
Equity in investee company .................... 2,350 2,912 3,904 4,936
--------- ----------- ----------- ----------
Income (loss) from continuing operations ...... 60,905 (25,677) 119,365 19,730
Litigation settlement of discontinued operation -- -- (7,500) --
--------- ----------- ----------- ----------
Net income (loss) ............................. $ 60,905 $ (25,677) $ 111,865 $ 19,730
========= =========== =========== ==========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30 December 31
ASSETS 1997 1996
============================================================================================
(Dollars in thousands, except per share amount)
<S> <C> <C>
Marketable securities:
Fixed maturities held for investment - at amortized cost
(quoted market $814,335 and $801,738) ............... $ 802,585 $ 787,836
Fixed maturities available for sale - at quoted market
(amortized cost $2,558,810 and $2,595,929) .......... 2,588,352 2,623,669
Equity securities - at quoted market (cost $420,989
and $436,053) ....................................... 719,923 716,606
Short-term investments ................................. 174,430 319,165
Cash ........................................................ 44,746 38,520
Premiums receivable ......................................... 1,271,562 1,104,331
Other accounts and notes receivable ......................... 150,431 137,293
Reinsurance recoverables .................................... 3,944,321 3,576,953
Federal and foreign income taxes, including deferred taxes .. -- 4,390
Notes receivable from parent company ........................ -- 202,272
Investments in real estate - at cost, less accumulated
depreciation ........................................... 273,282 275,237
Investment in investee company .............................. 159,295 157,894
Deferred policy acquisition costs ........................... 230,643 215,438
Other assets ................................................ 417,209 351,016
------------ ------------
$ 10,776,779 $ 10,510,620
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
============================================================================================
Unearned premiums ........................................... $ 1,659,426 $ 1,468,299
Unpaid claims and related expenses .......................... 6,738,987 6,530,258
Accounts payable and accrued expenses ....................... 488,317 529,047
Reinsurance ceded premiums payable .......................... 384,388 365,412
Federal and foreign income taxes, including deferred taxes .. 21,759 --
Senior reset notes .......................................... 15,365 15,365
Term loans and short-term debt .............................. 227,542 224,167
------------ ------------
9,535,784 9,132,548
------------ ------------
Contingencies and commitments
Shareholder's equity:
Common stock, par value $.10 per share, 1,000 shares
authorized, issued and outstanding .................. -- --
Additional paid-in capital ............................. 678,483 677,969
Retained earnings ...................................... 377,933 526,340
Net unrealized gain on investments ..................... 211,549 198,786
Net unrealized loss on foreign currency translation .... (26,970) (25,023)
------------ ------------
1,240,995 1,378,072
------------ ------------
$ 10,776,779 $ 10,510,620
============ ============
</TABLE>
See notes to consolidated financial statements
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<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Net
Unrealized
Net Loss on
Additional Unrealized Foreign
Common Paid-In Retained Gain on Currency Shareholder's
Stock Capital Earnings Investments Translation Equity
=============================================================================================================
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 ... $ -- $ 677,969 $ 526,340 $ 198,786 $ (25,023) $ 1,378,072
Transactions of investee
company ............... 514 (479) 35
Net income ................. 111,865 111,865
Dividends .................. (260,272) (260,272)
Appreciation after deferred
income taxes .......... 13,242 13,242
Foreign currency translation (1,947) (1,947)
------ ---------- --------- ----------- ----------- -------------
Balance, June 30, 1997 ..... $ -- $ 678,483 $ 377,933 $ 211,549 $ (26,970) $ 1,240,995
====== ========== ========= =========== =========== =============
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30 1997 1996
================================================================================
(In thousands)
CASH FLOWS USED BY OPERATING ACTIVITIES .......... $ (87,009) $ (20,837)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of:
Fixed maturities available for sale .......... 273,195 526,810
Equity securities ............................ 176,519 214,307
Maturities and repayments of:
