<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended June 30, 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 0-18298
-----------------------------------------
Unitrin, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 95-4255452
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One East Wacker Drive, Chicago, Illinois 60601
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(Address of principal executive offices) (Zip Code)
(312)661-4600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former
fiscal year, if changed since last report)
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
----- -----
72,367,783 shares of common stock, $0.10 par value, were outstanding as of
June 30, 1999.
<PAGE>
UNITRIN, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
PART I. Financial Information.
Item 1. Financial Statements.
Condensed Consolidated Statements of Income for the Six 1
and Three Months Ended June 30, 1999 and 1998 (Unaudited).
Condensed Consolidated Balance Sheets as of June 30, 1999 2
(Unaudited) and December 31, 1998.
Condensed Consolidated Statements of Cash Flows for the 3
Six Months Ended June 30, 1999 and 1998 (Unaudited).
Notes to the Condensed Consolidated Financial 4-8
Statements (Unaudited).
Item 2. Management's Discussion and Analysis of Results of 9-13
Operations and Financial Condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 13
PART II. Other Information.
Item 4. Submission of Matters to a Vote of Securities Holders. 13
Item 6. Exhibits and Reports on Form 8-K. 14
Signatures 15
</TABLE>
<PAGE>
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Premiums $652.2 $583.0 $328.0 $293.1
Consumer Finance Revenues 59.2 56.4 30.1 28.1
Net Investment Income 100.5 87.0 50.7 45.2
Net Gains on Sales of Investments 39.4 66.5 15.1 5.6
------ ------ ------ ------
Total Revenues 851.3 792.9 423.9 372.0
------ ------ ------ ------
Expenses:
Insurance Claims and Policyholders' Benefits 428.1 378.6 218.6 194.9
Insurance Expenses 276.0 239.8 140.1 121.3
Consumer Finance Expenses 48.7 46.9 24.7 23.5
Interest and Other Expenses 7.1 5.6 3.1 2.8
------ ------ ------ ------
Total Expenses 759.9 670.9 386.5 342.5
------ ------ ------ ------
Income before Income Taxes and Equity
in Net Income of Investees 91.4 122.0 37.4 29.5
Income Tax Expense 31.0 41.4 12.9 9.7
------ ------ ------ ------
Income before Equity in Net Income of Investees 60.4 80.6 24.5 19.8
Equity in Net Income of Investees 28.3 31.6 12.0 16.4
------ ------ ------ ------
Net Income $ 88.7 $112.2 $ 36.5 $ 36.2
====== ====== ====== ======
Net Income Per Share $ 1.21 $ 1.47 $ 0.50 $ 0.47
====== ====== ====== ======
Net Income Per Share Assuming Dilution $ 1.20 $ 1.45 $ 0.50 $ 0.46
====== ====== ====== ======
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of these financial statements.
1
<PAGE>
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
<S> <C> <C>
(Unaudited)
Assets:
Investments:
Fixed Maturities at Fair Value (Amortized
Cost: 1999 - $2,549.3; 1998 - $2,492.5) $2,539.1 $2,557.3
Equity Securities at Fair Value
(Cost: 1999 - $581.4; 1998 - $831.2) 933.6 786.3
Investees at Cost Plus Cumulative Undistributed Earnings
(Fair Value: 1999 - $1,285.0; 1998 - $1,223.2) 622.0 581.2
Other 280.2 379.4
-------- --------
Total Investments 4,374.9 4,304.2
-------- --------
Cash 11.3 8.6
Consumer Finance Receivables 559.9 532.0
Other Receivables 277.7 290.8
Deferred Policy Acquisition Costs 310.9 332.0
Other Assets 581.6 442.3
-------- --------
Total Assets $6,116.3 $5,909.9
======== ========
Liabilities and Shareholders' Equity:
Insurance Reserves:
Life and Health $2,084.4 $2,079.0
Property and Casualty 428.7 447.7
-------- --------
Total Insurance Reserves 2,513.1 2,526.7
-------- --------
Investment Certificates 577.2 544.6
Unearned Premiums 261.4 263.2
Accrued and Deferred Income Taxes 440.6 378.8
Notes Payable 128.8 116.2
Accrued Expenses and Other Liabilities 253.0 258.0
-------- --------
Total Liabilities 4,174.1 4,087.5
-------- --------
Shareholders' Equity:
Common Stock, $0.10 par value, 100 million Shares Authorized;
72,367,783 and 75,977,750 Shares Issued and Outstanding at
June 30, 1999 and December 31, 1998 7.3 7.6
Paid-in Capital 427.1 428.2
Retained Earnings 1,287.2 1,373.4
Accumulated Other Comprehensive Income 220.6 13.2
-------- --------
Total Shareholders' Equity 1,942.2 1,822.4
-------- --------
Total Liabilities and Shareholders' Equity $6,116.3 $5,909.9
======== ========
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of these financial statements.
2
<PAGE>
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net Income $ 88.7 $ 112.2
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operations:
Change in Deferred Policy Acquisition Costs 6.6 8.4
Equity in Net Income of Investees before Taxes (43.4) (48.7)
Cash Dividends from Investee 0.6 0.6
Amortization of Investments 11.5 11.4
Increase (Decrease) in Insurance Reserves and Unearned
Premiums 7.1 (4.2)
Increase (Decrease) in Accrued and Deferred Income
Taxes (50.8) 23.1
Increase (Decrease) in Accrued Expenses and Other
Liabilities (11.9) (14.5)
Net Gains on Sales of Investments (39.4) (66.5)
Provision for Loan Losses 11.7 10.6
Other, Net 15.5 23.8
------ ------
Net Cash Provided (Used) by Operating Activities (3.8) 56.2
------ ------
Investing Activities:
Sales and Maturities of Fixed Maturities 182.1 360.4
Purchases of Fixed Maturities (250.2) (391.3)
Sales and Redemptions of Equity Securities 292.3 83.0
Purchases of Equity Securities (2.4) (13.9)
Acquisition of Business (139.0) -
Change in Consumer Finance Receivables (39.9) 18.2
Change in Short-term Investments 100.8 0.5
Other, Net (12.0) (5.0)
------- ------
Net Cash Provided by Investing Activities 131.7 51.9
------- ------
Financing Activities:
Change in Investment Certificates 32.6 (38.5)
Changes in Universal Life and Annuity Accounts 4.5 4.9
Notes Payable Proceeds 171.8 168.5
Notes Payable Payments (159.2) (177.9)
Cash Dividends Paid (51.2) (48.9)
Common Stock Repurchases (127.0) (15.0)
Other, Net 3.3 2.8
------- -------
Net Cash Used by Financing Activities (125.2) (104.1)
------- -------
Increase (Decrease) in Cash 2.7 4.0
Cash, Beginning of Year 8.6 14.5
------- -------
Cash, End of Period $ 11.3 $ 18.5
======= =======
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of these financial statements.
3
<PAGE>
UNITRIN, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The unaudited Condensed Consolidated Financial Statements included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission but do not include all information and
footnotes required by generally accepted accounting principles. In the opinion
of management, the Condensed Consolidated Financial Statements reflect all
adjustments necessary for a fair presentation. The preparation of interim
financial statements relies heavily on estimates. This factor and certain other
factors, such as the seasonal nature of some portions of the insurance business,
as well as market conditions, call for caution in drawing specific conclusions
from interim results. The accompanying Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company's Annual Report on Form
10-K filed with the Commission for the year ended December 31, 1998.
On February 12, 1999, the Company's Board of Directors authorized a 2-for-1
stock split payable on March 26, 1999 in the form of a dividend distribution of
one share of common stock for each share of common stock outstanding on March 5,
1999, the record date for the dividend. Accordingly, prior year share and per
share amounts have been restated retroactively as if the distribution had
occurred prior to the periods presented.
Note 2 - Accounting Changes
Effective January 1, 1999, the Company prospectively adopted Statement of
Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP No. 98-1 requires the Company to
capitalize qualifying computer software costs incurred during the application
development stage. During the first six months of 1999, the Company capitalized
$3.5 million of qualifying computer software costs.
In the second quarter of 1999, the Company revised the management reporting of
its segment results to no longer include dividend income received from its
investment in Baker Hughes Incorporated ("Baker Hughes") in the Company's
operating segments. The Company considers the management of its investment in
Baker Hughes to be a corporate responsibility rather than an operating segment
responsibility. Prior period amounts have been reclassified to conform to the
revised reporting. This change had no effect on Net Income.
Note 3 - Acquisition of Businesses
On June 17, 1999, Trinity Universal Insurance Company, a subsidiary of the
Company, completed the acquisition of Valley Group, Inc. ( "Valley Group") and
its principal subsidiaries (Valley Insurance Company, Charter Indemnity Company
and White Mountains Insurance Company) in a cash transaction. Excluding certain
transaction costs, the estimated purchase price, which is subject to a post-
closing adjustment, was approximately $139 million. For the year ended December
31, 1998, Valley Group had consolidated annual premium revenues of approximately
$160 million. Immediately prior to the closing, Valley Group had a net book
value of approximately $45 million. The acquisition has been accounted for by
the purchase method and, accordingly, Valley Group's operations are included in
the Company's financial statements from the date of acquisition. Since the date
of closing, the Company has not had sufficient time to perform a comprehensive
allocation of the purchase price to the net assets acquired. Accordingly, the
entire purchase price has been reflected in Other Assets in the Condensed
Consolidated Balance Sheet at June 30, 1999.
On September 30, 1998, United Insurance Company of America, a subsidiary of the
Company, completed the acquisition of NationalCare Insurance Company
("NationalCare") and its wholly-owned subsidiary, Reserve National Insurance
Company ("Reserve National"), in a cash transaction for $98.5 million. The
acquisition has been accounted for by the purchase method and, accordingly,
NationalCare and Reserve National's operations are included in the Company's
financial statements from the date of acquisition.
