<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31, 1998
-------------------------------------------------
( ) Transition report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Transition period from to
---------------------- -----------------------
State Auto Financial Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1324304
- ---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
518 East Broad Street, Columbus, Ohio 43215-3976
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(614) 464-5000
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
(X) Yes ( ) No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common shares, without par value 18,350,632
- -------------------------------- ------------------------
(CLASS) (OUTSTANDING ON 4/30/98)
<PAGE> 2
<TABLE>
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(unaudited)
<CAPTION>
March 31 December 31
ASSETS 1998 1997
---- ----
<S> <C> <C>
Fixed maturities:
Held for investment, at amortized cost
(fair value $78,635 and $81,571, respectively) $ 76,336 $ 79,300
Available for sale, at fair value
(amortized cost $344,714 and $307,589, respectively) 355,875 320,299
Equity securities, at fair value (cost $4,286) 5,251 4,580
-------- --------
Total investments 437,462 404,179
Cash and cash equivalents 19,185 23,918
Deferred policy acquisition costs 19,075 17,689
Accrued investment income and other assets 17,241 16,327
Net prepaid pension expense 13,298 12,133
Reinsurance recoverable 12,284 9,871
Prepaid reinsurance premiums 4,031 3,627
Due from affiliates 3,742 2,179
Property and equipment, net 3,277 3,228
-------- --------
Total assets $529,595 $493,151
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss expenses payable $178,803 $162,446
Unearned premiums 107,222 99,445
Current federal income taxes 3,813 15
Deferred federal income taxes 2,585 3,049
Other liabilities 2,689 2,717
-------- --------
Total liabilities 295,112 267,672
-------- --------
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 30,000,000
shares; 18,350,632 and 18,341,899 shares issued and outstanding,
respectively, at stated value of $5 per share 91,753 91,709
Additional paid-in capital 2,976 2,894
Accumulated comprehensive income 8,232 8,830
Retained earnings 131,522 122,046
-------- --------
Stockholders' equity 234,483 225,479
-------- --------
Total liabilities and stockholders' equity $529,595 $493,151
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
<TABLE>
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended March 31, 1998 and 1997
(dollars in thousands, except per share amounts)
(unaudited)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Earned premiums (net of ceded earned premiums of
$4,031 and $2,747, respectively) $70,933 $62,251
Net investment income 6,528 6,236
Management services income 2,331 2,207
Net realized gains on investments 290 238
------- -------
Total revenues 80,082 70,932
------- -------
Losses and loss expenses (net of ceded losses and loss
expenses of $2,997 and $1,034, respectively) 45,132 41,940
Acquisition and operating expenses 20,821 18,175
Other expense, net 652 472
------- -------
Total expenses 66,605 60,587
------- -------
Earnings before federal income taxes 13,477 10,345
Federal income tax expense:
Current 3,856 2,487
Deferred (142) 327
------- -------
Total federal income taxes 3,714 2,814
------- -------
Net earnings $ 9,763 $ 7,531
======= =======
Net earnings per share:
- basic $ 0.53 $ 0.42
======= =======
- diluted $ 0.52 $ 0.41
======= =======
Dividends paid per common share $ 0.045 $ 0.040
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
<TABLE>
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
(in thousands)
(unaudited)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,763 $ 7,531
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization, net 216 198
Net realized gains on investments (290) (238)
Changes in operating assets and liabilities:
Deferred policy acquisition costs (277) (871)
Accrued investment income and other assets (914) (1,529)
Net prepaid pension expense (424) (317)
Other liabilities and due to/from affiliate, net (1,590) (786)
Reinsurance recoverable and prepaid reinsurance premiums (717) 552
Losses and loss expenses payable 1,988 570
Unearned premiums 137 981
Federal income taxes 3,656 804
-------- --------
11,548 6,895
Cash provided from the change in the reinsurance pool
participation percentage 18,059 --
-------- --------
Net cash provided by operating activities 29,607 6,895
-------- --------
Cash flows from investing activities:
Purchase of fixed maturities - available for sale (58,630) (22,765)
Maturities, calls and principal reductions of fixed maturities -
held to maturity 2,899 1,640
Maturities, calls and principal reductions of fixed maturities -
available for sale 8,123 1,645
Sale of fixed maturities - available for sale 13,506 13,994
Net additions of property and equipment (77) --
-------- --------
Net cash used in investing activities (34,179) (5,486)
-------- --------
Cash flows from financing activities:
Net proceeds from sale of common stock 126 182
Payment of dividends (287) (246)
-------- --------
Net cash used in financing activities (161) (64)
-------- --------
Net increase (decrease) in cash and cash equivalents (4,733) 1,345
Cash and cash equivalents at beginning of period 23,918 12,868
-------- --------
Cash and cash equivalents at end of period $ 19,185 $ 14,213
======== ========
Supplemental disclosures:
Federal income taxes paid -- $ 1,950
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(unaudited)
1. BASIS OF PRESENTATION
The financial statements for the interim periods included herein have been
prepared by the Company without audit; however, such information reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the financial statements and notes thereto for the year ended December 31,
1997 included in the Company's 1997 Form 10-K filed with the Securities and
Exchange Commission.
