-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jknc4sJ1uiyQWiPnozsmSGT+0j7qEC0ZE9n2mTa5t8CjrfKzlJsQRakxWYV/IBNy KdPVTU5+HEp2O+VbXhQUpg== 0000950129-98-004678.txt : 19981116 0000950129-98-004678.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950129-98-004678 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCEL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000001985 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 310788334 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08768 FILM NUMBER: 98748787 BUSINESS ADDRESS: STREET 1: 12603 SOUTHWEST FREEWAY STREET 2: SUITE 315 CITY: STAFFORD STATE: TX ZIP: 77477 BUSINESS PHONE: 2815659010 MAIL ADDRESS: STREET 1: 12603 SOUTHWEST FREEWAY STREET 2: SUITE 315 CITY: STAFFORD STATE: TX ZIP: 77477 FORMER COMPANY: FORMER CONFORMED NAME: ACCELERATION CORP DATE OF NAME CHANGE: 19870814 10-Q 1 ACCEL INTERNATIONAL CORPORATION - 9/30/98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM TO --------------- -------------- COMMISSION FILE NUMBER 0-8162 ------ ACCEL INTERNATIONAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 31-0788334 - ------------------------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12603 S.W. FRWY, STE. 315, STAFFORD, TEXAS 77477 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) 281-565-8010 ------------------------------- (Registrant's Telephone Number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Title of each class ------------------- COMMON STOCK, $.10 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of October 31, 1998, there were 8,552,820 shares of Common Stock, $.10 par value per share outstanding. 2 COMMISSION FILE NO. 0-8162 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 1998 INDEX
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Unaudited Consolidated Balance Sheets (September 30, 1998 and December 31, 1997) 3 - 4 Unaudited Consolidated Statements of Operations (Three months and nine months ended September 30, 1998 and 1997) 5 Unaudited Consolidated Statements of Common Stockholders' Equity (Nine months ended September 30, 1998 and year ended December 31, 1997) 6 Unaudited Consolidated Statements of Cash Flows (Nine months ended September 30, 1998 and 1997) 7 Notes to Unaudited Consolidated Financial Statements 8 - 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 17 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 18 Signature 18
2 3 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1998 1997 -------- --------- (Thousands of dollars) ASSETS Investments Investments available for sale, at fair value: Fixed maturities (cost: 1998--$28,723,000; 1997--$21,614,000) $ 29,391 $ 21,789 Equity securities (cost: 1997--$4,879,000) - 4,879 Short-term investments (cost: 1998--$2,014,000; 1997--$7,253,000) 2,019 7,253 Other invested assets 4,851 - -------- --------- 36,261 33,921 Cash 2,514 1,589 Receivables: Premiums in process of transmittal, less allowance (1998--$150,000; 1997--$130,000) 6,832 11,633 Amounts due from reinsurers 25,990 16,739 Amounts due from former subsidiaries 100 1,201 -------- --------- 32,922 29,573 Accrued investment income 294 252 Prepaid reinsurance premiums 10,126 9,567 Deferred policy acquisition costs 2,879 3,112 Equipment--at cost, less accumulated depreciation (1998--$463,000; 1997--$273,000) 532 409 Leasehold improvements, less accumulated amortization (1998--$9,000; 1997--$3,000) 27 35 Receivable from sale of discontinued and disposed of operations 703 24,987 Other assets: Reinsurance recoverable 2,759 - Other 690 649 -------- --------- 18,010 39,011 -------- --------- Total assets $ 89,707 $ 104,094 ======== =========
3 4 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)
September 30, December 31, 1998 1997 -------- --------- (Thousands of dollars) LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Policy Reserves and Liabilities: Unearned premium reserves $ 16,056 $ 29,986 Insurance claims 30,889 22,028 -------- --------- 46,945 52,014 Other Liabilities: Amounts withheld for others 1,749 2,076 Deferred reinsurance commissions 1,724 1,635 Amounts due reinsurers 4,101 4,563 Commissions payable - 2,842 Accounts payable and other liabilities 3,310 3,097 Payable to former subsidiaries 3 - Current federal income taxes 9 4,278 -------- --------- 10,896 18,491 -------- --------- 57,841 70,505 -------- --------- Commitments and Contingencies Redeemable Preferred Stock: Authorized shares--1,000,000; no issued or outstanding shares - - Common stockholders' equity: Common stock, $.10 par value Authorized shares (1998--15,000,000; 1997--15,000,000) Issued shares (1998--9,462,683; 1997--9,445,183) 946 944 Additional paid-in capital 32,645 32,610 Retained earnings 4,739 6,518 Less treasury shares at cost (1998--891,424; 1997--797,420) (6,905) (6,599) Accumulated other comprehensive income 441 116 -------- --------- Net common stockholders' equity 31,866 33,589 -------- --------- Total liabilities and common stockholders' equity $ 89,707 $ 104,094 ======== =========
See notes to unaudited consolidated financial statements 4 5 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ (Thousands of dollars, except per share data) REVENUE: Gross premiums written $ 8,772 $ 9,402 $ 33,704 $ 29,125 Less reinsurance ceded 5,441 4,579 20,284 12,502 ------------ ------------ ------------ ------------ Net premiums written 3,331 4,823 13,420 16,623 Decrease (increase) in unearned premium reserves 415 (347) 622 (4,123) ------------ ------------ ------------ ------------ Premiums earned 3,746 4,476 14,042 12,500 Net investment income: Interest and dividends 531 408 1,796 1,231 Realized gains (losses) 10 48 (43) 115 Equity in income of affiliated company (86) -- (86) -- Service fees on extended service contracts -- 823 -- 2,340 Other income 56 (16) 268 120 ------------ ------------ ------------ ------------ 4,257 5,739 15,977 16,306 ------------ ------------ ------------ ------------ BENEFITS AND EXPENSES: Loss and loss adjustment expenses 3,570 3,072 11,807 9,296 Commissions and selling expenses 1,377 1,676 5,304 6,163 Reinsurance expense recovery (1,663) (301) (4,416) (1,426) General and administrative 1,302 1,045 3,896 2,496 Taxes, licenses and fees 311 273 1,285 1,009 Interest -- 356 -- 1,069 Decrease (increase) in deferred policy acquisition costs 132 (43) 232 (1,495) ------------ ------------ ------------ ------------ 5,029 6,078 18,108 17,112 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE FEDERAL INCOME TAXES AND DISCONTINUED OPERATIONS (772) (339) (2,131) (806) Federal income taxes: Current expense (125) (19) (125) (19) Deferred expense -- (137) -- 127 ------------ ------------ ------------ ------------ (125) (156) (125) 108 ------------ ------------ ------------ ------------ INCOME (LOSS) FROM CONTINUING OPERATIONS (647) (183) (2,006) (914) Discontinued operations: Income from operations of discontinued business segment -- 613 -- 1,947 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (647) $ 430 $ (2,006) $ 1,033 ============ ============ ============ ============ Earnings per common share--basic/assuming dilution: Loss from continuing operations $ (0.08) $ (0.02) $ (0.23) $ (0.11) Income from discontinued operations -- .07 -- .23 ------------ ------------ ------------ ------------ Net income (loss) $ (0.08) $ 0.05 $ (0.23) $ 0.12 ============ ============ ============ ============ Weighted average number of common shares outstanding 8,570,956 8,604,557 8,579,400 8,604,017 ============ ============ ============ ============