Fixed maturities available for sale .......... 152,203 45,317
Fixed maturities held for investment ......... 15,298 24,790
Purchases of:
Fixed maturities available for sale .......... (372,552) (724,354)
Fixed maturities held for investment ......... (31,568) (42,976)
Equity securities ............................ (143,772) (202,061)
Decrease in short-term investments - net ......... 149,092 250,256
Other - net ...................................... (69,835) (28,549)
--------- ---------
148,580 63,540
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes receivable from parent company . -- (15,718)
Increase in term loans ........................... 40,000 30,894
Increase (decrease) in short-term debt - net ..... 3,390 (3,606)
Repayments of term loans ......................... (40,735) (10,241)
Dividends ........................................ (58,000) (55,000)
--------- ---------
(55,345) (53,671)
--------- ---------
Increase (decrease) in cash ...................... 6,226 (10,968)
Cash, beginning of period ........................ 38,520 50,848
--------- ---------
Cash, end of period .............................. $ 44,746 $ 39,880
========= =========
Supplemental disclosures of cash flow information:
Interest paid .................................... $ 7,300 $ 7,800
========= =========
Income taxes paid ................................ $ 35,900 $ 14,700
========= =========
Supplemental disclosure of non-cash financing activities:
In the second quarter of 1997, a non-cash dividend of $202.3 million was
recorded as a reduction in notes receivable from parent company.
See notes to consolidated financial statements
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<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments (consisting of normal recurring accruals
only) considered necessary to present fairly the financial position at June 30,
1997, and the results of operations, changes in shareholder's equity and cash
flows for all periods presented. The results of operations for the interim
periods are not necessarily indicative of the results that may be expected for
any other interim period or for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1996) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
2. EQUITY IN INVESTEE COMPANY
Equity income in Zenith National Insurance Corp. was $2.4 million and $3.9
million for the second quarter and first six months of 1997 compared to $2.9
million and $4.9 million in the corresponding 1996 periods.
Summarized financial information for Zenith National Insurance Corp. is as
follows:
Six Months Ended June 30 1997 1996
--------------------------------------------------------------------------
(In thousands, except per share amounts)
Revenues ................................. $299,057 $268,227
Income from continuing operations
before income taxes ................... 22,943 35,065
Net income ............................... 15,000 23,100
Net income per share ..................... .84 1.30
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<PAGE>
3. REINSURANCE
The reconciliation of property and casualty insurance direct premiums to net
premiums is as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------------------------------------------------
1997 1996
-------------------------- --------------------------
Premiums Premiums Premiums Premiums
Written Earned Written Earned
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Direct ....................... $ 1,705,811 $ 1,573,762 $ 1,464,406 $ 1,394,503
Assumed ...................... 230,121 183,815 181,028 163,302
Ceded ........................ (916,135) (812,156) (730,179) (678,993)
----------- ----------- ----------- -----------
Net Premiums ................. $ 1,019,797 $ 945,421 $ 915,255 $ 878,812
=========== =========== =========== ===========
</TABLE>
The reconciliation of property and casualty insurance gross policy claims and
settlement expenses to net policy claims and settlement expenses is as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Gross ...................................................... $ 1,163,635 $ 1,120,321
Reinsurance recoveries ..................................... (537,118) (395,067)
----------- -----------
Net policy claims and settlement expenses .................. $ 626,517 $ 725,254
=========== ===========
</TABLE>
For the six months ended June 30, 1996, gross policy claims and settlement
expenses included a charge of $134.5 million and net policy claims and
settlement expenses included a charge of $134.0 million to increase property and
casualty insurance loss reserves for asbestos-related and environmental
pollution claims for business written in or before 1987.
4. LEGAL PROCEEDINGS OF DISCONTINUED OPERATION
On June 13, 1997, a Judgment was entered dismissing the claims asserted by the
Superintendent of Insurance of New York against Frank B. Hall & Co. Inc.