The results of operations for the interim periods presented are not necessarily
indicative of the operating results that may be expected for the full fiscal
year ending December 31, 1998.
2. NET EARNINGS PER COMMON SHARE
The following table sets forth the compilation of basic and diluted net earnings
per common share:
<TABLE>
<CAPTION>
Three months ended
March 31
1998 1997
---- ----
(in thousands, except per share amounts)
<S> <C> <C>
Numerator:
Net earnings for basic and diluted earnings
per common share $ 9,763 $ 7,531
-------------------------
Denominator:
Weighted average shares for basic net
earnings per common share 18,346 18,145
Effect of dilutive stock options 529 406
Adjusted weighted average shares for
diluted net earnings per common share 18,875 18,551
-------------------------
Basic net earnings per common share $ 0.53 $ 0.42
-------------------------
Diluted net earnings per common share $ 0.52 $ 0.41
-------------------------
</TABLE>
3. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
SFAS No. 130 had no impact on the Company's net earnings or shareholders'
equity. SFAS No. 130 requires unrealized gains or losses on the Company's
available-for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the requirements
of SFAS No. 130.
The components of comprehensive income, net of related tax, for the three-month
periods ended March 31, 1998 and 1997 are as follows:
1998 1997
---- ----
(in thousands)
Net earnings $9,763 $7,531
Unrealized holding losses, net of tax (598) (3,124)
-----------------
Comprehensive income $9,165 $4,407
=================
<PAGE> 6
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - continued
March 31, 1998
(unaudited)
3. COMPREHENSIVE INCOME - continued
The components of accumulated other comprehensive income, net of related tax,
included in stockholders' equity at March 31, 1998 and December 31, 1997 include
only unrealized holding gains (losses), net of tax.
4. NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997, but is not required to be applied to interim
period financial statements in the year of adoption. SFAS No. 131 changes the
way public companies report segment information in annual financial statements
and also requires those companies to report selected segment information in
interim financial reports to shareholders. The Company has not yet determined
the reporting changes required by SFAS No. 131 to segment information.
<PAGE> 7
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
Earnings before federal income taxes increased $3.1 million to $13.5 million for
the quarter ended March 31, 1998 from the same 1997 period. This increase in
earnings is a result of an improvement in the Company's losses and loss expenses
from the same 1997 period. Also impacting the quarterly operations was an
amendment to the pooling arrangement by the Company's principal insurance
subsidiary, State Auto Property & Casualty Insurance Company (State Auto P&C).
From 1995 through 1997, State Auto P&C participated in a pooling arrangement
with State Automobile Mutual Insurance Company (Mutual), a majority shareholder
of the Company, and Milbank Insurance Company (Milbank), a wholly-owned
subsidiary of Mutual, whereby State Auto P&C assumed 35% of the pooled business,
Mutual 55% and Milbank 10%. Effective January 1, 1998, the pooling arrangement
was amended to include the insurance operations of Midwest Security Insurance
Company (Midwest), a wholly-owned subsidiary of Mutual. Concurrent with the
addition of Midwest to the pool, the pooling participation percentages were
amended to allocate 37% to State Auto P&C, 52% to Mutual, 10% to Milbank and 1%
to Midwest. In connection with the January 1, 1998 pooling changes, State Auto
P&C received approximately $18.1 million to cover its increased share of the
pooled liabilities.
Earned premiums, during the quarter ended March 31, 1998, increased $8.7 million
to $70.9 million from the same 1997 period. Of the $8.7 million increase, $7.3
million was due to an increase in earned premiums of State Auto P&C, of which
$5.3 million was due to the impact of the change in the pooling arrangement with
the remaining portion of the increase attributable to State Auto P&C's share of
the increase in the earned premiums of the pooled companies. The remaining $1.4
million of the $8.7 million increase was due to the earned premium growth of
State Auto National Insurance Company (National), the Company's non-standard
insurance company.
Net investment income increased $0.3 million to $6.5 million from the same 1997
period. Contributing to this increase, was the transfer to State Auto P&C of
approximately $18.1 million in conjunction with the change in the pooling
arrangement and a general increase in investable assets over the same 1997
period. Total cost of investable assets at March 31, 1998 was $444.5 million
compared to $396.8 million at March 31, 1997. The investment yield, based on
fixed and equity securities at cost, decreased to 6.0% from 6.4% for the same
1997 period. Contributing to the decrease in the investment yield has been the
gradual shift in the composition of the fixed maturity portfolio from taxables
to tax-exempt securities. At March 31, 1998, approximately 64% of the fixed
maturity portfolio was comprised of tax-exempt securities whereas at March 31,
1997, tax exempts comprised 53% of the portfolio.
Management services income increased slightly from the same 1997 period and
realized gains on investments were comparable to the same period in 1997.
Losses and loss expenses, as a percentage of earned premiums, decreased to 63.6%
for the quarter ended March 31, 1998 from 67.4% for the same 1997 period. The
decrease in this ratio is due to a reduction in the level of catastrophe losses
experienced by the Company as compared to the same period in 1997 and continuing
improvement in the Company's core underwriting operations. Nearly all lines of
business reflected improvements in their statutory loss ratios compared to the
same period in 1997.
Acquisition and operating expenses, as a percentage of earned premiums,
increased slightly to 29.4% from 29.2% in 1997.