See notes to unaudited consolidated financial statements 5 6 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (Thousands of dollars)
Additional Common Accumulated other Common paid-in Retained stock held in comprehensive stock capital earnings treasury ESOP loan income Net ---------- ------------ ------------ ------------ ----------- -------------- --------- Balances at December 31, 1996 $ 940 $ 32,507 $ 5,403 ($ 6,599) ($ 32) ($ 578) $ 31,641 Comprehensive income: Net income -- -- 1,115 -- -- -- 1,115 Other comprehensive income (loss), net: Change in net unrealized appreciation on investment securities -- -- -- -- -- 694 694 -------- -------- -------- -------- -------- -------- -------- Other comprehensive income -- -- -- -- -- 694 694 -------- -------- -------- -------- -------- -------- -------- Comprehensive income 1,115 694 1,809 Payments on ESOP loan -- -- -- -- 32 -- 32 Issuance of 44,021 shares of Common Stock under Common Stock Option Plan 4 103 -- -- -- -- 107 -------- -------- -------- -------- -------- -------- -------- Balances at December 31, 1997 944 32,610 6,518 (6,599) -- 116 33,589 Comprehensive income (loss): Net loss -- -- (2,006) -- -- -- (2,006) Other comprehensive income (loss), net: Change in valuation allowance for unrealized appreciation on investment securities -- -- 227 -- -- 325 552 -------- -------- -------- -------- -------- -------- -------- Other comprehensive income -- -- 227 -- -- 325 552 -------- -------- -------- -------- -------- -------- -------- Comprehensive income (loss) -- -- (1,779) -- -- 325 (1,454) Purchase of 94,004 shares as treasury stock -- -- -- (306) -- -- (306) Issuance of 17,500 shares of Common Stock under Common Stock Option Plan 2 35 -- -- -- -- 37 -------- -------- -------- -------- -------- -------- -------- Balances at September 30, 1998 $ 946 $ 32,645 $ 4,739 ($ 6,905) -- $ 441 $ 31,866 ======== ======== ======== ======== ======== ======== ========
See notes to unaudited consolidated financial statements 6 7 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998 1997 ---------- ---------- (Thousands of dollars) OPERATING ACTIVITIES: Income (loss) from continuing operations $ (2,006) $ (914) Adjustments to reconcile income (loss) from continuing operations to net cash (used in) provided by operating activities: Change in premiums receivable 4,801 (2,853) Change in accrued investment income (42) 17 Change in prepaid reinsurance premiums (559) (1,800) Change in premium deposits held (327) 102 Change in unearned premium reserves (13,930) 5,923 Change in insurance claim reserves 8,861 2,503 Change in amounts due to and from reinsurers (12,472) 800 Change in other assets, other liabilities and accrued income taxes (5,933) (356) Accrual of discount on bonds (38) (39) Amortization of premium on bonds 60 36 Change in deferred policy acquisition costs 232 (1,495) Change in deferred reinsurance commissions 89 835 Provision for depreciation and amortization 196 106 Net realized gains (losses) on investments 43 (110) ---------- ---------- Net cash (used in) provided by continuing operations (21,025) 2,755 Net cash (used in) provided by discontinued operations 40,122 2,618 ---------- ---------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 19,097 5,373 ---------- ---------- INVESTING ACTIVITIES: Sale of investments available for sale 13,433 18,019 Purchase of investments available for sale (16,018) (21,628) Other, net (311) (385) ---------- ---------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,896) (3,994) ---------- ---------- FINANCING ACTIVITIES: Payment of ESOP loan -- 32 Repayment of notes payable (15,000) -- Issuance of Common Stock under Stock Option Plan 30 -- Repurchase of treasury shares (306) -- ---------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (15,276) 32 ---------- ---------- NET INCREASE (DECREASE) IN CASH 925 1,411 Cash at beginning of period 1,589 415 ---------- ---------- CASH AT END OF PERIOD $ 2,514 $ 1,826
See notes to unaudited consolidated financial statements 7 8 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 NOTE A--SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements of ACCEL International Corporation ("ACCEL") and subsidiaries (collectively referred to herein as the "Company") have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X which, as to the insurance company subsidiaries, differ in some respects from statutory accounting practices prescribed or permitted by state insurance departments. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for all periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. PRINCIPLES OF CONSOLIDATION: The accompanying unaudited consolidated financial statements include the accounts of ACCEL and its wholly-owned subsidiaries. As discussed more fully in Note B, Acceleration Life Insurance Company ("ALIC") and Dublin International Limited ("Dublin") are presented as discontinued operations. All significant intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements. DESCRIPTION OF BUSINESS: ACCEL is an insurance holding company incorporated in Delaware. The Company is engaged in the underwriting and sale of property and casualty insurance products, concentrating on commercial lines of business. The Company offers various policies covering long-haul trucking, charter bus, limousine and paratransit vehicle fleets, as well as other specialized products tailored to other groups such as crane operators and gun dealers. The Company offers these products through general agents. The Company is subject to competition from other insurers throughout the states in which it writes business. The Company is also subject to regulation by the insurance departments of states in