4
<PAGE>
Note 3 - Acquisition of Businesses (Continued)
On May 29, 1998, the Company completed the acquisition of The Reliable Life
Insurance Company ("Reliable") whereby the Company acquired all of the then
outstanding shares of Reliable common stock in exchange for approximately 3.8
million shares of Unitrin common stock and cash for a total purchase price of
$198.4 million. The acquisition has been accounted for by the purchase method
and, accordingly, the operations of Reliable are included in the Company's
financial statements from the date of acquisition. In the second quarter of
1999, the Company completed the allocation of the purchase price to the assets
and liabilities acquired. Based on the Company's final allocation of the
purchase price, assets acquired and liabilities assumed in connection with the
acquisition of Reliable were:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ---------------------
<S> <C>
Investments $ 537.8
Cash 1.2
Other Receivables 14.7
Insurance In Force Acquired 78.0
Cost in Excess of Net Assets Acquired 32.3
Other Assets 34.7
Life and Health Insurance Reserves (425.0)
Unearned Premiums (1.7)
Accrued and Deferred Income Taxes (26.4)
Notes Payable (10.8)
Accrued Expenses and Other Liabilities (36.4)
-------
Total Purchase Price $ 198.4
=======
</TABLE>
Note 4 - Net Income Per Share
Net Income Per Share and Net Income Per Share Assuming Dilution determined in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" for the six and three months ended June 30, 1999 and 1998
was as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
(Dollars and Shares in Millions, Except Per Share Amounts) 1999 1998 1999 1998
- ---------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income $ 88.7 $ 112.2 $ 36.5 $ 36.2
Dilutive Effect on Net Income from Investees' Equivalent
Shares (0.4) (0.7) (0.2) (0.3)
-------- -------- -------- --------
Net Income Assuming Dilution $ 88.3 $ 111.5 $ 36.3 $ 35.9
======== ======== ======== ========
Weighted Average Common Shares Outstanding 73.5 76.4 72.7 77.7
Dilutive Effect of Unitrin Stock Option Plans 0.2 0.4 0.3 0.4
-------- -------- -------- --------
Weighted Average Common Shares and Equivalent Shares
Outstanding Assuming Dilution 73.7 76.8 73.0 78.1
======== ======== ======== ========
Net Income Per Share $ 1.21 $ 1.47 $ 0.50 $ 0.47
======== ======== ======== ========
Net Income Per Share Assuming Dilution $ 1.20 $ 1.45 $ 0.50 $ 0.46
======== ======== ======== ========
</TABLE>
5
<PAGE>
Note 5 - Investment in Investees
Unitrin accounts for its Investments in Investees (Curtiss-Wright Corporation
("Curtiss-Wright"), Litton Industries, Inc. ("Litton") and UNOVA, Inc.) under
the equity method of accounting using the most recent publicly-available
financial reports and other publicly-available information. Based on the most
recently available public information, Unitrin's voting percentage in Litton
common stock at June 30, 1999 was approximately 27.9% and the Company's
investment in Litton exceeded 10% of the Company's Shareholders' Equity. The
amounts included in Unitrin's financial statements for Litton represent amounts
reported by Litton for periods ending two months earlier. Accordingly, amounts
included in these financial statements represent the amounts reported by Litton
for the six and three month periods ended April 30, 1999 and 1998. Summarized
financial information reported by Litton for such periods was:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------- ----------------------
April 30, April 30, April 30, April 30,
(Dollars in Millions) 1999 1998 1999 1998
- --------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $2,386.4 $2,116.9 $1,255.5 $1,143.0
======== ======== ======== ========
Cost of Sales $1,852.0 $1,626.4 $ 967.6 $ 885.2
======== ======== ======== ========
Income from Continuing Operations $ 94.9 $ 87.4 $ 50.9 $ 46.8
======== ======== ======== ========
Net Income $ 94.9 $ 87.4 $ 50.9 $ 46.8
======== ======== ======== ========
</TABLE>
Equity in Net Income of Investees was $28.3 million and $12.0 million for the
six and three months ended June 30, 1999, respectively, compared to $31.6
million and $16.4 million for the six and three months ended June 30, 1998,
respectively. Equity in Net Income of Investees for the six months ended June
30, 1999 included income of $3.4 million resulting from Unitrin's proportionate
share of UNOVA's gain on sale of its headquarters building. Equity in Net Income
of Investees for the six and three months ended June 30, 1998 included income of
$9.9 million and $5.0 million, respectively, resulting from the Company's
investment in Western Atlas Inc. ("Western Atlas"). In August 1998, the Company
exchanged its investment in Western Atlas for common stock in Baker Hughes upon
the acquisition of Western Atlas by Baker Hughes in a merger transaction. As a
result of the merger, Unitrin owns less than 20% of Baker Hughes and the equity
method no longer applies.
On August 2, 1999, Litton announced that its "fiscal year 1999 results will be
reduced by special fourth-quarter charges totaling $116.8 million pretax or
$77.4 million after tax." Accordingly, in the third quarter of 1999, Unitrin
will reflect one-time after-tax charges totaling $13.9 million, or approximately
$0.19 per common share, related to Unitrin's proportionate share of Litton's
announced charges for the costs to exit its mainframe outsourcing and
professional services businesses, the consolidation of certain manufacturing
facilities and the effect of its voluntary settlement agreement with the United
States Attorney's office relating to foreign sales consultants.
On August 5, 1999, Curtiss-Wright announced its net third quarter 1999 earnings
will be increased by a $7.2 million "settlement of litigation against an
insurance carrier to recover environmental remediation costs." Unitrin accounts
for its investment in Curtiss-Wright on a three-month-delay basis. Accordingly,
in the fourth quarter of 1999, Unitrin will reflect a one-time after-tax gain
totaling $2.0 million, or approximately $0.03 per common share, related to
Unitrin's proportionate share of Curtiss-Wright's announced settlement.
6
<PAGE>
Note 6 - Other Comprehensive Income
Other Comprehensive Income related to the Company's investments in Fixed
Maturities and Equity Securities for the six and three months ended June 30,
1999 and 1998 was:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 1999 1998 1999 1998
- ---------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Increase (Decrease) in Unrealized Gains, Net of Reclassification
Adjustment for Gains Included in Net Income $ 322.0 $(55.6) $158.8 $10.8
Other Increase (Decrease) (2.0) - (2.0) -
Effect of Income Taxes (112.6) 19.0 (55.4) (3.7)
------- ------ ------ -----
Increase (Decrease) in Accumulated Other Comprehensive Income $ 207.4 $(36.6) $101.4 $ 7.1
======= ====== ====== =====
</TABLE>
The Company's Investments in Investees are accounted for under the equity method
of accounting and, accordingly, changes in the fair value of the Company's
Investments in Investees are excluded from the determination of Total
Comprehensive Income and Other Comprehensive Income under SFAS No. 130. Total
Comprehensive Income for the six months ended June 30, 1999 and 1998 was $296.1
million and $75.6 million, respectively. Total Comprehensive Income for the
three months ended June 30, 1999 and 1998 was $137.9 million and $43.3 million,
respectively.
7
<PAGE>
Note 7 - Business Segments
Segment Revenues and Operating Profit for the six and three months ended June
30, 1999 and 1998 were:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 1999 1998 1999 1998
- ----------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Property and Casualty Insurance:
Premiums $296.8 $336.7 $150.5 $165.8
Net Investment Income 22.4 22.1 11.8 11.0
------ ------ ------ ------
Total Property and Casualty Insurance 319.2 358.8 162.3 176.8
------ ------ ------ ------
Life and Health Insurance:
Premiums 355.4 246.3 177.5 127.3
Net Investment Income 81.5 64.9 40.9 34.4
------ ------ ------ ------
Total Life and Health Insurance 436.9 311.2 218.4 161.7
------ ------ ------ ------
Consumer Finance 59.2 56.4 30.1 28.1
------ ------ ------ ------
Total Segment Revenues 815.3 726.4 410.8 366.6
------ ------ ------ ------
Net Gains on Sales of Investments 39.4 66.5 15.1 5.6
Other (3.4) - (2.0) (0.2)
------ ------ ------ ------
Total Revenues $851.3 $792.9 $423.9 $372.0
====== ====== ====== ======
Income before Income Taxes and Equity in
Net Income of Investees:
Property and Casualty Insurance $ 13.6 $ 22.8 $ 1.7 $ 4.0
Life and Health Insurance 35.2 23.4 18.7 15.9
Consumer Finance 10.6 11.0 5.6 5.1
------ ------ ------ ------
Total Segment Operating Profit 59.4 57.2 26.0 25.0
------ ------ ------ ------
Net Gains on Sales of Investments 39.4 66.5 15.1 5.6
Other Income, Net (7.4) (1.7) (3.7) (1.1)
------ ------ ------ ------
Income before Income Taxes and
Equity in Net Income of Investees $ 91.4 $122.0 $ 37.4 $ 29.5
====== ====== ====== ======
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Property and Casualty Insurance
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 1999 1998 1999 1998
- --------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Premiums $ 296.8 $ 336.7 $ 150.5 $ 165.8
Net Investment Income 22.4 22.1 11.8 11.0
-------- -------- -------- --------
Total Revenues $ 319.2 $ 358.8 $ 162.3 $ 176.8
======== ======== ======== ========
Operating Profit $ 13.6 $ 22.8 $ 1.7 $ 4.0
======== ======== ======== ========
</TABLE>
Premiums in the Property and Casualty Insurance segment decreased by $39.9
million and $15.3 million for the six and three months ended June 30, 1999,
respectively, compared to the same periods in 1998 due primarily to lower
volume, partially offset by $6.4 million of premiums resulting from the
acquisition of Valley Group. - See Note 3 Acquisition of Businesses. Operating
Profit in the Property and Casualty Insurance segment decreased by $9.2 million
for the six months ended June 30, 1999, compared to the same period in 1998 due
primarily to higher storm damage and the effects of lower premium, partially
offset by the effects of reduced exposure on certain classes of business and
lower expense related to Year 2000 remediation projects. Operating Profit in
the Property and Casualty Insurance segment decreased by $2.3 million for the
three months ended June 30, 1999, compared to the same period in 1998 due
primarily to the effects of lower premium, partially offset by the effects of
reduced exposure on certain classes of business and lower expense related to
Year 2000 remediation projects.
Life and Health Insurance
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 1999 1998 1999 1998
- --------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Premiums $ 355.4 $ 246.3 $ 177.5 $ 127.3
Net Investment Income 81.5 64.9 40.9 34.4
-------- -------- -------- --------
Total Revenues $ 436.9 $ 311.2 $ 218.4 $ 161.7
======== ======== ======== ========
Operating Profit $ 35.2 $ 23.4 $ 18.7 $ 15.9
======== ======== ======== ========
</TABLE>
Premiums in the Life and Health Insurance segment increased by $109.1 million
and $50.2 million for the six and three months ended June 30, 1999,
respectively, compared to the same periods in 1998 due primarily to premiums
resulting from the June 1998 acquisition of Reliable and the September 1998
acquisition of Reserve National and its parent NationalCare - See Note 3
Acquisition of Businesses. Operating Profit in the Life and Health Insurance
segment increased by $11.8 million and $2.8 million for the six and three months
ended June 30, 1999, respectively, due primarily to the acquisitions of Reliable
Life and Reserve National.
9
<PAGE>
Consumer Finance
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
(Dollars in Millions) 1999 1998 1999 1998
- --------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 59.2 $ 56.4 $ 30.1 $ 28.1
======== ======== ======== ========
Operating Profit $ 10.6 $ 11.0 $ 5.6 $ 5.1
======== ======== ======== ========
</TABLE>
Revenues in the Consumer Finance segment increased by $2.8 million and $2.0
million for the six and three months ended June 30, 1999, respectively, compared
to the same periods in 1998 as a result of a higher level of loans outstanding.
Operating Profit in the Consumer Finance segment decreased by $0.4 million for
the six months ended June 30, 1999 compared to the same period in 1998 due
primarily to higher operating expenses partially the result of conversion costs
associated with Year 2000. Operating Profit in the Consumer Finance segment
increased by $0.5 million for the three months ended June 30, 1999 compared to
the same period in 1998 due primarily to the higher level of loans outstanding.
Net Gains on Sales of Investments
Net Gains on Sales of Investments were $39.4 million and $15.1 million,
respectively, for the six and three months ended June 30, 1999, compared to
$66.5 million and $5.6 million, respectively, for the same periods in 1998. Net
Gains on Sales of Investments for the six and three months ended June 30, 1999
included pre-tax gains of $40.1 million and $15.6 million, respectively,
resulting from sales of a portion of the Company's investment in Baker Hughes
common stock. The first quarter of 1998 included gains primarily resulting from
the disposition of the Company's investment in ITT Corporation ("ITT") common
stock in connection with the acquisition of ITT by Starwood Hotels & Resorts
Worldwide, Inc. and the redemption of the Company's investment in Navistar
International Corporation $6.00 Cumulative Convertible Preferred Stock, Series
G. Net Gains on Sales of Investments for the second quarter of 1998 included
the sale of certain investment real estate. The Company cannot anticipate when
or if similar investment gains or losses may occur in the future.