<PAGE> 8
Federal income taxes increased $0.9 million to $3.7 million from the same 1997
period. The effective tax rate increased slightly to 27.6% for the three months
ending March 31,1998 from 27.2% for the 1997 period. See discussion above
regarding the shift from taxables to tax exempts within the fixed maturity
portfolio.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities increased to $29.6 million for the
three months ended March 31, 1998 from $6.9 million for the same 1997 period.
This increase is due primarily to the transfer of $18.1 million to State Auto
P&C in connection with the amended pooling arrangement, as discussed above.
Additionally, the Company has experienced an increase in its cash flow from
operations due to improvements in its underlying book of business. Net cash used
in investing activities increased to $34.2 million for the three months ended
March 31, 1998 from $5.5 million for the same 1997 period. This increase is due
to the investing of the cash associated with the transfer of the $18.1 million
as well as cash generated from insurance operations. Net cash used in financing
activities for the three months ended March 31, 1998 remained comparable to the
same period in 1997. As of March 31, 1998, funds consisting of cash and cash
equivalents available for general operations were $19.2 million compared to
$14.2 million at March 31, 1997. No long-term fixed maturities were required to
be sold to meet obligations during the first three months of 1998.
Damage from spring storms that spawned tornadoes and hail in several of the
Company's operating states will impact the Company's second quarter results.
Management currently estimates losses from these spring storms to the Company to
be approximately $6.0 million.
On March 6, 1998, the Board of Directors of State Auto Financial adopted a
resolution authorizing the officers of State Auto Financial to take such steps
as are necessary to effect the exercise of State Auto Financial's option to
acquire Milbank from Mutual. State Auto Financial's acquisition of Milbank is
subject to procedural matters contemplated by an agreement entered into by
Mutual and State Auto Financial in 1993 being completed and regulatory approval
in Ohio and South Dakota. The proposed effective date of transfer is third
quarter 1998. Additionally, the Board declared a two-for-one stock split to be
distributed July 8, 1998, to shareholders of record on June 18, 1998. The split
is contingent upon shareholder approval of a proposal to increase the number of
authorized common shares, without par value, from 30 million to 100 million at
the Company's annual meeting of shareholders on May 28, 1998. Accordingly, the
impact of this stock split is not reflected in these financial statements.
With respect to the Year 2000 Issue, see the discussion regarding this subject
in the Company's December 31, 1997 Management's Discussion and Analysis of
Financial Condition and Results of Operations, included in the December 31, 1997
Form 10-K. There have been no material changes in the information reported
regarding the Year 2000 in the 1997 Form 10-K.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Statements contained herein expressing the beliefs of management and the other
statements which are not historical facts contained in this report are forward
looking statements that involve risks and uncertainties. Such statements
include, without limitation, those pertaining to the spring storms impacting the
Company's losses, and the Year 2000 discussion. These risks and uncertainties
include but are not limited to: legislative, judicial, and regulatory changes,
the impact of competitive products and pricing, product development, geographic
spread of risk, weather and weather-related events, other types of catastrophic
events, fluctuations of securities markets, economic conditions, technological
difficulties and advancements, availability of labor and materials in storm hit
areas, late reported claims and previously undisclosed damage.
<PAGE> 9
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
INDEX TO EXHIBITS
Item 6. a. Exhibits
Exhibit No. Description of Exhibits
----------- -----------------------
10(II) Amended and Restated Reinsurance Included herein
Pooling Agreement between State
Automobile Mutual Insurance Company,
State Auto Property and Casualty
Insurance Company, Milbank Insurance
Company and Midwest Security
Insurance Company effective January
1, 1998.
24(D) Power of Attorney - John R. Lowther Included herein
27 Financial data schedules Included herein
b. Reports on Form 8-K - None
<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STATE AUTO FINANCIAL CORPORATION
Date: MAY 05, 1998 /s/ Steven J. Johnston
------------ --------------------------------------
Steven J. Johnston
Treasurer and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE> 1
Exhibit 10(ii)
AMENDED AND RESTATED
--------------------
REINSURANCE POOLING AGREEMENT
-----------------------------
This Amended and Restated Reinsurance Pooling Agreement (the
"Agreement"), effective as of 12:01 a.m., Eastern Standard Time, January 1, 1998
is between and among State Automobile Mutual Insurance Company, 518 East Broad
Street, Columbus, Ohio (hereinafter referred to as "State Auto Mutual"), State
Auto Property and Casualty Insurance Company, 112 Main Street, Greer, South
Carolina (hereinafter referred to as "State Auto P&C"), Milbank Insurance
Company, East Highway 12, Milbank, South Dakota (hereinafter referred to as
"Milbank") and Midwest Security Insurance Company, 2700 Midwest Drive, Onalaska,
Wisconsin (hereinafter referred to as "Midwest Security"). (State Auto Mutual,
State Auto P&C, Milbank and Midwest Security are herein collectively referred to
as the "State Auto Insurance Companies" or "Group").