which it is licensed, and undergoes periodic examinations by those departments. In addition to the property and casualty insurance products described above, the Company has historically sold, principally through automobile dealers, credit life and credit accident and health insurance and extended service contracts ("Auto Aftermarket Group"). Effective December 31, 1997, the Company sold its Auto Aftermarket Group as discussed more fully in Note B. As a result of this transaction, the Company has ceased to be engaged in the auto aftermarket credit insurance and extended service contract businesses. ACCOUNTING ESTIMATES: In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs and the liability for unearned premium reserves and insurance claims. Although some variability is inherent in these estimates, management believes the amounts provided are adequate. The estimates are continually reviewed and adjusted as necessary. Such adjustments are reflected in current operations. INVESTMENTS: The Company classifies its fixed maturity and equity securities as available for sale, therefore these securities are carried at fair value and the unrealized appreciation or depreciation is reported as a separate component of common stockholders' equity after giving effect to applicable income taxes. Short-term investments, which include U. S. Treasury securities, commercial paper and certificates of deposit are carried at fair value which approximates cost. Effective April 1, 1998, the Company purchased a 25% interest in the common stock of USA Insurance Group, Inc., the parent company of Transportation Insurance Service, the Company's general agent, for $5 million. This investment is included in other invested assets and is accounted for using the equity method. Realized gains and losses on the disposal of investments are determined by specific identification and are included in the consolidated statements of operations. 8 9 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) When an other than temporary decline in value is recognized, the specific investment is carried at estimated realizable value and its original book value is reduced to reflect such impairment of the investment. Such reductions in book value are reflected in realized investment losses for the period in which they were written down. For mortgage backed securities, when the present value of estimated future cash flows discounted at a risk-free rate of return is less than the cost basis of the investment, an impairment loss is recognized by writing the investment down to its fair value. DEFERRED POLICY ACQUISITION COSTS: The costs (principally commissions and certain expenses of policy issuance) of acquiring or renewing insurance business, all of which vary with and are directly related to the production of business, have been deferred. These deferred policy acquisition costs are amortized in a manner related to the recognition of premiums earned. Anticipated investment income is considered in determining recoverability of deferred costs. EQUIPMENT AND DEPRECIATION: Equipment is carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over an estimated useful asset life of five years. LEASEHOLD IMPROVEMENTS: Leasehold improvements are carried at cost less accumulated amortization. Amortization is provided using the straight-line method over the term of the five-year lease. PREMIUM INCOME RECOGNITION AND UNEARNED PREMIUM RESERVES: Unearned premium reserves on property and casualty products are calculated on the pro rata method. Unearned premium reserves on the extended service contracts are based on the historical emergence pattern of claims. The Company's primary liability on new car contracts exists subsequent to the expiration of manufacturers' warranties. This method results in premium being recognized in direct proportion to the emergence of benefits on these contracts. INSURANCE CLAIMS: The liabilities for insurance claims are determined using statistical analyses and represent estimates of the ultimate net cost of all reported and unreported claims that are unpaid at period end. Considerable variability is inherent in such estimates and actual results will likely differ from those estimates. FEDERAL INCOME TAXES: ACCEL and its subsidiaries file a consolidated federal income tax return. The provision for income taxes is based on income for financial reporting purposes, after permanent differences. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. REINSURANCE: Reinsurance premiums ceded and reinsurance recoveries on losses and loss adjustment expenses incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported on a gross basis. DEFERRED REINSURANCE COMMISSIONS: Commissions and ceding fees received in connection with premiums ceded are deferred and amortized in a manner related to the recognition of premiums earned. Earned ceding fees, commissions and experience refunds are reported as reinsurance expense recoveries in the unaudited consolidated statements of operations. STOCK OPTION PLANS: Prior to January 1, 1996, the Company accounted for its stock option plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. 9 10 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) EARNINGS PER COMMON SHARE: Net income and net loss per common share are computed using the weighted average number of common shares outstanding during the period. Effective December 31, 1997, the Company adopted SFAS No. 128, Earnings per Share. This standard, which did not have an effect on net income, establishes standards for computing and presenting earnings per share. Earnings per share for all periods presented have been restated to comply with SFAS No. 128. RECLASSIFICATIONS: Certain amounts in the 1997 unaudited consolidated financial statements have been reclassified to conform with the 1998 presentation. NOTE B -- SALE OF AUTO AFTERMARKET GROUP On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the outstanding capital stock of Acceleration Life Insurance Company ("ALIC"), Acceleration National Service Company ("ANSC") and Dublin (collectively, the "Target Corporations") for $30.2 million in cash and to sell to Lyndon Property Insurance Company ("Lyndon Property") assets related to the vehicle extended service contract business of ACCEL's wholly owned subsidiary, Acceleration National Insurance Company ("ANIC"), for $10.3 million in cash. The sale was effective December 31, 1997. The agreements provided that within 125 days after the closing, the sales price for the Target Corporations would be decreased or increased by the amount, if any, by which the Target