Equity in Net Income of Investees
Equity in Net Income of Investees was $28.3 million and $12.0 million,
respectively for the six and three months ended June 30, 1999, respectively,
compared to $31.6 million and $16.4 million, respectively, for the same periods
in 1998. Equity in Net Income of Investees for the six months ended June 30,
1999 included income of $3.4 million resulting from Unitrin's proportionate
share of UNOVA's gain on sale of its headquarters building. Equity in Net
Income of Investees for the six and three months ended June 30, 1998 included
income of $9.9 million and $5.0 million, respectively, resulting from the
Company's investment in Western Atlas. In August 1998, the Company exchanged
its investment in Western Atlas for common stock in Baker Hughes upon the
acquisition of Western Atlas by Baker Hughes in a merger transaction. As a
result of the merger, Unitrin owns less than 20% of Baker Hughes and the equity
method no longer applies.
On August 2, 1999, Litton announced that its "fiscal year 1999 results will be
reduced by special fourth-quarter charges totaling $116.8 million pretax or
$77.4 million after tax." Accordingly, in the third quarter of 1999, Unitrin
will reflect one-time after-tax charges totaling $13.9 million, or approximately
$0.19 per common share, related to Unitrin's proportionate share of Litton's
announced charges for the costs to exit its mainframe outsourcing and
professional services businesses, the consolidation of certain manufacturing
facilities and the effect of its voluntary settlement agreement with the United
States Attorney's office relating to foreign sales consultants.
On August 5, 1999, Curtiss-Wright announced its net third quarter 1999 earnings
will be increased by a $7.2 million "settlement of litigation against an
insurance carrier to recover environmental remediation costs." Unitrin accounts
for its investment in Curtiss-Wright on a three-month-delay basis. Accordingly,
in the fourth quarter of 1999, Unitrin will reflect a one-time after-tax gain
totaling $2.0 million, or approximately $0.03 per common share, related to
Unitrin's proportionate share of Curtiss-Wright's announced settlement.
Other Items
Other Income, Net decreased by $5.7 million and $2.6 million for the six and
three months ended June 30, 1999, respectively, compared to same periods in 1998
due primarily to higher net corporate interest expense.
During the first six months of 1999, the Company repurchased 3,741,280 shares of
its common stock (adjusted for the Company's 2-for-1 stock split) in open market
transactions at an aggregate cost of $127.0 million. The repurchases were made
with general corporate funds. At June 30, 1999, the Company had approximately
5.9 million shares remaining under the existing Board of Directors repurchase
authorizations.
10
<PAGE>
Other Items (continued)
At June 30, 1999, the unused commitment under the Company's revolving credit
facility was $217.0 million. In addition, for the remainder of 1999, the
Company's subsidiaries would be able to pay approximately $622.8 million in
dividends to the Company without prior regulatory approval.
Year 2000
The Year 2000 issue (i.e. the ability of computer systems to accurately identify
and process dates beginning with the year 2000 and beyond) affects virtually all
companies and organizations. Most of the Company's computer systems are already
Year 2000 compliant. However, certain of the Company's computer systems use only
two digits to identify a year in a date field. For example, the year 2000 would
be represented in these systems as "00," but in many cases might be interpreted
by the computer as "1900" rather than "2000," thereby potentially resulting in
processing errors.
The ability to process information in a timely and accurate manner is vital to
the Company's data-intensive insurance and consumer finance businesses. The
Company recognizes that the computer systems used by these businesses must be
Year 2000 compliant by December 31, 1999 and, in some instances, well in advance
of that date. To meet this challenge, the Company and its subsidiaries have
instituted a four-phase Year 2000 program:
1) Assessment -- Identifying all hardware, software and key service
providers posing a Year 2000 exposure and the prioritizing of related Year
2000 projects;
2) Remediation and Conversion -- Procuring replacement Year 2000 compliant
hardware or software (including improvements in functionality in addition
to being Year 2000 compliant) or modifying existing software to be Year
2000 compliant;
3) Validation -- Testing and certification, including review of documented
remediation work and test results by technical project teams and key users,
of all such critical hardware and software;
4) Production -- Installing and placing into production all such critical
new or remediated hardware and software.
Each of the Company's business segments is responsible for developing and
implementing detailed project plans to address its Year 2000 exposure. Each
business segment's progress is monitored and reviewed by the Company's Year 2000
Certification Team. The Company's Year 2000 Certification Team is comprised of
senior members of the Company Information Systems Audit Group and Data Systems
Group and reports to the Company's senior management and Board of Directors on a
regular basis. In addition, the Company's insurance subsidiaries are subject to
oversight by state insurance regulatory bodies and its consumer finance
subsidiary is subject to oversight by the FDIC.
On June 17, 1999, the Company completed the acquisition of Valley Group. Prior
to the acquisition, Valley Group had implemented a Year 2000 program. The
Company's goal is to complete an evaluation of Valley Group's Year 2000 program
by September 30, 1999. Excluding Valley Group, each of the Company's three
business segments has substantially completed all four phases for both its
mission critical projects and non-mission critical projects. For purposes of
this Year 2000 discussion, the term "mission critical" refers to key business
functions, such as the processing of business transactions, regulatory
compliance and archival of important records, upon which the Company is
materially dependent.
Valley Group is comprised primarily of three separate business units operating
in different geographical regions and offering property and casualty insurance
policies using independent agents. Each business unit has its unique set of
mission critical applications and service providers which it uses to process
transactions. Should one or two of these business units not achieve Year 2000
compliance, the Company contingently plans to transfer the processing of that
business unit's transactions to another of Property and Casualty Insurance
segment's business units and process transactions manually until the transfer is
complete.
The Life and Health Insurance segment is comprised primarily of three separate
business units operating in different geographical regions and offering similar
insurance policies using employee-agents. Each business unit has its unique set
of mission critical applications which it uses to process transactions. Should
one or two of these business units not achieve Year 2000 compliance, the Company
contingently plans to transfer the processing of that business unit's
transactions to another of the Life and Health Insurance segment's business
units and process transactions manually until the transfer is complete.
The Company's Consumer Finance segment outsources its mission critical data
processing to Fiserv, Inc. ("Fiserv"). As a provider of third party data
processing services to the banking and financial services industry, Fiserv and
the data processing services it provides are subject to limited oversight by the
FDIC. In March of 1999, the Consumer Finance segment migrated from its former
Fiserv system to another system that Fiserv has represented to be Year 2000
compliant.
11
<PAGE>
Year 2000 - continued
The Consumer Finance segment has reviewed Fiserv's Year 2000 testing
documentation, the reports of an independent auditing concern engaged to review
Fiserv's Year 2000 testing and the reports of certain regulatory agencies,
including the FDIC, covering Fiserv's Year 2000 program. In addition to these
reviews and tests, the Consumer Finance segment has developed a contingency plan
to off-load all customer loan and deposit records prior to January 1, 2000 and
process customer loans and deposits manually at its branch offices in the event
of a Year 2000 failure.
The Company has not identified any Year 2000 problems associated with non-
information technology systems (e.g., telephone systems, elevators, etc.) that
have not either been remediated or replaced, or scheduled to be remediated or
replaced prior to January 1, 2000, or which are likely to pose any material
risks to the Company's operations.
The Company is also reviewing the Year 2000 issue with key service providers,
including banks, brokers and investment custodians, and continually updating its
risk assessment, readiness evaluation, action plans and contingency plans
related to these service providers. In addition, the Company is reviewing the
Year 2000 issue as it relates to its investee companies (Curtiss-Wright, Litton
and UNOVA; the "Investees") as well as its significant investment in Baker
Hughes by reviewing public disclosures concerning Year 2000 readiness made by
such companies. The Company has no representatives on any of the Investees' or
Baker Hughes' boards of directors and does not otherwise participate in the
management of the Investees or Baker Hughes. Accordingly, the Company does not
possess any non-public information concerning, assumes no responsibility for,
and has no contingency plans for, Year 2000 compliance by the Investees or Baker
Hughes.
If one or more of the Company's business segments, key service providers,
investee companies or Baker Hughes fails to make its computer systems Year 2000
compliant by the necessary dates, notwithstanding contingency plans currently
contemplated, such failure could materially adversely affect the Company's
operations and financial results. Each of the Company's three business segments
depends heavily on its computer systems to manage its operations. The Company
believes that the most reasonably likely worst case scenario would consist of a
combination of Year 2000 failures, including but not limited to the failures
discussed above, in the Company's mission critical systems, coupled with Year
2000 failures at one or more of the Investees or Baker Hughes. In such a
scenario, the Company might be forced to rely on the manual processing of
transactions, or, if feasible, to shift processing to other Company systems or
third party data processing vendors, which in either case would likely have a
material adverse effect on costs and produce an increased probability of errors
and potential legal exposures resulting from such errors. Such a scenario could
also result in the loss of revenues, the extent of which is not estimable. In
addition, Year 2000 failures at one or more Investees or Baker Hughes could
materially affect their earnings, and therefore adversely affect the earnings of
the Company and the Company's carrying value of its investment in these
companies.
Incremental expense recognized directly related to rewriting and testing
existing applications or converting to new Year 2000 compliant applications
totaled $2.6 million and $4.7 million for the six months ended June 30, 1999 and
1998, respectively. Total incremental expense recognized since inception of the
Company's Year 2000 program directly related to rewriting and testing existing
applications or converting to new Year 2000 compliant applications totaled $26.3
million through June 30, 1999. The Company estimates that the incremental
expense necessary to complete its Year 2000 program and directly related to
rewriting and testing existing applications or converting to new Year 2000
compliant applications will be approximately $0.3 million for the remainder of
1999. In addition to the above incremental expenses, upon completion of the
Company's Year 2000 program, the Company estimates that it will have made
capital expenditures, which will be expensed over the useful lives of the assets
to which they relate, totaling approximately $16 million to replace existing
hardware or software.
NOTE: The foregoing discussion on Year 2000 issues shall be considered "Year
2000 Readiness Disclosure" for purposes of the Year 2000 Information and
Readiness Disclosure Act.
Accounting Changes
Effective January 1, 1999, the Company prospectively adopted SOP No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP No. 98-1 requires the Company to capitalize qualifying
computer software costs incurred during the application development stage.
During the first six months of 1999, the Company capitalized $3.5 million of
qualifying computer software costs.
In the second quarter of 1999, the Company revised the management reporting of
its segment results to no longer include dividend income received from its
investment in Baker Hughes in the Company's operating segments. The Company
considers the management of its investment in Baker Hughes to be a corporate
responsibility rather than an operating segment responsibility. Prior period
amounts have been reclassified to conform to the revised reporting. This change
had no effect on Net Income.
12
<PAGE>
Accounting Changes - continued
In June 1999, the Financial Accounting Standards Board issued SFAS No.137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133" which deferred the effective date of
SFAS No. 133, "Accounting for Derivatives Instruments and for Hedging
Activities." SFAS No. 133 requires all derivatives to be recorded on the balance
sheet at fair value and establishes "special accounting" for the following three
different types of hedges: hedges of changes in the fair value of assets,
liabilities or firm commitments; hedges of the variable cash flows of forecasted
transactions; and hedges of foreign currency exposures of net investments in
foreign operations. Accordingly, SFAS No. 133 is effective for years beginning
after June 15, 2000, with earlier adoption permitted. The Company believes that
the effect of adoption of SFAS No. 133 will not be material.