BACKGROUND INFORMATION
----------------------
The members of the Group have determined that the underwriting
operations of the Group should be conducted by State Auto Mutual on behalf of
the Group which has been effected through the Amended and Restated Management
Agreement dated April 1, 1994 (the "4/1/94 Management Agreement") and as to
Midwest Security through the Management Agreement dated March 11, 1997 (the
"Midwest Management Agreement"), and by means of mutual reinsurance on a
percentage basis as herein provided.
State Auto Mutual and State Auto P&C originally entered into an
intercompany Reinsurance Agreement effective as of 12:01 a.m., January 1, 1987
(the "Reinsurance Agreement").
The Reinsurance Agreement has since been amended by an Addendum
effective January 1, 1987, adding an insolvency and arbitration provisions; by
Amendment Number 1 effective as of January 1, 1992 amending the pooling
percentages from 20% State Auto P&C - 80% State Auto Mutual to 30% and 70%
respectively; by Amendment Number 2 effective as of January 1, 1991 excluding
post retirement health care benefits as a pooled expense and as of January 1,
1994 excluding post employment benefits liability as a pooled expense; and by
Amendment Number 3 effective as of January 1, 1995 adding Milbank as a party and
adjusting the pooling percentages as follows: State Auto P&C 35%, State Auto
Mutual 55% and Milbank 10% and by an Amended and Restated Reinsurance Pooling
Agreement dated July 1, 1996 (the "7/1/96 Reinsurance Agreement"), which
excluded from the Reinsurance Agreement catastrophic loss claims and loss
adjustment expenses incurred by State Auto Mutual, State Auto P&C and Milbank in
the amount of $100,000,000 in excess of $120,000,000 of such losses and loss
adjustment expense and the premiums for such exposure. The parties to the 7/1/96
Reinsurance Agreement desire to amend that agreement effective January 1, 1998
to add Midwest Security as a party and adjust the Respective Percentages (as
defined below) as set forth herein.
The parties desire to amend and restate the Reinsurance Agreement as
set forth herein to provide for the continuation of the pooling arrangement it
effects, including the above-described previous amendments and the additional
amendment.
<PAGE> 2
Page 2
STATEMENT OF AGREEMENT
----------------------
In consideration of the mutual covenants set forth herein and INTENDING
TO BE LEGALLY BOUND HEREBY, the parties hereto hereby agree as follows:
DEFINITIONS:
- ------------
1. As used in this Agreement:
a. "Net Liabilities" shall mean all direct liabilities plus
reinsurance assumed minus reinsurance ceded, except as
otherwise expressly excluded below.
b. "Net Premiums" shall mean all direct premiums plus
reinsurance assumed minus reinsurance ceded, except as
otherwise expressly excluded below.
c. "Respective Percentage" shall be:
As to Midwest Security 1%
As to Milbank 10%
As to State Auto P&C 37%
As to State Auto Mutual 52%
2. CESSION:
--------
(a) State Auto P&C Cession: State Auto Mutual hereby reinsures
and assumes and State Auto P&C hereby cedes and transfers to
State Auto Mutual all Net Liabilities incurred under or in
connection with all contracts and policies of insurance issued
by State Auto P&C outstanding and in force as of and
subsequent to 12:01 a.m. Eastern Standard Time, January 1,
1998. Such liabilities shall include State Auto P&C's reserves
for unearned premiums, outstanding losses and loss expenses
(including unreported losses) and all other outstanding
underwriting and administrative expenses as evidenced by State
Auto P&C's books and records at the close of business on
December 31, 1997, but shall not include intercompany
balances, liabilities incurred in connection with the
investment transactions of State Auto P&C, liabilities for
dividends to stockholders declared and unpaid, other
liabilities not incurred in connection with underwriting
operations, post retirement health care benefits liability,
and post employment benefits liability. It is further agreed
State Auto Mutual shall receive the Net Premiums for said
contracts and policies.
(b) Milbank Cession: State Auto Mutual hereby reinsures and
assumes and Milbank hereby cedes and transfers to State Auto
Mutual all Net Liabilities incurred under or in connection
with all contracts and policies of insurance issued by Milbank
outstanding and in force as of and subsequent to 12:01 a.m.
EST, January 1,
<PAGE> 3
Page 3
1998. Such liabilities shall include Milbank's reserves for
unearned premiums, outstanding losses and loss expenses
(including unreported losses) and all other outstanding
underwriting and administrative expenses as evidenced by
Milbank's books and records at the close of business on
December 31, 1997, but shall not include intercompany
balances, liabilities incurred in connection with the
investment transactions of Milbank, liabilities for dividends
to stockholders declared and unpaid, other liabilities not
incurred in connection with underwriting operations, post
retirement health care benefits liability, and post employment
benefits liability. It is further agreed that State Auto
Mutual shall receive the Net Premiums for said contracts and
policies.
(c) Midwest Security Cession: State Auto Mutual hereby
reinsures and assumes and Midwest Security hereby cedes and
transfers to State Auto Mutual all Net Liabilities incurred
under or in connection with all contracts and policies of
insurance issued by Midwest Security outstanding and in force
as of and subsequent to 12:01 a.m. EST, January 1, 1998. Such
liabilities shall include Midwest Security's reserves for
unearned premiums, outstanding losses and loss expenses
(including unreported losses) and all other outstanding
underwriting and administrative expenses as evidenced by
Midwest Security's books and records at the close of business
on December 31, 1997, but shall not include intercompany
balances, liabilities incurred in connection with the
investment transactions of Midwest Security, liabilities for
dividends to stockholders declared and unpaid, other
liabilities not incurred in connection with underwriting
operations, post retirement health care benefits liability,
and post employment benefits liability. It is further agreed
that State Auto Mutual shall receive the Net Premiums for said
contracts and policies.