Corporations' combined GAAP stockholder's equity as of December 31, 1997 was less than or greater than, respectively, $31.6 million. As of December 31, 1997, the combined GAAP stockholder's equity of the Target Corporations was $32.1 million which resulted in a net sales price of approximately $41.0 million. The "Receivable from sale of discontinued and disposed of operations" ("Receivable from sale") of approximately $.7 million as of September 30, 1998 represents the difference between the net sales price of $41 million and the initial sales price of $40.5 million and approximately $.2 million related to the cession of vehicle extended service contract reserves to Lyndon Property. The receivable from sale of approximately $25 million as of December 31, 1997 represents the net sales proceeds of $41 million less the note payable and accrued interest of $16 million transferred to ALIC by an unaffiliated company on December 31, 1997. The Company has filed a legal action seeking declaratory judgment relief relating to disagreement with Lyndon concerning the exact amount of the net sales price. Accordingly, the receivable from sale may be more or less than $.7 million. The Company believes the resolution of the matter will not have a material adverse effect on the financial condition or results of operations of the Company. In conjunction with the sale, on January 1, 1998, ANIC ceded via a quota share reinsurance agreement 100% of its liability related to the vehicle extended service contract business to Lyndon Property. Upon consummation of the aforementioned sale, the Company ceased to be engaged in the auto aftermarket credit insurance and extended service contract businesses. The consolidated financial statements of the Company have been reclassified to reflect the disposition of ALIC and Dublin which comprised the Life/Health business segment. Accordingly, the revenues, benefits and expenses, and cash flows of ALIC and Dublin have been excluded from the respective captions in the unaudited consolidated statements of operations and unaudited consolidated statements of cash flows for 1997. The net operating results of these entities have been reported, net of applicable income taxes, as "Income from discontinued operations" and the net cash flows of these entities have been reported as "Net cash (used in) provided by discontinued operations." The vehicle extended service contract business sold to Lyndon Property and ANSC were components of the Company's property and casualty segment, and therefore are included in continuing operations for 1997. NOTE C--REINSURANCE The Company has entered into reinsurance contracts associated with its property and casualty lines which transfer a percentage of risk to the related reinsurer. The Company also has agreements which transfer risks after a predetermined loss amount has been reached. Unearned premium reserves associated with reinsurance agreements at September 30, 1998 and December 31, 1997 are $10.1 million and $9.6 million, respectively, and the liability for insurance claims is $22 million and $14.3 million at September 30, 1998 and December 31, 1997, respectively. The following data summarizes certain aspects of the Company's reinsurance activity for 1998 and 1997. 10 11 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE C--REINSURANCE--(CONTINUED) Premiums written and earned in 1998 and 1997 are summarized as follows:
WRITTEN EARNED -------------------------------------------------- -------------------------------------------------- Period Ended September 30, Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended 1998 1997 1998 1997 1998 1997 1998 1997 -------- -------- -------- -------- -------- -------- -------- -------- (Thousands of dollars) Direct $ 30,124 $ 27,872 $ 7,441 $ 8,149 $ 30,870 $ 20,314 $ 9,627 $ 8,031 Assumed 3,580 1,253 1,331 1,253 3,307 373 1,067 373 Ceded (20,284) (12,502) (5,441) (4,579) (20,135) (8,187) (6,948) (3,928) -------- -------- -------- -------- -------- -------- -------- -------- Net $ 13,420 $ 16,623 $ 3,331 $ 4,823 $ 14,042 $ 12,500 $ 3,746 $ 4,476 ======== ======== ======== ======== ======== ======== ======== ========
Loss and loss adjustment expenses incurred in 1998 and 1997 are summarized as follows:
Nine Months Ended Three Months Ended September 30, September 30, 1998 1997 1998 1997 -------- -------- -------- -------- (Thousands of dollars) Direct $ 25,683 $ 14,644 $ 8,342 $ 5,965 Assumed 2,163 264 740 264 Ceded (16,039) (5,612) (5,512) (3,157) -------- -------- -------- -------- Net loss and loss adjustment expenses $ 11,807 $ 9,296 $ 3,570 $ 3,072 ======== ======== ======== ========
NOTE D--SEGMENT INFORMATION The Company operates primarily in the property/casualty insurance industry within the United States. There are no intersegment sales. The allocations of certain general expenses and investment income within segments are based on a number of assumptions, and the reported operating results would change if different methods were applied. Depreciation and capital expenditures are not considered material. Information relating to revenue, income (loss) before federal income taxes and discontinued operations, and identifiable assets by segment are summarized as follows:
Nine Months Ended Three Months Ended September 30, September 30, 1998 1997 1998 1997 -------- -------- -------- -------- (Thousands of dollars) (Thousands of dollars) Revenue: Property/Casualty $ 15,688 $ 13,965 $ 4,278 $ 4,917 Corporate and Other 289 2,341 (21) 822 -------- -------- -------- -------- Total $ 15,977 $ 16,306 $ 4,257 $ 5,739 ======== ======== ======== ======== Income (loss) before federal income taxes and discontinued operations: Property/Casualty $ (1,728) $ 432 $ (522) $ (61) Corporate and Other (403) (1,238) (250) (278) -------- -------- -------- -------- Total $ (2,131) $ (806) $ (772) $ (339) ======== ======== ======== ========
September 30, December 31, 1998 1997 -------- -------- (Thousands of dollars) Identifiable assets: Property/Casualty $ 83,079 $ 89,303 Corporate and Other 6,628 14,791 -------- -------- Total $ 89,707 $104,094 ======== ========