Caution Regarding Forward-Looking Statements
Management's Discussion and Analysis of Results of Operations and Financial
Condition and the accompanying Condensed Consolidated Financial Statements
(including the notes thereto) contain forward-looking statements, which usually
include words such as "believe(s)," "goal(s)," "target(s)," "estimate(s),"
"anticipate(s)" and similar expressions. Readers are cautioned not to place
undue reliance on such statements, which speak only as of the date of this
Quarterly Report. Forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ materially from those
contemplated in such statements. Such risks and uncertainties include, but are
not limited to, those described under this Item 2 above, changes in economic
factors (such as interest rates), changes in competitive conditions (including
availability of labor with required technical or other skills), the number and
severity of insurance claims (including those associated with catastrophe
losses), governmental actions (including new laws or regulations or court
decisions interpreting existing laws and regulations) and adverse judgments in
litigation to which the Company or its subsidiaries are parties. No assurances
can be given that the results contemplated in any forward-looking statements
will be achieved. The Company assumes no obligation to release publicly any
revisions to any forward-looking statements as a result of events or
developments subsequent to the date of this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 305 of Regulation S-K has been omitted because
the sources and effects of changes in the information provided under Item 305 of
Regulation S-K from the end of the preceding year to the date of this Quarterly
Report on Form 10-Q are not material.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Unitrin, Inc. was held on May 5, 1999 for
the purpose of electing eight directors.
The final tabulation for each of the eight nominees for director is as follows:
<TABLE>
<CAPTION>
Votes Votes
Nominee For Withheld
------------------------ ---------- --------
<S> <C> <C>
James E. Annable 31,256,945 159,482
Reuben L. Hedlund 31,256,544 159,883
Jerrold V. Jerome 31,237,725 178,702
William E. Johnston, Jr. 31,258,015 158,412
George A. Roberts 31,251,770 164,657
Fayez S. Sarofim 30,453,231 963,196
Henry E. Singleton 30,453,073 963,354
Richard C. Vie 31,238,916 177,511
</TABLE>
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3.1 Certificate of Incorporation (Incorporated herein by reference to
Exhibit 3.1 to the Company's Registration Statement on Form 10 dated
February 15, 1990.)
3.2 Amended and Restated By-Laws (Incorporated herein by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.)
4 Rights Agreement between the Company and First Chicago Trust Company
of New York, as rights agent, dated as of August 3, 1994
(Incorporated herein by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A dated August 3, 1994.)
10.1 Unitrin, Inc. 1990 Stock Option Plan as amended and restated
10.2 Unitrin, Inc. 1997 Stock Option Plan as amended and restated
10.3 Unitrin, Inc. 1995 Non-Employee Director Stock Option Plan as amended
and restated
10.4 Unitrin, Inc. Pension Equalization Plan (Incorporated herein by
reference to Exhibit 10.4 to Company's Annual Report on Form 10-K for
the year ended December 31, 1994.)
10.5 Unitrin is a party to individual severance agreements (the form of
which is incorporated herein by reference to Exhibit 10.5 to the
Company's 1994 Annual Report on Form 10-K), with following executive
officers:
Richard C. Vie (Chairman, President and Chief Executive Officer)
David F. Bengston (Vice President)
James W. Burkett (Senior Vice President)
Eric J. Draut (Senior Vice President, Treasurer & Chief Financial
Officer)
Scott Renwick (General Counsel and Secretary)
Donald G. Southwell (Senior Vice President)
(Note: Each of the foregoing agreements is identical except that the
severance compensation multiple is 2.99 for Mr. Vie and 2.0 for the
other executive officers. The term of these agreements has been
extended by action of Unitrin's board of directors through
January 1, 2000.)
10.6 Severance Compensation Plan After Change of Control (Incorporated
herein by reference to Exhibit 10.6 to the Company's 1994 Annual
Report on Form 10-K; the term of this plan has been extended by
Unitrin's board of directors through January 1, 2000.)
10.7 1998 Bonus Plan for Senior Executives (Incorporated herein by
reference to Exhibit A of the Company's Proxy Statement, dated
April 9, 1998, in connection with Company's annual meeting of
shareholders.)
10.8 Amended and Restated Credit Agreement, dated September 17, 1997 among
Unitrin, Inc., the Lenders party thereto, and NationsBank of Texas,
N.A. as Administrative Agent (Incorporated herein by reference to
Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.)
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter ended
June 30, 1999.
14
<PAGE>
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.
Unitrin, Inc.
Date: August 10, 1999 /s/ Richard C. Vie
------------------------------
Richard C. Vie
Chairman, President
and Chief Executive Officer
Date: August 10, 1999 /s/ Richard Roeske
------------------------------
Richard Roeske
Corporate Controller
(Principal Accounting Officer)
15
<PAGE>
EXHIBIT 10.1
UNITRIN, INC.
1990 STOCK OPTION PLAN
AS AMENDED AND RESTATED
May 5, 1999
1. Purpose.
-------
The purpose of this 1990 Stock Option Plan (the "Plan") of Unitrin, Inc.,
a Delaware corporation (the "Company"), is to secure for the Company and its
shareholders the benefits arising from stock ownership by selected executive and
other key employees of the Company or its subsidiaries and such other persons
(other than Directors who are not employees of the Company) as the Stock Option
Committee, may from time to time determine. The Plan will provide a means
whereby (i) such employees may purchase shares of the Common Stock of the
Company pursuant to options which will qualify as "incentive stock options"
under Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) such employees or other persons (other than Directors who are not
employees of the Company), may purchase shares of Common Stock of the Company
pursuant to "non-incentive" or "non-qualified" stock options and (iii) any of
such persons may receive shares of the Common Stock of the Company, or cash in
lieu thereof, pursuant to stock appreciation rights granted in tandem with such
options.
2. Administration.
--------------
The Plan shall be administered by a Stock Option Committee (the
"Committee") appointed by the Board of Directors of the Company consisting of
two or more directors of the Company, all of whom shall be "disinterested
persons" (within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended), to whom administration of the Plan has been duly delegated.
No member of the Committee shall
1
<PAGE>
be eligible for grants or allocations to acquire equity securities of the
Company under the Plan or any other discretionary plan of the Company or its
affiliates for a period of one year before membership on the Committee and
during such membership (or for such other period as may be required from time to
time by Rule 16b-3 of the Securities Exchange Act of 1934, as amended). Any
action of the Committee with respect to administration of the Plan shall be
taken by a majority vote or written consent of its members.
Subject to the provisions of the Plan, the Committee shall have authority
(i) to construe and interpret the Plan, (ii) to define the terms used herein,
(iii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (iv) to determine the individuals to whom and the time or times at which
options shall be granted, whether such options will be incentive stock options
or non-qualified stock options, whether to include a stock appreciation right
with an option and the terms of such rights, the number of shares to be subject
to each option, the option price, the number of installments, if any, in which
each option may be exercised, and the duration of each option, (v) to approve
and determine the duration of leaves of absence which may be granted to
participants without constituting a termination of their employment for the
purposes of the Plan, and (vi) to make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
participants in the Plan and their legal representatives and beneficiaries.
3. Shares Subject to the Plan.
--------------------------
Subject to adjustment as provided in paragraph 16 hereof, the shares to be
offered under the Plan shall consist of the Company's authorized but unissued
Common Stock, and the aggregate amount of such stock which may be issued upon
exercise of all options under the Plan shall not exceed Two Million Five Hundred
Thousand (2,500,000) of such shares. If any option granted under the Plan shall
expire or terminate for any
2
<PAGE>
reason (other than surrender at the time of exercise of a related stock
appreciation right provided for in paragraph 8 hereof), without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for options to be granted under the Plan.
Any shares of the Company's Common Stock that are used (whether actually or
constructively) by an option holder as full or partial payment to the Company of
the purchase price of the shares of Common Stock being acquired through the
exercise of an option granted under the Plan shall be added to the aggregate
number of shares of Common Stock available for issuance under the Plan.
4. Eligibility and Participation.
-----------------------------
All executive and other key employees of the Company or of any subsidiary
corporation (as defined in Section 425(f) of the Code) and directors of the
Company who are regular employees of the Company, shall be eligible for
selection to participate in the Plan. Other non-employees (excluding Committee
members for the periods specified in paragraph 2 hereof and other directors who
are not regular employees of the Company), may participate in the Plan with
respect to non-qualified stock options, but only selected executive and other
key employees of the Company or a subsidiary may receive incentive stock options
under the Plan. An individual who has been granted an option, may if such
individual is otherwise eligible, be granted an additional option or options if
the Committee shall so determine, subject to the other provisions of the Plan.
No incentive stock option may be granted to any person who, at the time the
incentive stock option is granted, owns shares of the Company's outstanding
Common Stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company (and of its affiliates if
applicable), unless the exercise price of such option is at least 110 percent
(110%) of the fair market value of the stock subject to the option and such
option by its terms is not exercisable after the expiration of five years from
the date
3
<PAGE>
such option is granted.
The aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options (whenever
granted and including the substitute options) are exercisable for the first time
by an optionee during any calendar year (under all incentive stock option plans
of the Company and its subsidiaries) shall not exceed $100,000.
All options granted under the Plan shall be granted within ten years from
February 15, 1990.
5. Duration of Options.
-------------------
Each option and all rights associated therewith, shall expire on such date
as the Committee may determine, and shall be subject to earlier termination as
provided herein; provided, however, that in the case of incentive stock options,
each incentive stock option and all rights associated therewith shall expire in
any event within ten (10) years of the date on which such incentive stock option
is granted.
6. Purchase Price.
--------------
The purchase price of the stock covered by each option shall be determined
by the Committee, but in the case of incentive stock options, shall not be less
than one hundred percent (100%) of the fair market value of such stock on the
date the incentive stock option is granted. The purchase price of the shares
upon exercise of an option shall be paid in full at the time of exercise (i) in
cash or by check payable to the order of the Company, (ii) by delivery of shares
of Common Stock of the Company already owned by, and in the possession of the
option holder, or (iii) if authorized by the Committee or if specified in the
option being exercised, by a promissory note made by option holder in favor of
the Company, upon the terms and conditions determined by the Committee and
secured by the shares issuable upon exercise complying with applicable law
(including,
4
<PAGE>
without limitation, state corporate and federal margin requirements), or any
combination thereof. Shares of Common Stock used to satisfy the exercise price
of an option shall be valued at their fair market value determined (in
accordance with paragraph 9 hereof) as of the close of business on the date of
exercise (or if such date is not a business day, as of the close of the business
day immediately preceding such date).
7. Exercise of Option/Grant of Restorative Stock Option
----------------------------------------------------
Each option granted under this Plan shall be exercisable in such
installments during the period prior to its expiration date as the Committee
shall determine, but in no event shall any option be exercisable for at least
six months after grant except in the case of the death or disability of the
option holder; provided that, unless otherwise determined by the Committee, if
the option holder shall not in any given installment period purchase all of the
shares which the option holder is entitled to purchase in such installment
period, then the option holder's right to purchase any shares not purchased in
such installment period shall continue until the expiration date or sooner
termination of the option holder's option. No option may be exercised for a
fraction of a share and no partial exercise of any option may be for less than
fifty (50) shares.