3. ASSETS TRANSFER TO STATE AUTO MUTUAL:
-------------------------------------
(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto P&C hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an
amount, in cash or other assets, equal to the aggregate of all
liabilities of State Auto P&C assumed by State Auto Mutual
under paragraph 2(a) hereof, less a ceding commission equal to
the sum of the acquisition expenses associated with the
unearned premium reserves which are transferred as provided
herein. There have been included among the assets assigned and
transferred to State Auto Mutual by State Auto P&C all of the
right, title and interest of State Auto P&C in and to all
assets relative to the underwriting operations of State Auto
P&C, due or that became due, as evidenced by its books and
records at the close of business on December 31, 1997, not
including investments, accrued investment income, intercompany
balances and bank deposits.
<PAGE> 4
Page 4
(b) Milbank: In consideration of the agreements herein
contained, Milbank hereby agrees that there has been or will
be assigned and transferred to State Auto Mutual an amount, in
cash or other assets, equal to the aggregate of all
liabilities of Milbank assumed by State Auto Mutual under
paragraph 2(b) hereof, less a ceding commission equal to the
sum of the acquisition expenses associated with the unearned
premium reserves which are transferred as provided herein.
There shall be included among the assets assigned and
transferred to State Auto Mutual by Milbank all of the right,
title and interest of Milbank in and to all assets relative to
the underwriting operations of Milbank due or that may become
due as evidenced by its books and records at the close of
business on December 31, 1997 not including investments,
accrued investment income, intercompany balances and bank
deposits.
(c) Midwest Security: In consideration of the agreements
herein contained, Midwest Security hereby agrees that there
has been or will be assigned and transferred to State Auto
Mutual an amount, in cash or other assets, equal to the
aggregate of all liabilities of Midwest Security assumed by
State Auto Mutual under paragraph 2(c) hereof, less a ceding
commission equal to the sum of the acquisition expenses
associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among
the assets assigned and transferred to State Auto Mutual by
Midwest Security all of the right, title and interest of
Midwest Security in and to all assets relative to the
underwriting operations of Midwest Security due or that may
become due as evidenced by its books and records at the close
of business on December 31, 1997, not including investments,
accrued investment income, intercompany balances and bank
deposits.
4. ASSUMPTION OF REINSURANCE:
--------------------------
(a) State Auto P&C: State Auto P&C hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to
State Auto P&C its Respective Percentage of all Net
Liabilities under all contracts and policies of insurance,
(including those ceded by State Auto P&C and reinsured by
State Auto Mutual as provided in paragraph 2(a)), on which
State Auto Mutual is subject to liability and which are
outstanding and in force on or after the effective date
hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not
include intercompany balances, liabilities for federal income taxes,
liabilities incurred in connection with investment transactions,
liabilities for dividends to stockholders declared and unpaid, other
liabilities not incurred in connection with underwriting operations,
post retirement health care benefits liability and post employment
benefits liability.
<PAGE> 5
Page 5
(b) Milbank: Milbank hereby reinsures and assumes and State
Auto Mutual hereby cedes and transfers to Milbank its
Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by
Milbank and reinsured by State Auto Mutual as provided in
paragraph 2(b)), on which State Auto Mutual is subject to
liability and which are outstanding and in force on or after
the effective date hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not
include intercompany balances, liabilities for federal income taxes,
liabilities incurred in connection with investment transactions,
liabilities for dividends to stockholders declared and unpaid, other
liabilities not incurred in connection with underwriting operations,
post retirement health care benefits liability and post employment
benefits liability.
(c) Midwest Security: Midwest Security hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to
Midwest Security its Respective Percentage of all Net
Liabilities under all contracts and policies of insurance,
(including those ceded by Midwest Security and reinsured by
State Auto Mutual as provided in paragraph 2(c), on which
State Auto Mutual is subject to liability and which are
outstanding and in force on or after the effective date
hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not
include intercompany balances, liabilities for federal income taxes,
liabilities incurred in connection with investment transactions,
liabilities for dividends to stockholders declared and unpaid, other
liabilities not incurred in connection with underwriting operations,
post retirement health care benefits liability and post employment
benefits liability.
5. ASSET TRANSFER BY STATE AUTO MUTUAL:
------------------------------------
(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been
or will be assigned and transferred to State Auto P&C an
amount, in cash or other assets, equal to the aggregate of all
liabilities of State Auto Mutual assumed by State Auto P&C
under paragraph 4(a) hereof, less a ceding commission equal to
the sum of the acquisition expenses associated with the
unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to State Auto P&C by State Auto Mutual all of the
right, title and interest of State Auto Mutual in and to all
assets relative to the underwriting operations of State Auto
Mutual, due or that may become due, as evidenced by its books
and records at the close of business on December 31, 1997, not
including investments, accrued investment income, intercompany
balances and bank deposits.