11 12 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE D--SEGMENT INFORMATION--(CONTINUED) Effective January 1, 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This standard, which does not have an effect on net income, establishes standards for disclosing segment information. NOTE E--COMMITMENTS AND CONTINGENCIES Due to the nature of its operations, the Company is at all times subject to pending and threatened legal actions that arise in the normal course of its activities. In management's opinion, based on the advice of outside counsel, the accompanying consolidated financial statements would not be materially affected by the ultimate outcome of any legal proceedings or contingent liabilities. In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company ("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property insurance, property and casualty, and assumed treaty reinsurance. Galaxy became statutorily insolvent at June 30, 1994. Due to the insolvency of Galaxy, the Company wrote its investment in RGL to zero and deconsolidated RGL as of April 1, 1994. On October 7, 1994, the Liquidation Bureau took control of Galaxy pursuant to an order of liquidation of the New York Supreme Court. Prior to the liquidation of Galaxy, ANIC had issued certain certificates of suretyship ("Certificates") with respect to certain Galaxy insurance policies each of which provided that ANIC would assume the responsibilities of Galaxy under the specified policy if Galaxy became insolvent or financially unable to meet its obligations on the underlying policy, but only if certain conditions were met. In particular, the Certificates provided that ANIC's assumption of liability was contingent upon the insured's executing and delivering all agreements, assignments or evidences of subrogation satisfactory to ANIC respecting payments made or liabilities assumed. In May 1996, the Liquidation Bureau, acting on behalf of the New York Property/Casualty Insurance Security Funds (the "Guaranty Fund"), informally advised the Company that on behalf of the Guaranty Fund it intended to seek indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund to Galaxy insureds on policies which may have been covered by the Certificates. The Company has taken the position that the Guaranty Fund has no right to seek indemnification unless Galaxy insureds who hold properly issued Certificates have executed assignments and evidences of subrogation to ANIC. Even if any Galaxy insured properly made such a claim directly to ANIC, the Company has been advised by counsel that if ANIC paid any such claim, it would have the right, under assignment and subrogation agreements with its insureds, to assert all rights that the insureds could have asserted to recover the loss amounts from any other source, including the Guaranty Fund. In early 1998, the Superintendent of Insurance of the State of New York, as Liquidator of Galaxy and Administrator of the Guaranty Fund, filed suit against ANIC in New York State Supreme Court. The complaint alleged, among other things, breach of contract and demanded that ANIC specifically perform its alleged obligations under the Certificates. The complaint asked for an amount in excess of $6.5 million in damages. As reflected above, the suit requested indemnification or reimbursement for the claims paid or to be paid by the Guaranty Fund to Galaxy insureds on policies which may have been covered by the Certificates. ANIC has maintained that the Guaranty Fund does not have the right to seek indemnification unless the terms and conditions of validly issued Certificates have been strictly complied with. Accordingly, ANIC filed for dismissal of the suit which motion was recently granted by the Court. Should the matter survive the recent development, ANIC will continue to vigorously defend itself against any such claims and its alleged liability in the suit. In November 1997, suit was filed against ALIC by four long-term care policyholders seeking to represent a class of North Dakota policyholders alleging breach of contract, fraud and misrepresentation regarding an alleged promise not to raise premiums "too much". Said long-term care insurance business was entirely reinsured to and assumed by Commonwealth Life Insurance Company ("Commonwealth") of Louisville, Kentucky, in 1991. The matter was tendered to Commonwealth to defend on behalf of ALIC pursuant to the applicable provisions of the reinsurance agreement between the parties, and Commonwealth also tendered the matter back to ALIC. 12 13 ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE E--COMMITMENTS AND CONTINGENCIES--(CONTINUED) The allegations of fraud and misrepresentation at the time of sale of the long-term care policies are based on alleged statements that premiums "would not be raised too much" even though the policy on its face stated that the "Company reserves the right to increase premiums at anytime." Moreover, premiums were increased subsequent to the reinsurance of the business to Commonwealth by ALIC and the increases appear to have been approved by the proper regulatory authority. Plaintiffs recently filed a motion to amend their complaint to set forth allegations that the policies were intentionally underpriced and/or poorly underwritten, so as to justify premium increases and induce policy lapses. The Company and Commonwealth are cooperating to vigorously defend the matter. Joint motions to dismiss and to strike the class action allegations were filed in the U.S. District Court, District of North Dakota, Southeastern Division. The Court acted to deny all pending motions without prejudice to refiling until development of the record has occurred. The parties have undertaken to conduct discovery to develop the record as directed by the Court. Based thereon, the Company intends to file a motion for summary judgment in the near future. The Company continues to believe there is little or no exposure of liability for ALIC and the matter will not have a material adverse effect on the financial condition or results of operations of the Company. In the event the plaintiffs prevail however, the Company believes that it has the right to seek indemnification from Commonwealth. When the suit was filed, the Company was in the middle of a transaction to sell one hundred percent of ALIC to Lyndon. Due to the recent filing of the suit, Lyndon requested a separate indemnification for the matter. Accordingly, the Company agreed to provide additional indemnification, fully assume and directly pay for all defense costs of the litigation against ALIC, and to directly pay any settlement costs, judgments or other liabilities incurred in connection with the litigation. The indemnification shall expire on its terms when and if there is a final, nonappealable determination that class certification in the matter is denied. The obligation of the Company is insured by a bond of indemnity in the amount of $3,000,000 issued by ANIC. 13 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Results for the Three and Nine Months Ended September 30, 