-----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, RMC/okxPJSjtPWejOGS6ZBTChgL7mWDEaubURUwXVerjXhRyMnl3kcxAV8Ex2aNs FwjBv3D3lItNglnI9mjaQw== 0000074931-97-000027.txt : 19970801 0000074931-97-000027.hdr.sgml : 19970801 ACCESSION NUMBER: 0000074931-97-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970731 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORION CAPITAL CORP CENTRAL INDEX KEY: 0000074931 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 956069054 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07801 FILM NUMBER: 97648540 BUSINESS ADDRESS: STREET 1: 600 FIFTH AVENUE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020-2302 BUSINESS PHONE: 212-332-80 MAIL ADDRESS: STREET 1: 600 FIFTH AVENUE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020-2302 FORMER COMPANY: FORMER CONFORMED NAME: EQUITY FUNDING CORP OF AMERICA DATE OF NAME CHANGE: 19760518 FORMER COMPANY: FORMER CONFORMED NAME: TONGOR CORP OF AMERICA DATE OF NAME CHANGE: 19670330 FORMER COMPANY: FORMER CONFORMED NAME: TONGOR CORP DATE OF NAME CHANGE: 19661024 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1997 ( ) TRANSITION REPORT, PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-7801 ORION CAPITAL CORPORATION -------------------------- (Exact name of registrant as specified in its charter) Delaware 95-6069054 - --------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 600 Fifth Avenue New York, New York 10020 - 2302 - ---------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 332-8080 -------------- Former name, former address and former fiscal year if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- 27,537,405 shares of Common Stock, $1.00 par value, of the registrant were outstanding on July 29, 1997. Page 1 of 28 Exhibit Index Appears at Page 24 ORION CAPITAL CORPORATION FORM 10-Q INDEX For the Quarter Ended June 30, 1997 Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Consolidated Balance Sheet at June 30, 1997 (Unaudited) and December 31, 1996....................... 3 - 4 Consolidated Statement of Earnings for the three and six- month periods ended June 30, 1997 and 1996 (Unaudited).. 5 Consolidated Statement of Stockholders' Equity for the six-month periods ended June 30, 1997 and 1996 (Unaudited), and for the year ended December 31, 1996 .. 6 Consolidated Statement of Cash Flows for the six-month periods ended June 30, 1997 and 1996 (Unaudited) ....... 7 - 8 Notes to Consolidated Financial Statements (Unaudited) ... 9 - 11 Independent Accountants' Review Report ................... 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............... 13 - 20 PART II. OTHER INFORMATION .................................. 21 Page 2
PART 1. FINANCIAL INFORMATION ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS (000s omitted) June 30, 1997 December 31, (Unaudited) 1996 ------------- ------------ Investments: Fixed maturities at amortized cost (market $331,164 - 1997 and $334,755 - 1996) .................................. $ 324,640 $ 326,841 Fixed maturities at market (amortized cost $1,305,556 - 1997 and $1,169,812 - 1996) ..................... 1,342,885 1,205,308 Common stocks at market (cost $135,582 - 1997 and $136,631 - 1996) .............. 212,947 209,281 Non-redeemable preferred stocks at market (cost $161,107 - 1997 and $151,439 - 1996) ....................... 169,317 152,312 Other long-term investments .............. 87,104 90,129 Short-term investments ................... 375,073 325,896 ---------- ---------- Total investments ..................... 2,511,966 2,309,767 Cash ....................................... 13,598 11,607 Accrued investment income .................. 28,282 25,724 Investment in affiliate .................... 22,735 22,170 Accounts and notes receivable .............. 198,840 181,495 Reinsurance recoverables and prepaid reinsurance .............................. 500,595 517,209 Deferred policy acquisition costs .......... 141,732 136,168 Property and equipment ..................... 68,785 68,763 Excess of cost over fair value of net assets acquired .......................... 79,700 81,198 Deferred federal income taxes .............. 20,887 23,554 Other assets ............................... 90,173 86,702 ---------- ---------- Total assets .......................... $3,677,293 $3,464,357 ========== ========== See Notes to Consolidated Financial Statements (Unaudited) Page 3 ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY (000s omitted - except for share data) June 30, 1997 December 31, (Unaudited) 1996 ------------- ------------ Liabilities: Policy liabilities - Losses ...................................... $1,407,056 $1,421,920 Loss adjustment expenses .................... 386,302 363,744 Unearned premiums ........................... 502,800 496,249 Policyholders' dividends .................... 21,465 22,489 ---------- ---------- Total policy liabilities .................. 2,317,623 2,304,402 Notes payable ................................. 310,565 310,904 Other liabilities ............................. 243,049 227,087 ---------- ---------- Total liabilities ......................... 2,871,237 2,842,393 ---------- ---------- Contingencies (Note F) Minority interest in subsidiary ................. 50,238 45,231 ---------- ---------- Company-obligated mandatorily redeemable capital securities of subsidiary trust holding solely the Junior Subordinated Debentures of Orion ........................... 125,000 - ---------- ---------- Stockholders' equity: Preferred stock, authorized 5,000,000 shares - issued and outstanding - none Common stock, $1 par value; authorized 50,000,000 shares; issued 30,675,000 shares.. 30,675 15,338 Capital surplus ............................... 142,856 158,587 Net unrealized investment gains, net of federal income taxes of $35,867 - 1997 and $31,674 - 1996 .............................. 80,207 72,260 Net unrealized foreign exchange translation losses, net of federal income taxes of $216 - 1997 and $414 - 1996 ................. (2,531) (2,164) Retained earnings ............................. 