<PAGE> 6
Page 6
(b) Milbank: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been
or will be assigned and transferred to Milbank an amount, in
cash or other assets, equal to the aggregate of all
liabilities of State Auto Mutual assumed by Milbank under
paragraph 4(b) hereof, less a ceding commission equal to the
sum of the acquisition expenses associated with the unearned
premium reserves which are transferred as provided herein.
There shall be included among the assets assigned and
transferred to Milbank by State Auto Mutual all of the right,
title and interest of State Auto Mutual in and to all assets
relative to the underwriting operations of State Auto Mutual,
due or that may become due, as evidenced by its books and
records at the close of business on December 31, 1997, not
including investments, accrued investment income, intercompany
balances and bank deposits.
(c) Midwest Security: In consideration of the agreements
herein contained, State Auto Mutual hereby agrees that there
has been or will be assigned and transferred to Midwest
Security an amount, in cash or other assets, equal to the
aggregate of all liabilities of State Auto Mutual assumed by
Midwest Security under paragraph 4(c) hereof, less a ceding
commission equal to the sum of the acquisition expenses
associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among
the assets assigned and transferred to Midwest Security by
State Auto Mutual all of the right, title and interest of
State Auto Mutual in and to all assets relative to the
underwriting operations of State Auto Mutual, due or that may
become due, as evidenced by its books and records at the close
of business on December 31, 1997, not including investments,
accrued investment income, intercompany balances and bank
deposits.
6. PREMIUM COLLECTION AND PAYMENT OF LOSSES:
-----------------------------------------
As of the effective date of this Agreement and pursuant to the
terms of the 4/1/94 Management Agreement as amended from time to time,
and the Midwest Management Agreement, as amended from time to time,
State Auto P&C, Milbank and Midwest Security hereby authorize and
empower State Auto Mutual to collect and receive all premiums and to
take charge of, adjust and administer the payment of all losses with
respect to any and all contracts and policies of insurance previously
or thereafter issued by State Auto P&C, Milbank and Midwest Security
and to reinsure or terminate all such contracts and policies, and in
all respects to act as though said contracts and policies were issued
by State Auto Mutual. State Auto Mutual agrees to administer the
payment of all losses and loss adjustment expenses in connection with
such contracts and policies. None of the foregoing is intended to
affect or impair the direct obligation of State Auto P&C, Milbank and
Midwest Security to their insureds under policies issued by State Auto
P&C, Milbank and Midwest Security, respectively.
<PAGE> 7
Page 7
7. PREMIUM PAYABLE BY STATE AUTO MUTUAL:
-------------------------------------
(a) State Auto P&C: Commencing with the effective date of this
Agreement, State Auto Mutual hereby agrees to pay to State
Auto P&C its Respective Percentage of the Net Premiums written
by the parties hereto. Similarly, commencing with the
effective date of this Agreement, all losses, loss expenses,
underwriting expenses, and administrative expenses chargeable
to underwriting of the parties hereto, including the
policyholder dividends, less all losses and expenses recovered
and recoverable under reinsurance ceded to reinsurers other
than the parties hereto, (except for catastrophe reinsurance
ceded by State Auto Mutual and Milbank to State Auto P&C
pursuant to a Property Catastrophe Overlying Excess of Loss
Reinsurance Contract dated as of July 1, 1996 in which State
Auto P&C provides catastrophe coverage for State Auto Mutual
and Milbank for $100,000,000 of catastrophe losses and loss
expenses in excess of $120,000,000 of such losses and loss
expenses incurred by the Group) (the "State Auto P&C
Catastrophe Assumption Agreement") shall be prorated between
the parties on the basis of the Respective Percentage of each.
Accounts shall be rendered at quarterly intervals and shall be
settled within 60 days thereafter.
(b) Milbank: Commencing with the effective date of this
Agreement, State Auto hereby agrees to pay Milbank its
Respective Percentage of the Net Premiums written by the
parties hereto. Similarly, commencing with the effective date
of this Agreement, all losses, loss expenses, underwriting
expenses, and administrative expenses chargeable to
underwriting of the parties hereto, including policyholder
dividends, less all losses and expenses recovered and
recoverable under reinsurance ceded to reinsurers other than
the parties hereto, (except for the State Auto P&C Catastrophe
Assumption Agreement) shall be prorated between the parties on
the basis of the Respective Percentage of each. Accounts shall
be rendered at quarterly intervals and shall be settled within
sixty (60) days thereafter.
(c) Midwest Security: Commencing with the effective date of
this Agreement, State Auto hereby agrees to pay Midwest
Security its Respective Percentage of the Net Premiums written
by the parties hereto. Similarly, commencing with the
effective date of this Agreement, all losses, loss expenses,
underwriting expenses, and administrative expenses chargeable
to underwriting of the parties hereto, including policyholder
dividends, less all losses and expenses recovered and
recoverable under reinsurance ceded to reinsurers other than
the parties hereto, (except for the State Auto P&C Catastrophe
Assumption Agreement) shall be prorated between the parties on
the basis of the Respective Percentage of each. Accounts shall
be rendered at quarterly intervals and shall be settled within
sixty (60) days thereafter.