1998 and 1997 OPERATING RESULTS On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the outstanding capital stock of Acceleration Life Insurance Company ("ALIC"), Acceleration National Service Company ("ANSC") and Dublin International Limited ("Dublin") (collectively, the "Target Corporations") for $30.2 million in cash and to sell to Lyndon Property Insurance Company ("Lyndon Property") assets related to the vehicle extended service contract business of ACCEL's wholly owned subsidiary, Acceleration National Insurance Company ("ANIC"), for $10.3 million in cash. The sale was effective December 31, 1997. The agreements provided that within 125 days after the closing, the sales price for the Target Corporations would be decreased or increased by the amount, if any, by which the Target Corporations' combined GAAP stockholder's equity as of December 31, 1997, was less than or greater than, respectively, $31.6 million. As of December 31, 1997, the combined GAAP stockholder's equity of the Target Corporations was $32.1 million which resulted in a net sales price of approximately $41 million. The "receivable from sale of discontinued and disposed of operations" ("receivable from sale") of approximately $.7 million as of September 30, 1998 represents the difference of approximately $.5 million between the net sales price of $41 million and the initial sales price of $40.5 million and approximately $.2 million related to the cession of vehicle extended service contract reserves to Lyndon Property. The receivable from sale of approximately $25 million as of December 31, 1997, represents the net sales proceeds of $41 million less the note payable and accrued interest of $16 million transferred to ALIC by an unaffiliated company on December 31, 1997. The Company has filed a legal action seeking declaratory judgment relief relating to a disagreement with Lyndon concerning the exact amount of the net sales price. Accordingly, the receivable from sale may be more or less than $.7 million. The Company believes the resolution of the matter will not have a material adverse effect on the financial condition or results of operations of the Company. In conjunction with the sale, on January 1, 1998, ANIC ceded via a quota share reinsurance agreement 100% of its liability related to the vehicle extended service contract business to Lyndon Property. Upon consummation of the aforementioned sale, the Company ceased to be engaged in the auto aftermarket credit insurance and extended service contract businesses. The consolidated financial statements of the Company have been reclassified to reflect the disposition of ALIC and Dublin that comprised the Life/Health business segment. Accordingly, the revenues, benefits and expenses, and cash flows of ALIC and Dublin have been excluded from the respective captions in the unaudited consolidated statements of operations and unaudited consolidated statements of cash flows for 1997. The net operating results of these entities have been reported, net of applicable income taxes, as "Income from discontinued operations," and the net cash flows of these entities have been reported as "Net cash (used in) provided by discontinued operations" for 1997. The vehicle extended service contract business sold to Lyndon Property and ANSC were components of the Company's property and casualty segment, and therefore are included in continuing operations for 1997. The loss before federal income taxes and discontinued operations for the nine months of 1998 was $2.1 million compared with a loss of $806,000 for the same period in 1997. The Company's primary product line, commercial auto, produced a positive underwriting margin in the first nine months of 1998 of approximately $700,000 while net investment income contributed approximately $1.8 million. These contributions were offset primarily by general and administrative expenses of approximately $3.9 million and taxes, licenses and fees other than premium taxes of $400,000. The Company's commercial auto program, consisting of direct and assumed business, continued its growth, producing $26.8 million of annualized premium in the first nine months of 1998 compared with $21.2 million for the same period in 1997. For the quarter ended September 30, 1998, the loss before federal income taxes and discontinued operations was $772,000 compared with a loss of $339,000 for the same quarter in 1997. Loss and loss adjustment expenses as a percentage of net earned premiums increased to 95.3% for the quarter ended September 30, 1998, from 68.6% for the same period in 1997 due to reserve strengthening on prior years' reserves of $750,000 in the third quarter of 1998. The major cause of the poor loss performance has been the large fleet trucking and paratransit accounts which have been non-renewed or cancelled. Gross premium writings for the first nine months of 1998 were $33.7 million compared with $29.1 million for the same period in 1997. This increase is due to increased writings in the Company's commercial auto program of approximately $3.3 million. Gross premiums written for the third quarter of 1998 were $8.8 million as compared with $9.4 million for the third quarter of 1997. This decrease is 14 15 attributable to the company non-renewing larger trucking and paratransit accounts within the commercial auto line due to poor underwriting results. Net premium earned was $14 million for the first nine months of 1998 as compared with $12.5 million for the first nine months of 1997. The third quarter of 1998 produced net earned premium of $3.7 million as compared with $4.5 million for the third quarter of 1997. The year to date increase is due to the completion of the earnings cycle in the first half of 1998 for policies written in 1997 which have since been non-renewed or cancelled as discussed previously, which also accounts for the decrease in the third quarter of 1998 as compared with the same quarter in 1997. The net loss and loss adjustment expense ratios were 84.1% for the first nine months of 1998 as compared with 74.3% for the same period in 1997. This increase is attributable to losses from the Company's trucking and paratransit accounts. Many of these policies have since been non-renewed or canceled and this refinement process is continuing. However, some development may persist in the future. A positive impact on 1997 earnings was the level of service fee revenue on extended service contract business which amounted to $2.3 million for the first nine months of 1997. These service fees are non-recurring in 1998 due to the sale of the extended service contract