Upon the exercise of an option by an option holder by delivering (whether
actually or constructively) previously-acquired shares of Common Stock of the
Company in full or partial payment for the shares received upon such exercise
(as provided in Section 6), the Committee shall grant the option holder a
"restorative stock option" to purchase additional shares of Common Stock of the
Company. A restorative stock option shall also be granted to an option holder
who delivers previously-acquired shares or has shares withheld from an exercise
to the extent permitted in paragraph 10 in connection with the income tax
withholding liability arising from such exercise. The number of shares of
Common Stock subject to a restorative stock option shall be equal to the
5
<PAGE>
number of shares delivered in payment of the purchase price and/or the number of
shares delivered or withheld in connection with the related tax withholding
obligation. The purchase price of the restorative stock option shall not be less
than one hundred percent (100%) of the fair market value of such Common Stock on
the date other restorative stock option is granted. All other terms of
restorative stock options granted hereunder, including, but not limited to,
vesting and expiration, shall be identical to the terms of the initial option
upon which the restorative stock option is granted.
8. Stock Appreciation Rights.
-------------------------
If deemed appropriate by the Committee, any stock option may be coupled
with a stock appreciation right at the time of the grant of the option, or, the
Committee may grant a stock appreciation right to any person at any time after
granting an option to such person prior to the end of the term of such
associated option. Such stock appreciation right shall be subject to such terms
and conditions not inconsistent with the Plan as the Committee shall impose,
provided that:
(1) A stock appreciation right shall be exercisable to the extent, and
only to the extent, the associated option is exercisable and shall be
exercisable only for such period as the Committee may determine (which period
may expire prior to the expiration date of the option);
(2) A stock appreciation right shall entitle the option holder to
surrender to the Company unexercised the option to which it is related, or any
portion thereof, and to receive from the Company in exchange therefor that
number of shares (rounded down to the nearest whole number) having an aggregate
value equal to the excess of the fair market value of one share (determined as
thereinafter provided) over the option price per share specified in such option
multiplied by the number of shares subject to the option, or portion thereof,
which is so surrendered; and
(3) The Committee may elect to settle, or the stock appreciation right
may
6
<PAGE>
permit the optionee to elect to receive (subject to approval by the Committee),
any part or all of the Company's obligation arising out of the exercise of a
stock appreciation right by the payment of cash equal to the aggregate fair
market value of that part or all of the shares it would otherwise be obligated
to deliver, provided that in no event shall cash be payable to an officer or
director of the Company upon exercise of a stock appreciation right (i) if the
stock appreciation right was exercised during the first six months of its term;
and (ii) unless the stock appreciation right was exercised during a period of
ten business days beginning with the third business day after the release to the
public of a quarterly or annual summary statement of the Company's sales and
earnings; or (iii) unless the transaction is otherwise exempt from the operation
of Section 16(b) of the Securities Exchange Act of 1934.
9. Fair Market Value of Common Stock.
---------------------------------
The fair market value of a share of Common Stock of the Company shall be
determined for purposes of the Plan by reference to the closing price on the New
York Stock Exchange (or other principal stock exchange on which such shares are
then listed) or, if such shares are not then listed on such exchange (or other
principal stock exchange), by reference to the closing price (if a National
Market Issue) or the mean between the bid and asked price (if other over-the-
counter issue) of a share as supplied by the National Association of Securities
Dealers through NASDAQ (or its successor in function), in each case as reported
by The Wall Street Journal, for the date on which the option or stock
-----------------------
appreciation right is granted or exercised, or if such date is not a business
day, for the business day immediately preceding such date (or, if for any reason
no such price is available, in such other manner as the Committee may deem
appropriate to reflect the then fair market value thereof).
7
<PAGE>
10. Withholding Tax.
---------------
Upon (i) the disposition by an employee or other person of shares of
Common Stock acquired pursuant to the exercise of an incentive stock option
granted pursuant to the Plan within two years of the granting of the incentive
stock option or within one year after exercise of the incentive stock option,
(ii) the exercise of "non-incentive" or "non-qualified" options, or (iii) the
exercise of a stock appreciation right, the Company shall have the right to (a)
require such employee or such other person to pay the Company the amount of any
taxes which the Company may be required to withhold with respect to such shares
or (b) deduct from all amounts paid in cash with respect to the exercise of a
stock appreciation right the amount of any taxes which the Company may be
required to withhold with respect to such cash amounts.
Subject to the limitation set forth in the next sentence, any holder of
an option or stock appreciation right hereunder may elect to satisfy all or any
portion of the tax withholding obligations arising from the exercise of such
option or stock appreciation right either by delivering previously-acquired
shares of Common Stock of the Company or by having the Company withhold shares
that would otherwise be issued pursuant to such exercise. With respect to
exercises of options and stock appreciation rights granted on or after May 5,
1999, no holder thereof shall have the right to deliver previously-acquired
shares of Common Stock or to have shares of Common Stock withheld in excess of
the minimum number required to satisfy applicable tax withholding requirements
based on minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes.
11. Nontransferability.
------------------
An option (and any accompanying stock appreciation right) granted under
the Plan shall, by its terms, be non-transferable by the option holder, either
voluntarily or by operation of law, otherwise than by will or the laws of
descent and distribution, and shall
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be exercisable during option holder's lifetime only by the option holder,
regardless of any community property interest therein of the spouse of the
option holder, or such spouse's successors in interest. If the spouse of the
option holder shall have acquired a community property interest in such option
(or accompanying stock appreciation right), the option holder, or the option
holder's permitted successors in interest, may exercise the option (or
accompanying stock appreciation right) on behalf of the spouse of the option
holder or such spouse's successors in interest.
12. Holding of Stock After Exercise of Option.
-----------------------------------------
At the discretion of the Committee, any option may provide that the option
holder, by accepting such option, represents and agrees, for the option holder
and the option holder's permitted transferees (by will or the laws of descent
and distribution), that none of the shares purchased upon exercise of the option
or any accompanying stock appreciation right will be acquired with a view to any
sale, transfer or distribution of said shares in violation of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder, or
any applicable state "blue sky" laws, and the person entitled to exercise the
same shall furnish evidence satisfactory to the Company (including a written and
signed representation) to that effect in form and substance satisfactory to the
Company, including an indemnification of the Company in the event of any
violation of the Securities Act of 1933 or state blue sky law by such person.
13. Termination of Employment.
-------------------------
If a holder of an incentive stock option ceases to be employed by the
Company or one of its subsidiaries for any reason other than the option holder's
death or permanent disability (within the meaning of Section 105(d) (4) of the
Code), the option holder's incentive stock option (and any accompanying stock
appreciation right) shall be exercisable for a period of three (3) months after
the date option holder ceases to be an
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employee of the Company or such subsidiary (unless by its terms it sooner
expires ) to the extent exercisable on the date of such cessation of employment
and shall thereafter expire and be void and of no further force or effect. A
leave of absence approved in writing by the Committee shall not be deemed a
termination of employment for the purposes of this paragraph 13, but no option
may be exercised during any such leave of absence, except during the first three
(3) months thereof. Termination of employment or other relationship with the
Company by the holder of a non-qualified stock option will have the effect
specified in the individual option agreement, as determined by the Committee.
14. Death or Permanent Disability of Option Holder.
----------------------------------------------
If the holder of an incentive stock option dies or becomes permanently
disabled while option holder is employed by the Company or one of its
subsidiaries, option holder's option (and any accompanying stock appreciation
right) shall expire one (1) year after the date of such death or permanent
disability unless by its terms it sooner expires. During such period after
death, such option (and any accompanying stock appreciation right) may, to the
extent that it remained unexercised (but exercisable by the option holder
according to such option's terms) on the date of such death, be exercised by the
person or persons to whom the option holder's rights under the option shall pass
by option holder's will or by the laws of descent and distribution. The death or
disability of a holder of a non-qualified stock option will have the effect
specified in the individual option agreement as determined by the Committee.
15. Privileges of Stock Ownership.
-----------------------------
No person entitled to exercise any option or stock appreciation right
granted under the Plan shall have any of the rights or privileges of a
shareholder of the Company in respect of any shares of stock issuable upon
exercise of such option or stock
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appreciation right until certificates representing such shares shall have been
issued and delivered. No shares shall be issued and delivered upon the exercise
of any option or accompanying stock appreciation rights unless and until there
shall have been full compliance with all applicable requirements of the
Securities Act of 1933 (whether by registration or satisfaction of exemption
conditions), all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery.
16. Adjustments.
-----------
If the outstanding shares of the Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar transaction, an appropriate and proportionate adjustment shall be made
in the maximum number and kind of shares as to which options may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised options or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment in the outstanding options shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the option but
with a corresponding adjustment in the price for each share or other unit of any
security covered by the option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than eighty percent
(80%) of the then outstanding stock of the Company to another corporation, the
Plan shall terminate, and all options and stock
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appreciation rights theretofore granted hereunder shall terminate; provided,
however, that notwithstanding the foregoing, the Board of Directors shall
provide in writing in connection with such transaction for any or all of the
following alternatives (separately or in combinations): (i) for the options and
any accompanying stock appreciation rights theretofore granted more than six
months before such transaction to become immediately exercisable notwithstanding
the provisions of paragraph 7 hereof, except the last sentence thereof; (ii) for
the assumption by the successor corporation of the options and stock
appreciation rights theretofore granted or the substitution by such corporation
for such options and rights of new options and rights covering the stock of the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; (iii) for the
continuance of the Plan by such successor corporation in which event the Plan
and the options and any accompanying stock appreciation rights theretofore
granted shall continue in the manner and under the terms so provided; or (iv)
for the payment in cash or stock in lieu of and in complete satisfaction of such
options and rights.
Adjustments under this paragraph 16 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan on any such adjustment.
At the discretion of the Committee, any option may contain provisions to
the effect that upon the happening of certain events, including a change in
control (as defined by the Committee in the option) of the Company, any
outstanding options and accompanying stock appreciation rights not theretofore
exercisable shall immediately become exercisable in their entirety,
notwithstanding any of the other provisions of the option.
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17. Amendment and Termination of Plan.
---------------------------------
The Committee may at any time suspend or terminate the Plan. The Committee
may also at any time amend or revise the terms of the Plan, provided that no
such amendment or revision shall, unless appropriate shareholder approval of
such amendment or revision is obtained, increase the maximum number of shares in
the aggregate which may be sold pursuant to options granted under the Plan,
except as permitted under the provisions of paragraph 16, or change the minimum
purchase price of incentive stock options set forth in paragraph 6, or increase
the maximum term of incentive stock options provided for in paragraph 5, or
permit the granting of options or stock appreciation rights to anyone other than
as provided in paragraph 4.
Notwithstanding the foregoing, no amendment, suspension or termination of
the Plan shall, without specific action of the Committee and the consent of the
option holder, in any way modify, amend, alter or impair any rights or
obligations under any option or accompanying stock appreciation right
theretofore granted under the Plan.