("Hall") and the other Hall defendants in the action described in note 14 of the
Company's 1996 Annual Report. The Judgment approves the amended settlement
agreement described in note 4 of the Company's Report on Form 10-Q for the
quarterly period ended March 31, 1997. In connection with the amended settlement
agreement, the Company recorded a charge of $7.5 million in the first six months
of 1997 which was classified as a charge pertaining to a discontinued operation.
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<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
The Company had income from continuing operations, before gains on sales of
investments, of $52.2 million and $100.7 million in the second quarter and first
six months of 1997, compared to an operating loss of $38.0 million and income
from operations of $4.5 million in the corresponding 1996 periods. The 1996
second quarter loss resulted from an after-tax charge of $87.1 million to
increase property and casualty net loss reserves for asbestos-related and
environmental pollution claims. Excluding the effects of this charge, income
from operations was $49.1 million and $91.6 million in the quarter and six
months ended June 30, 1996. The improved results in 1997, when compared to 1996
and excluding the effects of the $87.1 million charge to strengthen net loss
reserves, reflect increased operating profits in the title insurance operations.
Net income was $60.9 million and $111.9 million in the three months and six
months ended June 30, 1997 which includes after-tax gains on sales of
investments of $8.7 million and $18.7 million, respectively. Net income for the
first six months of 1997 also includes a charge of $7.5 million for a litigation
settlement pertaining to a subsidiary which was discontinued in 1991. (See note
4 to the accompanying unaudited consolidated financial statements). For the
second quarter and first six months of 1996, the Company had a net loss of $25.7
million and net income of $19.7 million, respectively, which included after-tax
gains on sales of investments of $12.3 million and $15.2 million, respectively.
PROPERTY AND CASUALTY INSURANCE OPERATIONS
Net premiums written in the quarter and six months ended June 30, 1997 increased
to $512.5 million and $1.02 billion from $439.8 million and $915.3 million in
the corresponding 1996 periods. Net premiums earned in the quarter and six
months ended June 30, 1997 likewise increased to $485.1 million and $945.4
million from $439.0 million and $878.8 million in the corresponding 1996
periods. These increases in premiums written and premiums earned resulted from
growth in both domestic and international operations, and reflect increased
writings in workers' compensation, ocean and inland marine, general liability,
surety and accident and health lines, as well as premiums generated from the
start-up of the Company's non-standard automobile insurance business.
Underwriting losses for the second quarter and first six months of 1997 were
$6.7 million and $13.8 million and the combined ratios (calculated on a GAAP
basis), after policyholders' dividends, were 100.6% and 100.9%. The strong
underwriting results in 1997 reflect continued underwriting profits in surety,
workers' compensation, general liability and ocean and inland marine lines of
business. Underwriting losses for the second quarter and first six months of
1996 were $140.7 million and $150.8 million, and the combined ratios were 131.6%
and 116.8%. Included in the 1996 underwriting results is a second quarter pretax
charge of $134.0 million to increase net loss reserves for asbestos-
-8-
<PAGE>
related and environmental pollution claims for business written in or before
1987. Excluding the effects of this pretax charge, underwriting losses were $6.7
million and $16.8 million in the second quarter and first six months of 1996 and
the combined ratios were 101.1% and 101.6%.
PROPERTY AND CASUALTY INSURANCE INVESTMENT RESULTS
Net investment income of the property and casualty insurance operations was
$62.8 million and $129.2 million in the three-month and six-month periods ended
June 30,1997 compared to $63.0 million and $126.3 million in the corresponding
1996 periods. The changes in net investment income in 1997, when compared to the
prior year, reflects growth in the size of the fixed maturity investment
portfolio which, in the second quarter of 1997, was offset by the effects of
lower interest rates.
Gains on sales of investments were $13.3 million and $27.6 million in the second
quarter and first six months of 1997 compared to $19.9 million and $23.8 million
in the corresponding 1996 periods. These gains primarily resulted from sales of
equity securities.