business to Lyndon Property effective January 1, 1998. Commissions and selling expenses as a percent of gross premiums were 15.7% for the first nine months of 1998 compared with 21.2% for the same period in 1997. For the third quarter of 1998, commissions and selling expenses as a percent of gross premiums were 15.7% as compared with 17.8% for the same period in 1997. These decreases are due largely to commercial auto becoming the predominant product line for the Company. Commercial auto has significantly lower acquisition costs than the Company's extended service contract business which was fully ceded to Lyndon effective January 1, 1998. The Company's general and administrative expenses have increased by $1.4 million or 56.1% in the first nine months of 1998 compared with the same period in 1997. For the third quarter of 1998, general and administrative expenses increased by $257,000 or 24.6% for the same period in 1997. These increases are largely due to salaries and other expenses which were previously allocated to the subsidiaries sold effective December 31, 1997. STRATEGIC PARTNERSHIP The Company's Board of Directors has engaged Advest, an investment banking firm, to assist the Company in finding a strategic partner or purchaser for itself or its insurance subsidiaries, with an eye to enhancing overall shareholder value. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows from operations have generally been adequate for its current operating needs. The Company's long haul trucking, charter bus and paratransit business generally is written for a term of one year with the casualty claim-related liabilities extending beyond that period. The Company's liability on vehicle extended service contracts typically has extended for either one-year or five-year periods. However as previously discussed, the Company's existing vehicle extended service contract business was ceded to Lyndon Property effective January 1, 1998. The Company's "available for sale" fixed maturity securities at September 30, 1998 and 1997 include collateralized mortgage obligation securities and asset-backed collateralized securities. The mortgage and asset-backed securities are subject to risks associated with variable prepayments. As such, those securities may have a different actual maturity and yield than planned at the time of purchase. The degree to which a security is susceptible to either gains or losses is influenced by the difference between its amortized cost and par value, relative sensitivity of the underlying mortgages to prepayment risk in a changing interest rate environment and relative priority of the securities in the overall securitization. The Company limits the extent of its risks on fixed maturity securities by generally avoiding securities whose cost significantly exceeds par, by purchasing securities which are backed by stable collateral, and by concentrating on securities that have either a planned amortization or sequential pay classes. The collateralized mortgage obligations and asset backed securities owned have primarily short to intermediate average lives. At September 30, 1998, the Company did not have a significant amount of higher risk mortgage or asset backed securities which had a significant risk of loss or principal. There are negligible default risks on the mortgage and asset backed security portfolios as a whole as the vast majority of the assets are either guaranteed by U. S. government-sponsored entities or are supported in the securitization structure by junior securities enabling the assets to achieve high investment grade status. The Company's collateralized mortgage obligations and asset backed securities are predominantly sequential pay with little or no exposure to interest only obligations ("IOs") or inverse IOs. 15 16 Ohio domiciled insurance companies are subject to Ohio law which regulates the ability of insurance companies to pay dividends. The regulation limits the annual dividend or distribution of an insurer to the greater of (1) net income of the previous year or (2) 10% of unassigned surplus as of the end of the previous year. In addition, all dividends must come from earned surplus to qualify as a non-extraordinary dividend. Amounts greater than this would be considered extraordinary dividends and could not be paid without permission of the Ohio Department of Insurance. Based on this regulation, ANIC could pay a dividend of approximately $8.8 million without Ohio Department of Insurance approval to ACCEL in 1998. The Company used a portion of the proceeds from the sale upon closing in January 1998 of the Auto Aftermarket Group to retire the outstanding balance of $15 million of senior notes held by ALIC, who had received them from an unaffiliated company, along with accrued interest of approximately $1.1 million, to make a capital contribution of $3.5 million to ANIC, to pay taxes on the sale of approximately $4.3 million, to transfer $8.8 million in cash to Lyndon in connection with the ceding of the existing vehicle extended service contract business on January 1, 1998 and has utilized the remainder for general corporate purposes. The estimates for policy reserves are continually under review and adjusted as necessary as experience develops or new information becomes known; such adjustments are included in current operations. These liabilities are necessarily subject to the impact of future changes in claim severity, frequency and other factors. Although considerable variability is inherent in such estimates, based on recent evaluations management believes that the current level of policy reserves will be adequate to cover anticipated claim liabilities. Accordingly, the ultimate amounts required for settlement of policy benefits may vary significantly from the amounts included in the accompanying consolidated financial statements. Due to the nature of its operations, the Company is at all times subject to pending and threatened legal actions that arise in the normal course of its activities. For information regarding legal proceedings involving the Company including developments relating to the insolvency of Galaxy Insurance Company (a subsidiary of the Company) and a suit against ALIC by four long-term care policyholders, see "Note E" in the Notes to Unaudited Consolidated Financial Statements. In management's opinion, based on the advice of and information obtained from outside counsel, the ultimate resolution of the pending legal matters will not have a material adverse effect on the financial condition or results of operations of the Company. Effective April 1, 1998, the