18. Effective Date of Plan.
----------------------
Effectiveness of the Plan is subject to approval by the holders of the
outstanding voting stock of the Company as hereinafter provided within twelve
months from the date the Plan is adopted by the Board of Directors. The Plan
shall be deemed approved by the holders of the outstanding voting stock of the
Company by (i) the affirmative vote of the holders of a majority of the voting
shares of the Company represented and voting at a duly held meeting at which a
quorum is present or (ii) the written consent of the holders of a majority of
the outstanding voting shares of the Company. Any options granted under the Plan
prior to obtaining such shareholder approval shall be granted under the
conditions that the options so granted: (1) shall not be exercisable prior to
such approval, and (2) shall become null and void if such shareholder approval
is not obtained.
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EXHIBIT 10.2
UNITRIN, INC.
1997 STOCK OPTION PLAN
AS AMENDED AND RESTATED
May 5, 1999
1. PURPOSE
The purpose of the Unitrin, Inc. 1997 Stock Option Plan is to secure for
Unitrin, Inc. and its shareholders the benefits arising from stock
ownership by selected executive and other key employees of Unitrin, Inc. or
its subsidiaries or affiliates and such other persons as the Committee (as
defined hereafter) may from time to time determine.
2. DEFINITIONS
As used herein, the following words or terms have the meanings set forth
below:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
"Committee" means the Stock Option Committee of the Board or any successor
committee. The Committee shall be composed of two or more persons who
qualify both as "outside directors" under Section 162(m) of the Code and
related regulations and "non-employee directors" under Rule 16b-3 of the
Securities Exchange Act of 1934, or any successor provisions.
"Company" means Unitrin, Inc., a Delaware corporation.
"Constructive or Actual Delivery" means either: (i) presentation to the
Company of a recent brokerage account statement or other written evidence
satisfactory to the Committee evidencing beneficial ownership by the
Participant of shares of Stock other than shares held in 401(k), pension,
IRA or similar accounts, or (ii) physical delivery of certificates
evidencing shares of Stock, properly indorsed for transfer to the Company
or with an appropriately executed stock power.
"Disability" means a physical or mental disability of such a nature that it
would qualify a Participant for benefits under the long-term disability
insurance plan of Unitrin, Inc., or one of its subsidiaries or affiliates.
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"Exercise Price" means the price at which the Stock underlying an Option
granted under this Plan may be purchased upon exercise of the Option.
"Fair Market Value," as used to refer to the price of a share of Stock on a
particular day, means the closing price for the Common Stock for that day
as subsequently reported in The Wall Street Journal, or if no prices are
quoted for that day, the last preceding day on which such prices of Stock
are so quoted (or, if for any reason no such price is available, in such
other manner as the Committee may deem appropriate to reflect the fair
market value.)
"ISO" means an Option that satisfies the requirements of Section 422(b) of
the Code and any regulations promulgated thereunder from time to time, or
any successor provisions thereto.
"Non-Qualified Option" means an Option that does not satisfy the
requirements for an ISO.
"Option" means an option, including a Non-Qualified Option, an ISO and a
Restorative Option, granted to a Participant under this Plan to purchase a
designated number of shares of Stock.
"Option Agreement" means an agreement between the Company and a Participant
evidencing the terms and conditions of a particular Option.
"Participant" means an individual selected by the Committee to receive an
Option under the Plan.
"Representative" means an executor, administrator, guardian, trustee or
other representative of a Participant who has legal authority to exercise
such Participant's Options or Stock Appreciation Rights on behalf of such
Participant or such Participant's estate.
"Restorative Option" means an Option granted to a Participant under Section
8 of the Plan.
"Retirement" means the termination of employment with the Company and/or
its subsidiaries or affiliates by a Participant after attaining age 55,
where such Participant does not continue to render services as a
consultant, advisor or director to the Company or any such subsidiaries or
affiliates.
"Stock" means the Common Stock of the Company.
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<PAGE>
"Stock Appreciation Right" means a stock appreciation right granted
pursuant to Section 9 of the Plan.
"Substantial Cause" means (a) the commission of a criminal act against, or
in derogation of, the interests of the Company or its subsidiaries or
affiliates; (b) knowingly divulging confidential information about the
Company or its subsidiaries or affiliates to a competitor or to the public
or using such information for personal gain; or (c) the performance of any
similar action that the Committee, in its sole discretion, may deem to be
sufficiently injurious to the interests of the Company or its subsidiaries
or affiliates to constitute substantial cause for the termination of
services by a Participant as an employee, director, consultant or advisor.
Nothing in this Plan shall be construed to imply that a Participant's
employment may only be terminated for Substantial Cause.
3. THE COMMITTEE
a) Administration. The Plan shall be administered by the Committee, which
shall have authority: (i) to construe and interpret the Plan and to
prescribe, amend and rescind rules and regulations relating to the Plan,
(ii) to make all determinations as to eligibility pursuant to Section 5 of
the Plan, (iii) to grant Options and Stock Appreciation Rights as more
fully described in Section 3(b) below, (iv) to approve and determine the
duration of leaves of absence which may be granted to Participants without
constituting a termination of their employment for the purposes of the
Plan, and (v) to make all other determinations necessary or advisable for
the administration of the Plan. All determinations and interpretations made
by the Committee shall be binding and conclusive on all Participants and
their Representatives, successors in interest and beneficiaries. Any
action of the Committee with respect to administration of the Plan shall be
taken by a majority vote or written consent of its members.
b) Granting Authority. Subject to the provisions of the Plan, the
Committee shall have sole authority and discretion to determine the
Participants to whom and the time or times at which Options shall be
granted, whether an Option will be an ISO or a Non-Qualified Option,
whether to couple a Stock Appreciation Right with an Option and the terms
of such Right, the number of shares of Stock to be subject to each Option,
the Exercise Price, the number of installments, if any, in which each
Option may vest, and the expiration date of each Option.
4. SHARES SUBJECT TO PLAN
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<PAGE>
Subject to adjustment as provided in Section 14 hereof, the maximum number
of shares of Stock which may be issued pursuant to the exercise of Options
and Stock Appreciation Rights granted under the Plan shall not exceed two
million (2,000,000) shares in total. The maximum number of shares that may
be granted to an individual Participant under the Plan shall be one-third
of such total. If any Option granted under the Plan shall expire or
terminate for any reason (other than surrender at the time of exercise of a
related Stock Appreciation Right provided for in paragraph 9 hereof),
without having been exercised in full, the unpurchased shares subject
thereto shall again be available for Options to be granted under the Plan.
Any shares of Stock that are used by Constructive or Actual Delivery as
full or partial payment for the Exercise Price of an Option and/or the
withholding taxes arising from the exercise of such Option, or that are
withheld from the shares that would otherwise be issued upon exercise of
such Option in full or partial payment of such withholding taxes, shall in
each case be added to the aggregate number of shares of Stock available for
issuance under this Plan.
5. ELIGIBILITY
The following persons shall be eligible to receive grants of Options and
Stock Appreciation Rights under this Plan:
a) all executive and other key employees of the Company or of any
subsidiary or affiliate of the Company who are designated as such by the
Committee in its sole discretion;
b) directors of the Company who are regular employees of the Company or
any such subsidiary or affiliate; and
c) key persons selected by the Committee in its sole discretion who render
services to the Company or its subsidiaries or affiliates as consultants or
advisors, but such persons shall only be eligible to receive Non-Qualified
Options (including Restorative Options issued with respect to such
Options).
6. TERMS OF OPTIONS
a) Duration. Each Option and all rights associated therewith, shall
expire on such date as the Committee may determine, subject to earlier
termination as provided herein. All Options granted under this Plan shall
be granted on or before December 31, 2006.
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<PAGE>
b) Exercise Price. The Exercise Price of the Stock covered by each Option
shall be determined by the Committee.
c) Vesting. Each Option granted under this plan shall vest and be
exercisable in such installments, if any, during the period prior to its
expiration date as the Committee shall determine, and, unless otherwise
specified in an Option Agreement, no Option shall be exercisable for at
least six months after grant except in the case of the death or Disability
of the Participant.
d) Non-Transferability. Unless otherwise provided in an Option Agreement,
an Option (and any accompanying Stock Appreciation Right) granted under the
Plan shall, by its terms, be non-transferable by the Participant, either
voluntarily or by operation of law, otherwise than by will or the laws of
descent and distribution, and shall be exercisable during the Participant's
lifetime only by the Participant (or, in the case of the incapacity of the
Participant, by the Participant's Representative) regardless of any
community property interest therein of the spouse of the Participant, or
such spouse's successors in interest. If the spouse of the Participant
shall have acquired a community property interest in such Option (or
accompanying Stock Appreciation Right), the Participant, or the
Participant's Representative, may exercise the Option (or accompanying
Stock Appreciation Right) on behalf of the spouse of the Participant or
such spouse's successors in interest.
e) Option Agreements. The terms of each Option granted pursuant to this
Plan shall be evidenced by an Option Agreement in a form approved by the
Committee and signed by both the Company and the Participant, except that a
Restorative Option may be evidenced by a certificate reciting the essential
terms of such Option and signed only by the Company.
7. EXERCISE OF OPTIONS
a) Notice by Participant. Each Participant (or such Participant's
Representative) who desires to exercise an Option shall give advance
written notice of such exercise to the Company in such form as may be
prescribed from time to time by the Committee.
b) Payment for Exercises. The Exercise Price of an Option shall be paid
in full at the time of exercise of such Option: (i) by check payable to
the order of the Company, (ii) by Constructive or Actual Delivery, (iii) by
wire transfer or other means acceptable to the Committee, (iv) if
authorized by the Committee, by a promissory note made by the Participant
in favor of the Company, upon such terms
5
<PAGE>
and conditions and secured by such collateral as may be required by the
Committee, or (v) any combination of the foregoing acceptable to the
Committee. Shares of Stock used by Constructive or Actual Delivery to
satisfy the Exercise Price of an Option shall be valued at their Fair
Market Value on the date of exercise.
c) Partial Exercises. No Option may be exercised for a fraction of a
share and no partial exercise of any Option may be made for less than fifty
(50) shares.
d) Withholding Taxes. Upon the exercise of a Non-Qualified Option or a
Stock Appreciation Right, the Company shall have the right to: (i) require
such Participant (or such Participant's Representative) to pay the Company
the amount of any taxes which the Company may be required to withhold with
respect to such exercise, or (ii) deduct from all amounts paid in cash with
respect to the exercise of a Stock Appreciation Right the amount of any
taxes which the Company may be required to withhold with respect to such
cash amounts.
Subject to the limitation set forth in the next sentence, a Participant or
such Participant's Representative may elect to satisfy all or any portion
of the tax withholding obligations arising from the exercise of an Option
or Stock Appreciation Right either by: (i) Constructive or Actual Delivery,
or (ii) directing the Company to withhold shares that would otherwise be
issued pursuant to such exercise. With respect to exercises of Options and
Stock Appreciation Rights granted on or after May 5, 1999, no Participant
or Participant's Representative shall have the right to utilize
Constructive or Actual Delivery or have shares of Stock withheld in excess
of the minimum number required to satisfy applicable tax withholding
requirements based on minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes. Shares of Stock used in either
of the foregoing ways to satisfy tax withholding obligations will be valued
at their Fair Market Value on the date of exercise.