<PAGE> 8
Page 8
8. OFFSET: It is understood and agreed that, insofar as is practicable
and consistent with the purposes and intentions of this Agreement, the
obligations of each company under this Agreement to transfer assets to
the other company may, in whole or in part, be offset against the
reciprocal reinsurance obligations of each company to the other company
so that each company shall deliver hereunder only a net amount of
assets required under such offset.
9. GENERAL STATEMENT OF INTENT: It is the purpose and intent of this
Agreement that:
(a) State Auto Mutual shall be liable as a reinsurer to State
Auto P&C, Milbank and Midwest Security on the policies and
contracts of insurance of State Auto P&C, Milbank and Midwest
Security respectively, issued and in force at 12:01 a.m., EST,
January 1, 1998, or on which there were, at that time,
unsettled claims or losses, and on policies and contracts
thereafter issued by State Auto P&C, Milbank and Midwest
Security to the extent of State Auto Mutual's Respective
Percentage.
(b) State Auto P&C shall be liable as a reinsurer to State
Auto Mutual, Milbank and Midwest Security on the policies and
contracts of insurance of State Auto Mutual, Milbank and
Midwest Security, respectively, issued and in force at 12:01
a.m., EST, January 1, 1998, or on which there were, at that
time, unsettled claims or losses, and on policies and
contracts thereafter issued by State Auto Mutual, Milbank and
Midwest Security to the extent of State Auto P&C's Respective
Percentage.
(c) Milbank shall be liable as a reinsurer to State Auto
Mutual, State Auto P&C and Midwest Security on the policies
and contracts of State Auto Mutual, State Auto P&C and Midwest
Security, respectively, issued and in force at 12:01 a.m.,
EST, on January 1, 1998 or on which there were, at that time,
unsettled claims or losses and on policies thereafter issued
by State Auto Mutual, State Auto P&C and Midwest Security to
the extent of Milbank's Respective Percentage.
(d) Midwest Security shall be liable as a reinsurer to State
Auto Mutual, State Auto P&C, and Milbank on the policies and
contracts of State Auto Mutual, State Auto P&C, and Milbank,
respectively, issued and in force at 12:01 a.m., EST, on
January 1, 1998 or on which there were, at that time,
unsettled claims or losses and on policies thereafter issued
by State Auto Mutual, State Auto P&C and Milbank to the extent
of Midwest Security's Respective Percentage.
(e) The parties hereto shall, on and after 12:01 a.m., EST,
January 1, 1998, participate on the basis of 52% for State
Auto, 37% for State Auto P&C, 10% for Milbank and 1% for
Midwest Security in all of the underwriting operations of each
of the three parties hereto.
<PAGE> 9
Page 9
10. LOSSES EXCLUDED: Notwithstanding any of the foregoing, the parties
hereto understand and agree that this Amended and Restated Reinsurance
Pooling Agreement shall not apply to catastrophe losses and loss
expenses for residential and commercial property to the extent such
losses and loss expenses are covered by the State Auto P&C Catastrophe
Assumption Agreement. Once the aforesaid $100,000,000 of coverage is
exhausted by loss expenses and loss payments on behalf of any party
hereto, under either the State Auto P&C Catastrophe Assumption
Agreement or directly, all parties understand and agree that
catastrophe losses and loss expenses in excess of $220,000,000 shall
once again be ceded and assumed under the terms of this Amended and
Restated Reinsurance Agreement. All premiums attributable to the State
Auto P&C Catastrophe Assumption Agreement are to be paid to State Auto
P&C outside of the Amended and Restated Reinsurance Pooling Agreement.
11. LIABILITIES EXCLUDED: In addition to the liabilities set forth in
paragraphs 2(a), 2(b), 2(c) and 10 above, this Agreement shall not
apply to the investment operation or liabilities for federal income tax
or other liabilities excluded by this Agreement.
12. "FOLLOW THE FORTUNES": The reinsurance provided by the terms of
this Agreement shall be subject to the same terms and conditions under
which the original insurance was concluded, or which may be or may have
been agreed to during the term of the original insurance contract.
13. METHODS AND PROCEDURES: The president of State Auto Mutual, State
Auto P&C, Milbank and Midwest Security, or any officer of any of these
companies designated by said president, shall determine the methods and
procedures, including accounting transactions, by which the terms of
this Agreement shall be performed by and on behalf of the parties
hereto.
14. AMENDMENTS: This Agreement may be modified from time to time, so as
to adapt its provisions to the varying conditions of the business of
the Group, by a mutual agreement in writing of the parties hereto,
subject to ratification by the Board of Directors of each party and
with the approval of the insurance officials from the State of Ohio,
the State of South Carolina, the State of South Dakota, and the State
of Wisconsin as required by law.
15. TERM: This Agreement shall remain in full force and effect until
canceled by agreement of the parties or by the giving of ninety (90)
days notice by one of the parties to the other parties and to the
respective domiciliary insurance department of each of the parties.
16. INTERPRETATION: Wherever required to give the correct meaning
throughout this Agreement, the singular shall be interpreted in the
plural. Clerical errors or errors of involuntary or inadvertent
omission or commission shall not be interpreted as a discharge of
liability on behalf of any of the parties to this contract. Such errors
shall be rectified at the time of discovery or as soon as practicable
thereafter. Caption headings are for convenience only and are not
intended to affect the construction of the terms hereof.