Company purchased a 25% interest in the common stock of USA Insurance Group, Inc., the parent company of TIS, the Company's general agent, for $5 million. This investment is included in other invested assets and is accounted for using the equity method. In June 1997, the Financial Accounting Standards Board issued Statement of Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, effective for years beginning after December 15, 1997. This SFAS establishes standards for reporting and display of comprehensive income and its components. The adoption of SFAS No. 130 does not affect results of operations or financial position, but affects their presentation and disclosure. The Company adopted SFAS No. 130 as of January 1, 1998. The Company adopted the reporting requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, in the first quarter of 1998. Adoption of this SFAS had no effect on net income of the Company. SFAS No. 132, Employer's Disclosures about Pensions and Other Postretirement Benefits, is effective for fiscal years beginning after December 15, 1997. This SFAS will not affect the Company's financial statement presentation or related disclosures as the Company does not offer pension or other postretirement benefits to employees or former employees. Although the cumulative effects of inflation on premium growth cannot be fully determined, increases in the value of commercial property results in increased premiums for property coverages. The combination of severity (which is affected by inflation) and frequency of loss trends in commercial auto and general liability are recognized in premium increases or decreases by the adoption of filed premium rates. The National Association of Insurance Commissioners ("NAIC") has completed and adopted a project to codify statutory accounting principles with a provision for commissioner discretion in the determination of appropriate statutory accounting for insurers. Although the NAIC has indicated that January 1, 2001 is the expected date of implementation, the implementation is ultimately dependent upon an insurer's state of domicile. Implementation of the codified statutory principles may affect the surplus level of ANIC on a statutory basis. Management is unable at this time to determine what impact, if any this project will have on the statutory surplus of ANIC. 16 17 YEAR 2000 CONSIDERATIONS The Company is aware of the issues associated with the programming code in existing computer systems as the millennium (Year 2000) approaches. The Company's plan for assessment and renovation of these issues is grouped by hardware, system and operating software, application system software, end-user decision support software, telecommunications, office (non-information technology) systems, service provider relationships and business partner relationships. Within each grouping, components representing mission-critical operations to the Company have been prioritized. Hardware, operating software, application software, telecommunications, and key business partner relationships necessary to conduct the basic business of the Company have progressed beyond the renovation phase and are being validated or implemented. Additionally, the Company is performing final assessments of supportive components within each group to verify that normal life cycles and third party provider efforts have matured to compliance levels. The Company expects little renovation will be required from this phase other than completion of its general ledger system implementation which is scheduled for the second quarter of 1999. Since January 1996, the Company has incurred approximately $120,000 in costs associated with the Year 2000 project. The Company expects to incur approximately $60,000 in remaining costs prior to the project's anticipated completion in the second quarter of 1999. Management is in constant appraisal of the project status and is supportive and committed to successful completion. Based on the Company's current state of readiness and project progress, management has determined that the effect on the Company's financial condition and earnings is not material. Should any of the Company's benchmarks be compromised from the planned completion timetables, the Company has contingency plans in the form of contractual resource relationships, which will be activated to accelerate the delinquent task. CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS The 1995 Private Securities Litigation Reform Act provides issuers the opportunity to make cautionary statements regarding forward-looking statements. Accordingly, any forward-looking statement contained herein or in any other oral or written statement by the Company or any of its officers, directors or employees is qualified by the fact that actual results of the Company may differ materially from such statement due to the following important factors, among other risks and uncertainties inherent in the Company's business: state insurance regulations, rate competition, adverse changes in interest rates, unforeseen losses with respect to loss and settlement expense reserves for unreported and reported claims, and catastrophic events. 17 18 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (b) No reports on Form 8-K have been filed by the Registrant during the quarter ended September 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACCEL INTERNATIONAL CORPORATION DATED: November 13, 1998 BY: /s/ Cindy Moore ----------------------- ---------------------------- Cynthia A. Moore Senior Vice President, Chief Financial Officer and Treasurer* * Ms. Moore has been duly authorized to execute the report on behalf of the Registrant. 18 19 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM ACCEL INTERNATIONAL CORPORATION'S SEPTEMBER 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL STATEMENTS. FINANCIAL DATA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 INCLUDED HEREIN HAS BEEN RESTATED TO REFLECT DISCONTINUED OPERATIONS (SEE "NOTE B" IN THE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS). 9-MOS 9-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 SEP-30-1998 SEP-30-1997 29,391 20,549 0 0 0 0 0 5,001 0 0 0 0 36,261 33,868 2,514 1,826 2,759 0 2,879 2,913 89,707 69,270 30,889 13,519 16,056 26,852 0 0 0 0 0 15,000 0 0 0 0 946 941 0 0 89,707 101,455 14,042 12,500 1,796 1,231 (43) 115 268 120 11,807 9,296 232 (1,495) 6,069 8,242 (2,131) (806) (125) 108 (2,006) (914) 0 1,947 0 0 0 0 (2,006) 1,033 (0.23) 0.12 (0.23) 0.12 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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