TITLE INSURANCE OPERATIONS
Premiums and fees in the second quarter and first six months of 1997 were $204.8
million and $386.7 million compared to $197.7 million and $367.8 million in the
corresponding 1996 periods. The increase in premiums and fees in 1997 reflect
the continued strong residential resale markets and commercial real estate
markets.
Agency commissions in the second quarter and first six months of 1997 were $86.2
million and $170.4 million compared to $88.7 million and $164.5 million in the
corresponding 1996 periods. Other expenses increased to $100.0 million and
$190.4 million in the second quarter and first half of 1997 from $90.9 million
and $174.7 million in the corresponding 1996 periods reflecting increased
employee compensation expense due to the higher levels of business activity. The
expense ratios of the title insurance operations (which includes agent
commissions) were 90.4% and 92.8% in the second quarter and first six months of
1997 compared to 90.2% and 91.5% in the corresponding 1996 periods. The
provision for claim losses was $10.0 million and $18.7 million in the second
quarter and first six months of 1997 compared to $17.2 million and $31.8 million
in the corresponding 1996 periods. The title insurance operations have
benefitted from favorable paid claims experience in recent years, a trend which
is expected to continue.
INVESTMENT PORTFOLIO
At June 30, 1997, the Company's investment portfolio aggregated $4.0 billion (at
cost), of which 11% was invested in equity securities. The Company seeks to
maintain a diversified and balanced fixed maturity portfolio representing a
broad spectrum of industries and types of securities. The portfolio is managed
to achieve a proper balance of safety, liquidity and investment yields.
-9-
<PAGE>
The Company's fixed maturity portfolio consists of investment grade securities
(those rated "BBB" or better by Standard & Poor's) and, to a lesser extent,
non-investment grade and non-rated securities. The risk of default is generally
considered to be greater for non-investment grade securities, when compared to
investment grade securities, since these issues may be more susceptible to
severe economic downturns. At June 30, 1997, the carrying values of
non-investment grade securities and securities not rated by Standard & Poor's
were $457.4 million (13% of the fixed income portfolio) and $142.8 million (4%
of the fixed income portfolio), respectively. Substantially all of the Company's
non-investment grade and non-rated securities are classified as available for
sale and, accordingly, are carried at market value.
OTHER OPERATIONS
RCG International, Inc. ("RCG"), a subsidiary of the Company, primarily provides
technical services in the information technology industry. Information
technology revenues increased to $46.4 million and $84.8 million in the second
quarter and first six months of 1997 from $32.9 million and $63.2 million in the
corresponding 1996 periods resulting from increased assignments from existing
and new clients. Information technology operating expenses were $46.3 million
and $84.7 million in the second quarter and first six months of 1997 compared to
$32.0 million and $61.3 million in the corresponding 1996 periods. The increase
in operating expenses resulted from higher employee compensation expenses
associated with the increased revenues and higher selling, recruiting and
administrative costs associated with building the infrastructure of the
information technology operations. RCG's revenues and expenses are included in
other revenues and other expenses in the accompanying consolidated statement of
operations.
At June 30, 1997, the Company's real estate operations had holdings with a
carrying value of $273.3 million, which includes nine shopping centers with an
aggregate carrying value of $126.4 million, office buildings and other
commercial properties, with an aggregate carrying value of $83.9 million, and
undeveloped land with a carrying value of $63.0 million.
EQUITY IN INVESTEE COMPANY
Equity in investee company income was $2.4 million and $3.9 million in the
three-month and six-month periods ending June 30, 1997 compared to $2.9 million
and $4.9 million in the corresponding 1996 periods from the Company's investment
in Zenith National Insurance Corp. ("Zenith"). The decline in investee company
income reflects increased underwriting losses by Zenith.