8. GRANT OF RESTORATIVE OPTIONS
Subject to the remaining provisions of this Section 8, if a Participant
elects to pay some or all of the Exercise Price of an Option (the
"Underlying Option") and/or any related withholding taxes by Constructive
or Actual Delivery (or, in the case of such taxes, by directing the Company
to withhold shares that would otherwise be issued upon exercise of such
Underlying Option), then such Participant shall be granted a Restorative
Option to purchase additional shares of Stock. The number of shares of
Stock subject to the Restorative Option shall be equal to the sum of: (a)
any shares used by Constructive or Actual Delivery to pay the Exercise
Price
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<PAGE>
and/or the related withholding taxes, and (b) any shares withheld in
connection with the exercise in payment of withholding taxes. The Exercise
Price of the Restorative Option shall be equal to one hundred percent
(100%) of the Fair Market Value of the Stock on the date the Underlying
Option is exercised. The Restorative Option shall be fully vested beginning
six months after the date of its grant and shall expire on the expiration
date of the Underlying Option. All other terms of the Restorative Option
shall be identical to the terms of the Underlying Option. No Restorative
Option shall be granted: (i) to any Participant who is not actively
employed by the Company or one of its subsidiaries or affiliates on the
date of exercise of the Underlying Option or who is not then rendering
services to the Company or any such subsidiaries or affiliates as a
consultant, advisor or director, or (ii) if, on the date of exercise of the
Underlying Option such Option would be scheduled to expire within six
months.
9. STOCK APPRECIATION RIGHTS
If deemed appropriate by the Committee, any Option may be coupled with a
Stock Appreciation Right at the time of the grant of the Option, or the
Committee may grant a Stock Appreciation Right to any Participant at any
time after granting an Option to such Participant but prior to the
expiration date of such associated Option. Such Stock Appreciation Right
shall be subject to such terms and conditions consistent with the Plan as
the Committee shall impose, provided that:
(a) A Stock Appreciation Right shall be exercisable to the extent, and
only to the extent, the associated Option is exercisable and shall be
exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the Option);
(b) A Stock Appreciation Right shall entitle the Participant to surrender
to the Company unexercised the Option to which it is related, or any
portion thereof, and to receive from the Company in exchange therefor that
number of shares (rounded down to the nearest whole number) having an
aggregate value equal to the excess of the Fair Market Value of one share
over the Exercise Price per share specified in such Option, multiplied by
the number of shares subject to the Option, or portion thereof, which is so
surrendered; and
(c) The Committee may elect to settle, or the Stock Appreciation Right may
permit the Participant to elect to receive (subject to approval by the
Committee), any part or all of the Company's obligation arising out of the
exercise of a Stock Appreciation Right by the payment of cash equal to the
aggregate Fair Market Value of that part or all of the shares it would
otherwise be obligated to deliver,
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<PAGE>
provided that in no event shall cash be payable to an officer or director
of the Company upon exercise of a Stock Appreciation Right: (i) if the
Stock Appreciation Right was exercised during the first six months of its
term; or (ii) unless the transaction is otherwise exempt from the operation
of Section 16(b) of the Securities Exchange Act of 1934.
10. HOLDING OF STOCK AFTER EXERCISE OF OPTION
At the discretion of the Committee, any Option Agreement may provide that
the Participant, by accepting such Option, represents and agrees, for the
Participant and the Participant's permitted transferees, that none of the
shares purchased upon exercise of the Option or any accompanying Stock
Appreciation Right will be acquired with a view to any sale, transfer or
distribution of said shares in violation of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, or any
applicable state "blue sky" laws, and the person entitled to exercise the
same shall furnish evidence satisfactory to the Company (including a
written and signed representation) to that effect in form and substance
satisfactory to the Company, including an indemnification of the Company in
the event of any violation of the Securities Act of 1933 or state blue sky
law by such person.
11. CESSATION OF SERVICES
Unless otherwise specified in an Option Agreement or approved in writing by
the Committee, if a Participant ceases to provide services to any of the
Company, its subsidiaries and affiliates as an employee, director,
consultant or advisor, other than as a result of the Participant's
Retirement, death or Disability, the Participant's outstanding Options (and
any accompanying Stock Appreciation Rights) shall, to the extent such
Options are already vested, be exercisable for a period of 90 days after
the date such Participant ceases to provide all such services and shall
thereafter expire and be void and of no further force or effect. A leave of
absence approved in writing by the Committee shall not be deemed a
cessation of services for purposes of this paragraph, but no Option (or
accompanying Stock Appreciation Right) may be exercised during any such
leave of absence, except during the first 90 days thereof unless otherwise
agreed to in writing by the Committee. If a Participant's services as an
employee, director, consultant or advisor are terminated for Substantial
Cause, all of the Participant's outstanding Options (and accompanying Stock
Appreciation Rights) will terminate as of the date of such termination.
12. RETIREMENT, DEATH OR DISABILITY OF PARTICIPANT
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<PAGE>
Upon the Retirement of a Participant or upon such Participant's death or
Disability while employed by the Company or one of its subsidiaries or
affiliates or while such Participant was providing services thereto as a
director, consultant or advisor, the Participant's outstanding Options (and
any accompanying Stock Appreciation Rights) shall expire one (1) year after
the date of such Retirement, death or Disability unless by their terms they
expire sooner. During such period after the death of a Participant, such
Options (and any accompanying Stock Appreciation Rights) may, to the extent
that they were vested but unexercised on the date of death, be exercised by
the Participant's Representative.
13. PRIVILEGES OF STOCK OWNERSHIP
No Participant shall have any of the rights or privileges of a shareholder
of the Company in respect of any shares of Stock issuable upon exercise of
any Option or Stock Appreciation Right until certificates representing such
shares shall have been issued and delivered. No shares shall be issued and
delivered upon the exercise of any Option or accompanying Stock
Appreciation Rights unless and until there shall have been full compliance
with all applicable requirements of the Securities Act of 1933 (whether by
registration or satisfaction of exemption conditions), all applicable
listing requirements of The Nasdaq Stock Market or any national securities
exchange on which shares of the same class are then listed and any other
requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
14. ADJUSTMENTS
If the outstanding shares of the Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of
shares of securities of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of shares as to
which Options (and accompanying Stock Appreciation Rights) may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options or portions thereof, which shall
have been granted prior to any such change, shall likewise be made. Any
such adjustment in an outstanding Option shall be made without change in
the aggregate purchase price applicable to the unexercised portion of such
Option but with a corresponding adjustment in the Exercise Price for each
share or other unit of any security covered by the Option.
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<PAGE>
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all the property or more than
eighty percent (80%) of the then outstanding Stock of the Company to
another corporation, this Plan shall terminate; provided, however, that
notwithstanding the foregoing, the Board shall provide in writing in
connection with such transaction for any one or more of the following
alternatives (separately or in combinations); (i) for each Option and any
accompanying Stock Appreciation Rights theretofore granted to become
immediately exercisable notwithstanding the provisions of Section 6(c)
hereof, (ii) for the assumption by the successor corporation of the Options
and Stock Appreciation Rights theretofore granted or the substitution by
such corporation for such Stock Appreciation Rights theretofore granted or
the substitution by such corporation for such Options and rights of new
Options and rights covering the stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; (iii) for the continuance of the Plan by
such successor corporation in which event the Plan and the Options and any
accompanying Stock Appreciation Rights therefore granted shall continue in
the manner and under the terms so provided; or (iv) for the payment in cash
or stock in lieu of and in complete satisfaction of such Options and
rights.
Adjustments under this paragraph shall be made by the Committee, whose
determination as to which adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the plan on any such adjustment.
At the discretion of the Committee, any Option Agreement may contain
provisions to the effect that upon the happening of certain events,
including a change in control (as defined by the Committee in such Option
Agreement) of the Company, any outstanding Options and accompanying Stock
Appreciation Rights not theretofore vested shall immediately become vested
and exercisable in their entirety, notwithstanding any of the other
provisions of the Option.
15. AMENDMENT AND TERMINATION OF PLAN
The Board may at any time suspend or terminate the Plan or amend or revise
the terms of the Plan. In the event that any provision of applicable law
mandates that any such amendment or revision be approved by the Company's
shareholders, then such amendment or revision shall be submitted to such
shareholders for approval or ratification within a time period that
satisfies such law. In the case of other laws
10
<PAGE>
that require shareholder approval of amendments or revisions as a condition
to receiving or preserving certain benefits (e.g., deductibility of certain
compensation under Section 162(m) of the Code) or achieving a "safe harbor"
status, the Board shall have sole discretion to determine whether or not to
submit amendments and revisions to the Company's shareholders for approval.
Notwithstanding the foregoing, no amendment, suspension or termination of
the Plan shall, without specific action of the Board and the consent of the
Option holder, in any way modify, amend, alter or impair any rights or
obligations under any Option or accompanying Stock Appreciation Right
theretofore granted under the Plan.
16. EFFECTIVE DATE OF PLAN
Effectiveness of the Plan is subject to approval by the holders of the
outstanding Stock of the Company. The Plan shall be deemed approved by the
holders of the outstanding Stock of the Company by the affirmative vote of
the holders of a majority of the shares of Stock of the Company represented
and voting at a duly held meeting at which a quorum is present (including
abstentions to the extent abstentions are counted as voting under
applicable state law). Any Options granted under the Plan prior to
obtaining such shareholder approval shall be granted under the conditions
that the Options so granted: (1) shall not be exercisable prior to such
approval, and (2) shall become null and void if such shareholder approval
is not obtained.
11
<PAGE>
EXHIBIT 10.3
UNITRIN INC.
------------
1995 Non-Employee Director Stock Option Plan
--------------------------------------------
Amended and Restated
--------------------
May 5, 1999
-----------
1. Purpose.
-------
The purpose of this 1995 Non-Employee Director Stock Option Plan ("Plan") of
Unitrin, Inc. ("Company") is to encourage ownership in the Company by non-
employee directors of the Company and to attract and retain qualified non-
employee personnel to serve as directors of the Company.
2. Administration.
--------------
The Plan will be administered by a committee or committees (which term
includes subcommittees) consisting of two or more persons appointed by the Board
of Directors of the Company. The composition of any committee responsible for
administration of the Plan shall comply with the applicable requirements of Rule
16b-3 of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
including, if applicable, the requirement that certain plans be administered by
"disinterested administrators". Members of a committee will serve for such term
as the Board of Directors may determine, subject to removal by the Board of
Directors at any time. With respect to any matter, the term "Committee" refers
to the committee that has been delegated authority with respect to such matter.
Subject to the provisions of the Plan, the Committee shall have authority: (i)
to construe and interpret the Plan; (ii) to define the terms used herein; (iii)
to prescribe, amend and rescind rules and regulations relating to the Plan; (iv)
to make such changes to the Plan as may become necessary or advisable to comply
with Rule 16b-3 of the Exchange Act; and (v) to make all other determinations
necessary or advisable for the administration of the Plan. All determinations
and interpretations made by the Committee shall be binding and conclusive on all
participants in the Plan and their legal representatives and beneficiaries.
Notwithstanding anything to the contrary in this Plan, the Committee shall not
have the authority to make any determination or to take any action that would
cause the Plan to cease to comply with the terms and conditions of Rule 16b-3
under the Exchange Act.
3. Shares Subject to the Plan.
--------------------------
The shares to be offered under the Plan shall consist of authorized but
unissued shares or treasury shares of the Company's common stock ("Common
Stock") and, subject to adjustment as provided in paragraph 13 hereof, the
aggregate amount of Common Stock which may be subject to options granted
pursuant to paragraphs 5a, 5b and 5c hereunder ("Options") shall not exceed
200,000 shares. If any Option granted under the Plan shall expire or terminate
for any reason, without having been exercised or vested in full, as the case may
be, the unpurchased shares subject thereto shall again be available for Options
to be granted under the Plan. Options granted under the Plan will not be
qualified as
1
<PAGE>
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended ("Code"). All Options granted under the Plan shall be granted
within 10 years of August 2, 1995.