<PAGE> 10
Page 10
17. INSOLVENCY: The reinsurance made under this Agreement shall be
payable by the assuming reinsurer on the basis of the liability of the
ceding insurer under the contract or contracts reinsured without
diminution because of the insolvency of the ceding insurer. In the
event of insolvency of the ceding insurer, the liquidator or receiver
or statutory successor of such insurer shall give written notice to the
assuming reinsurer of the pendency of a claim against the insolvent
ceding insurer on the policy or bond reinsured within a reasonable time
after such claim is filed in the insolvency proceeding; that during the
pendency of such claim the assuming reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such
claim is to be adjudicated any defense or defenses which it may deem
available to the ceding insurer or its liquidator or receiver or
statutory successors; that the expense thus incurred by the assuming
reinsurer shall be chargeable, subject to court approval, against the
insolvent ceding insurer as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the
ceding insurer solely as a result of the defense undertaken by the
assuming reinsurer. The reinsurance made effective under this Agreement
shall be payable by the assuming reinsurer to the ceding insurer or to
the liquidator, receiver or statutory successor of the ceding insurer.
18. ARBITRATION: In the event of any dispute hereafter arising with
respect to this Agreement, State Auto Mutual, State Auto P&C, Milbank,
and Midwest Security hereby agree that such dispute shall, upon the
request of the one of the parties, be submitted to arbitration. One
arbitrator shall be chosen by each party and those arbitrators shall
then select an umpire who shall hear and decide the issues to be
arbitrated. If one party fails to name an arbitrator within thirty (30)
days after receipt of a written request to do so, the party initiating
the arbitration may choose the arbitrators. The decision of the umpire
shall be final and binding on the parties. Each party shall bear the
expense of its arbitrator and the cost of the umpire shall be shared
equally. The arbitration shall take place at Columbus, Ohio or such
other location upon which the parties may mutually agree.
<PAGE> 11
Page 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and the year first above written.
Attest: STATE AUTOMOBILE MUTUAL
INSURANCE COMPANY
/s/John R. Lowther By /s/Robert H. Moone
- ---------------------------- -------------------------------
Secretary President
STATE AUTO PROPERTY AND CASUALTY
INSURANCE COMPANY
/s/John R. Lowther By /s/Robert H. Moone
- ---------------------------- -------------------------------
Secretary President
MILBANK INSURANCE COMPANY
/s/John R. Lowther By /s/Robert H. Moone
- ---------------------------- -------------------------------
Secretary President
MIDWEST SECURITY INSURANCE COMPANY
/s/John R. Lowther By /s/Robert H. Moone
- ---------------------------- -------------------------------
Secretary President
<PAGE> 1
Exhibit 24(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of State Auto Financial Corporation, an Ohio corporation (the
"Company"), hereby constitutes and appoints Robert L. Bailey, Robert H. Moone,
John R. Lowther, and Steven J. Johnston and each of them, my true and lawful
attorney-in-fact and agents, with full power to act without the other, with full
power of substitution and resubstitution, for me and in my name, place and
stead, in my capacity as director or officer of the Company, to execute the
Company's Form 10-K Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Company's fiscal year ended December 31,
1997, for each fiscal year thereafter and any amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full powers and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as I might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
31st day of March 1998.
Signature Position(s) with the Company
--------- ----------------------------
/s/ John R. Lowther Director
- ------------------------------ ------------------------------
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO
FINANCIAL CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE INTERIM PERIOD
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 355,875,000
<DEBT-CARRYING-VALUE> 76,336,000
<DEBT-MARKET-VALUE> 0
<EQUITIES> 5,251,000
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 437,462,000
<CASH> 19,185,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 19,075,000
<TOTAL-ASSETS> 529,595,000
<POLICY-LOSSES> 178,803,000
<UNEARNED-PREMIUMS> 107,222,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 91,753,000
<OTHER-SE> 142,730,000
<TOTAL-LIABILITY-AND-EQUITY> 529,595,000
70,933,000
<INVESTMENT-INCOME> 6,528,000
<INVESTMENT-GAINS> 290,000
<OTHER-INCOME> 2,331,000
<BENEFITS> 45,132,000
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 20,821,000
<INCOME-PRETAX> 13,477,000
<INCOME-TAX> 3,714,000
<INCOME-CONTINUING> 9,763,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,714,000
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATE AUTO
FINANCIAL CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE INTERIM PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 296,482,000
<DEBT-CARRYING-VALUE> 88,573,000
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 385,055,000
<CASH> 14,213,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 16,583,000
<TOTAL-ASSETS> 458,705,000
<POLICY-LOSSES> 166,445,000
<UNEARNED-PREMIUMS> 94,864,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 90,759,000
<OTHER-SE> 100,046,000
<TOTAL-LIABILITY-AND-EQUITY> 458,705,000
62,251,000
<INVESTMENT-INCOME> 6,236,000
<INVESTMENT-GAINS> 238,000
<OTHER-INCOME> 2,207,000
<BENEFITS> 41,940,000
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 18,175,000
<INCOME-PRETAX> 10,345,000
<INCOME-TAX> 2,814,000
<INCOME-CONTINUING> 7,531,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,531,000
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.41
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