-10-
<PAGE>
OTHER MATTERS
On July 8, 1997, the Company increased term loan borrowings by $25 million to
$187.5 million. The additional borrowings were used to redeem all outstanding
7.866% senior reset notes, due December 1, 2000. The outstanding principal
amount of such notes was $25 million, including $9.6 million held by Reliance
Insurance Company. The redemption price was 100% of the principal amount of such
notes plus interest from June 1, 1997 to the redemption date.
Certain current and former senior executives of the Company are limited partners
in a partnership which owns various real estate properties. The general partner
of the partnership was, until late June 1997, an indirect subsidiary of Reliance
Insurance Company. At June 15, 1997, the partnership's total outstanding debt
was $174.6 million, including $12.7 million borrowed from Reliance Group
Holdings, Inc. under a line of credit. As of June 15, 1997, $38 million of that
indebtedness was guaranteed by the Company. In June 1997, the capital stock of
the indirect subsidiary was reclassified, investors unaffiliated with the
Company acquired all of its common stock and Reliance Insurance Company
acquired $27.6 million face amount of its preferred stock. Subsequently, the
former indirect subsidiary sold to Reliance Insurance Company $11 million in
aggregate principal amount of senior notes and to Reliance Group Holdings, Inc.
$18 million in aggregate principal amount of subordinated notes, the line of
credit from Reliance Group Holdings, Inc. to the partnership was repaid in full
and the Company's guarantee was terminated.
The National Association of Insurance Commissioners has a risk-based capital
requirement for the property and casualty insurance industry. Risk-based capital
refers to the determination of the amount of statutory capital required for an
insurer based on the risks assumed by the insurer (including, for example,
investment risks, credit risks relating to reinsurance recoverables and
underwriting risks) rather than just the amount of net premiums written by the
insurer. A formula that applies prescribed factors to the various risk elements
in an insurer's business is used to determine the minimum statutory capital
requirement for the insurer. An insurer having less statutory capital than the
formula calculates would be subject to varying degrees of regulatory
intervention, depending on the level of capital inadequacy. All of the Company's
statutory insurance companies have statutory capital in excess of the minimum
required risk-based capital.
Maintaining appropriate levels of statutory surplus is considered important by
the Company's management, state insurance regulatory authorities and the
agencies that rate insurers' claims-paying abilities and financial strength.
Failure to maintain certain levels of statutory capital and surplus could result
in increased scrutiny or, in some cases, action taken by state regulatory
authorities and/or downgrades in an insurer's ratings.
-11-
<PAGE>
RELIANCE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RELIANCE FINANCIAL SERVICES CORPORATION
---------------------------------------
(Registrant)
Date: August 14, 1997 /s/ George E. Bello
--------------- ---------------------------------------
George E. Bello
Executive Vice President and Controller
(Chief Accounting Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet and the Consolidated Statement of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 2,588,352
<DEBT-CARRYING-VALUE> 802,585
<DEBT-MARKET-VALUE> 814,335
<EQUITIES> 719,923
<MORTGAGE> 0
<REAL-ESTATE> 273,282
<TOTAL-INVEST> 4,558,572
<CASH> 44,746
<RECOVER-REINSURE> 3,944,321
<DEFERRED-ACQUISITION> 230,643
<TOTAL-ASSETS> 10,776,779
<POLICY-LOSSES> 6,738,987
<UNEARNED-PREMIUMS> 1,659,426
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 242,907
0
0
<COMMON> 0
<OTHER-SE> 1,240,995
<TOTAL-LIABILITY-AND-EQUITY> 10,776,779
1,332,124
<INVESTMENT-INCOME> 144,923
<INVESTMENT-GAINS> 28,735
<OTHER-INCOME> 120,417
<BENEFITS> 645,262
<UNDERWRITING-AMORTIZATION> 223,063
<UNDERWRITING-OTHER> 466,065
<INCOME-PRETAX> 169,061
<INCOME-TAX> 53,600
<INCOME-CONTINUING> 119,365
<DISCONTINUED> (7,500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,865
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