4. Eligibility.
-----------
Each director of the Company who first becomes a director after November 1,
1993 and is not an employee of the Company or any subsidiary of the Company and
each director who has retired as an employee of the Company or a subsidiary of
the Company shall be eligible to participate in the Plan ("Eligible Directors").
Each Option granted under the Plan shall be governed by an agreement in such
form as the Committee shall from time to time approve.
5. Stock Option Grants.
-------------------
a. Initial Option Grants.
---------------------
An Option covering 2,000 shares of Common Stock shall be granted to each
Eligible Director on the date of adoption of the Plan by the Board of Directors,
subject to approval by the Company's shareholders at the Company's 1996 Annual
Meeting. If a director first becomes an Eligible Director subsequent to the
adoption of this Plan, an Option covering 2,000 shares of Common Stock shall be
granted to such director on the date that he or she first becomes eligible.
b. Annual Option Grants.
--------------------
An Option covering 2,000 shares of Common Stock will be granted to each
Eligible Director automatically at the conclusion of each Company Annual
Meeting.
c. Retainer Option Grants.
----------------------
Eligible Directors may file with the Committee or its designee at least six
months prior to the commencement of a fiscal year of the Company ("Plan Year")
an irrevocable election to receive an Option in lieu of the Annual Retainer for
service during the Plan Year ("Retainer Option"). Retainer Options will be
granted on January 2 of a Plan Year (or if January 2 is not a business day, on
the next succeeding business day) for service during such Plan Year. The number
of shares of Common Stock to be subject to a Retainer Option shall be equal to
the nearest number of whole shares determined by dividing the Annual Retainer by
the fair market value of a share of Common Stock on the date of grant. For these
purposes "Annual Retainer" shall mean the amount of money which the Eligible
Director would be entitled to receive for serving as a director during the Plan
Year, but shall not include the amount of money which the Eligible Director
would be entitled to receive for any other services to be provided to the
Company.
Notwithstanding the foregoing, elections to receive Retainer Options may be
made at any time during a Plan Year so long as such elections are made at least
six months in advance of receiving the corresponding Retainer Options and the
director making such election first becomes an Eligible Director less than six
months before the commencement of the subject Plan Year. In any such case, the
Retainer Option shall be granted on the first business day which is six months
and one day after the date of the
2
<PAGE>
director's election to receive a Retainer Option. Such Retainer Option shall
pertain only to that portion of the Annual Retainer remaining to be paid during
such Plan Year on or after the date of grant.
d. Duration of Options.
-------------------
Subject to paragraph 9, below, each Option granted pursuant to this paragraph
5 and all rights associated therewith shall expire ten years from the date of
grant.
e. Purchase Price.
--------------
The purchase price of the stock covered by each Option shall be the fair
market value (as defined in paragraph 6) of a share of Common Stock as of the
date of the grant of such Option.
f. Exercise of Options.
-------------------
Options granted hereunder shall be exercisable during an Option holder's
lifetime only by the Option holder or by his or her guardian or legal
representative. Each Option granted under this Plan shall be exercisable in full
one year after the date of the grant. No Option may be exercised for a fraction
of a share and no partial exercise of any Option may be for less than: (i) one
hundred (100) shares; or (ii) the total number of shares then eligible for
exercise, if less than one hundred (100) shares.
The purchase price for the shares shall be paid in full at the time of
exercise: (i) in cash or by check payable to the order of the Company; (ii) by
delivery of shares of Common Stock already owned by, and in the possession of,
the Option holder; or (iii) by delivering a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the Option price (in which
case the exercise will be effective upon receipt of such proceeds by the
Company). Shares of Common Stock used to satisfy the exercise price of an Option
shall be valued at their fair market value determined in accordance with
paragraph 6 hereof.
As further provided in paragraph 15, effectiveness of the Plan is subject to
approval of the Company's shareholders at the Company's 1996 Annual Meeting. No
Options issued prior to such approval shall be exercisable.
6. Fair Market Value of Common Stock.
---------------------------------
For purposes of the Plan, the fair market value of a share of Common Stock
shall be determined by reference to the closing price on the Nasdaq Stock Market
(or the principal stock exchange on which the Common Stock is then listed) or,
if the Common Stock is not then listed on the Nasdaq Stock Market (or on a stock
exchange), by reference to the mean between the bid and asked price of a share
as supplied by the National Association of Securities Dealers (or its successor
in function), in each case as reported by The Wall Street Journal, for the date
on which the Option is granted or exercised, as the case may be, or if such date
is not a business day, for the business day immediately preceding such date or,
if for any reason no such price is available for such date, then by reference to
the most recent closing price or the mean between the bid and asked price of a
share for the
3
<PAGE>
last date on which the Common Stock was traded.
7. Withholding Tax.
---------------
Upon the exercise of Options issued hereunder, the Company shall have the
right to require the Option holder to pay the Company the amount of taxes, if
any, which the Company may be required to withhold with respect to such shares.
8. Transferability.
---------------
Options granted hereunder shall not be transferable, other than by will or
the laws of descent and distribution, except to the extent: (i) transfer is
permitted by Rule 16b-3 of the Exchange Act; and (ii) approved by the
Committee. Subject to the foregoing, Options shall not be assigned, pledged or
otherwise encumbered by the holder thereof, either voluntarily or by operation
of law.
9. Termination of Directorship.
---------------------------
All rights of a director in an Option, to the extent that the Option has not
been exercised, shall terminate three months after the date of the termination
of his or her services as a director for any reason other than: (i) the death
of the director; (ii) cessation of services as a director because the
individual, although nominated by the Board of Directors, is not elected by the
shareholders to the Board of Directors; or (iii) retirement because of total
and permanent disability as defined in Section 22(e)(3) of the Code
(collectively, "Termination Events"). If a director ceases to be a director of
the Company because of a Termination Event, his or her unvested Options shall
vest immediately. All vested Options shall expire twelve months after the date
of a Termination Event.
10. No Right to Continue as a Director.
----------------------------------
Neither the Plan nor the granting of an Option under the Plan shall
constitute or be evidence of any agreement or understanding that any director
has a right to continue as a director for any period of time or at any
particular rate of compensation.
11. Restrictions on Disposition of Shares.
-------------------------------------
Each Option shall provide that the holder, by accepting such Option,
represents and agrees, for the Option holder and the Option holder's permitted
transferees, that none of the shares acquired upon exercise of such Option will
be acquired with a view towards any sale, transfer or distribution of said
shares in violation of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, or any applicable "blue sky" laws, and
the holder of such Option shall furnish evidence satisfactory to the Company
(including a written and signed representation) to that effect in form and
substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation by such person of the Securities Act of
1933, as amended, or state blue sky law.
12. Privileges of Stock Ownership.
-----------------------------
No Option holder shall have any of the rights or privileges of a shareholder
of the Company in respect of any shares of Common Stock issuable with respect
to such Option
4
<PAGE>
until certificates representing such shares shall have been issued and
delivered. No shares shall be issued and delivered upon the exercise of an
Option unless and until there shall have been full compliance with all
applicable requirements of the Securities Act of 1933, as amended (whether by
registration or satisfaction of exemption conditions), all applicable listing
requirements of the National Association of Securities Dealers or any national
securities exchange on which shares of the same class are then listed and any
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
13. Adjustments.
-----------
If the outstanding shares of the Common Stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar transaction, an appropriate and proportionate adjustment shall be made
in the maximum number and kind of shares as to which Options may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options, which shall have been granted prior to
any such change, and to the number of shares covered by initial and annual
Option grants under paragraph 5, shall likewise be made. Any such adjustment in
the outstanding Options shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Options but with a
corresponding adjustment in the price for each share or other unit of security
covered by the Option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than eighty percent
(80%) of the then outstanding stock of the Company to another corporation, the
Plan shall terminate, and all Options theretofore granted shall immediately
become exercisable.
No fractional shares of stock shall be issued under the Plan on any such
adjustment.
14. Amendment and Termination of Plan.
---------------------------------
The Board of Directors may at any time terminate the Plan. The Board of
Directors may also at any time amend or revise the terms of the Plan, provided
that no such amendment or revision shall become effective without the approval
of the Company's shareholders if such approval is required in order to comply
with Rule 16b-3 of the Exchange Act or any other applicable law or regulation.
Notwithstanding the foregoing, Plan provisions relating to the amount, price
and timing of Options may be amended only by action of the shareholders, but
not more than once every six months, other than to
5
<PAGE>
comport with changes in the Code or the Employee Retirement Income Security Act
of 1974, as amended, or the rules in effect thereunder.
Notwithstanding the foregoing, no amendment or termination of the Plan shall,
without specific action of the Board of Directors and the consent of the Option
holder, in any way modify, amend, alter or impair any rights or obligations
under any Option theretofore granted under the Plan.
15. Effective Date of Plan.
----------------------
Effectiveness of the Plan is subject to approval by the holders of the
outstanding voting stock of the Company as hereinafter provided at the
Company's 1996 annual meeting of shareholders. The Plan shall be deemed
approved by the holders of the outstanding voting stock of the Company by: (i)
the affirmative vote of the holders of a majority of the voting shares of the
Company represented and voting at a duly held meeting at which a quorum is
present; or (ii) the written consent of the holders of a majority of the
outstanding voting shares of the Company. Notwithstanding anything in this Plan
to the contrary, any Options granted under the Plan prior to obtaining such
shareholder approval shall be granted under the conditions that the Options so
granted: (1) shall not be vested, transferable (if permitted in accordance with
paragraph 8 above) other than by will or the laws of descent and distribution
or exercisable prior to such approval; and (2) shall become null and void if
such shareholder approval is not obtained.
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from the
Condensed Consolidated Financial Statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<DEBT-HELD-FOR-SALE> 2,539,100 2,809,600
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 933,600 187,500
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 4,374,900 3,992,500
<CASH> 11,300 18,500
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 6,116,300 5,561,700
<POLICY-LOSSES> 2,513,100 2,449,700
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 128,800 82,500
0 0
0 0
<COMMON> 7,300 8,200
<OTHER-SE> 1,934,900 1,734,600
<TOTAL-LIABILITY-AND-EQUITY> 6,116,300 5,561,700
652,200 583,000
<INVESTMENT-INCOME> 100,500 87,000
<INVESTMENT-GAINS> 39,400 66,500
<OTHER-INCOME> 59,200 56,400
<BENEFITS> 428,100 378,600
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 331,800<F1> 292,300<F3>
<INCOME-PRETAX> 91,400 122,000
<INCOME-TAX> 31,000 41,400
<INCOME-CONTINUING> 88,700<F2> 112,200<F4>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 88,700 112,200
<EPS-BASIC> 1.21 1.47
<EPS-DILUTED> 1.20 1.45
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
<FN>
<F1> 1999 Includes Consumer Finance Expenses of $48.7 million and Other
Expenses of $7.1 million.
<F2> 1999 Includes Equity in Net Income of Investees of $28.3 million.
<F3> 1998 Includes Consumer Finance Expenses of $46.9 million and Other
Expenses of $5.6 million.
<F4> 1998 Includes Equity in Net Income of Investees of $31.6 million.
</FN>
</TABLE>