417,386 370,793 Treasury stock, at cost (3,141,844 shares - 1997 and 3,138,230 shares - 1996) ........... (35,268) (34,980) Deferred compensation on restricted stock ..... (2,507) (3,101) ---------- ---------- Total stockholders' equity ................ 630,818 576,733 ---------- ---------- Total liabilities and stockholders' equity. $3,677,293 $3,464,357 ========== ========== See Notes to Consolidated Financial Statements (Unaudited) Page 4 ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) (000s omitted-except for per common share data) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Premiums earned .............................. $335,226 $319,109 $659,189 $621,511 Net investment income ........................ 41,316 36,291 81,537 70,793 Realized investment gains .................... 8,358 5,761 24,147 11,126 Other income ................................. 5,180 6,011 10,119 11,533 -------- -------- -------- -------- 390,080 367,172 774,992 714,963 -------- -------- -------- -------- Expenses: Losses incurred .............................. 173,532 174,004 343,547 342,804 Loss adjustment expenses ..................... 52,162 45,329 101,149 88,506 Amortization of deferred policy acquisition costs ...................................... 93,277 86,810 188,075 165,249 Other insurance expenses ..................... 10,500 6,697 16,619 15,533 Dividends to policyholders ................... 4,804 4,946 9,868 8,892 Interest expense ............................. 6,179 6,143 12,302 12,318 Other expenses ............................... 10,633 12,451 21,662 23,155 -------- -------- -------- -------- 351,087 336,380 693,222 656,457 -------- -------- -------- -------- Earnings before equity in earnings (loss) of affiliate, federal income taxes and minority interest expense .................... 38,993 30,792 81,770 58,506 Equity in earnings (loss) of affiliate ......... 322 119 909 (721) -------- -------- -------- -------- Earnings before federal income taxes and minority interest expense .................... 39,315 30,911 82,679 57,785 Federal income taxes ........................... 10,042 7,701 20,791 13,767 Minority interest expense: Subsidiary net earnings ...................... 2,120 2,637 3,719 5,558 Subsidiary trust preferred securities, net of federal income taxes ....................... 1,772 - 3,310 - -------- -------- -------- -------- Net earnings ................................. $ 25,381 $ 20,573 $ 54,859 $ 38,460 ======== ======== ======== ======== Net earnings per common share ................ $ .91 $ .74 $ 1.97 $ 1.38 ======== ======== ======== ======== See Notes to Consolidated Financial Statements (Unaudited) Page 5 ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (000s omitted) Six Months Ended June 30, Year Ended (Unaudited) December 31, ------------------- ------------ 1997 1996 1996 ---- ---- ---- Common stock: Balance, beginning of period ................ $ 15,338 $ 15,338 $ 15,338 Stock issued in 2-for-1 common stock split .. 15,337 - - -------- -------- -------- Balance, end of period ...................... $ 30,675 $ 15,338 $ 15,338 ======== ======== ======== Capital surplus: Balance, beginning of period ................ $158,587 $146,658 $146,658 Exercise of stock options and issuance / cancellation of restricted stock .......... (394) (335) 29 Recognition of pre-reorganization federal income tax benefits ............... - - 11,900 Stock issued in 2-for-1 common stock split .. (15,337) - - -------- -------- -------- Balance, end of period ...................... $142,856 $146,323 $158,587 ======== ======== ======== Net unrealized investment gains: Balance, beginning of period ................ $ 72,260 $ 63,255 $ 63,255 Change in unrealized investment gains, net of taxes .............................. 7,947 (16,344) 9,005 -------- -------- -------- Balance, end of period ...................... $ 80,207 $ 46,911 $ 72,260 ======== ======== ======== Net unrealized foreign exchange translation losses: Balance, beginning of period ................ $ (2,164) $ (3,935) $ (3,935) Change in unrealized foreign exchange translation losses, net of taxes .......... (367) 340 1,771 -------- -------- -------- Balance, end of period ...................... $ (2,531) $ (3,595) $ (2,164) ======== ======== ======== Retained earnings: Balance, beginning of period ................ $370,793 $298,452 $298,452 Net earnings ................................ 54,859 38,460 86,631 Dividends declared .......................... (8,266) (6,911) (14,290) -------- -------- -------- Balance, end of period ...................... $417,386 $330,001 $370,793 ======== ======== ======== Treasury stock: Balance, beginning of period ................ $(34,980) $(26,534) $(26,534) Exercise of stock options and issuance / cancellation of restricted stock .......... 563 414 2,702 Acquisition of treasury stock ............... (851) (9,611) (11,148) -------- -------- -------- Balance, end of period ...................... $(35,268) $(35,731) $(34,980) ======== ======== ======== Deferred compensation on restricted stock: Balance, beginning of period ................ $ (3,101) $ (2,331) $ (2,331) Issuance / cancellation of restricted stock.. 167 170 (1,827) Amortization of deferred compensation on restricted stock .......................... 427 480 1,057 -------- -------- -------- Balance, end of period ...................... $ (2,507) $ (1,681) $ (3,101) ======== ======== ======== See Notes to Consolidated Financial Statements (Unaudited) Page 6 ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (000s omitted) Six Months Ended June 30, ------------------------- 1997 1996 ---- ---- Cash flows from operating activities: Premiums collected ............................. $ 667,713 $ 646,044 Net investment income collected ................ 69,180 65,407 Losses and loss adjustment expenses paid ....... (429,896) (395,065) Policy acquisition costs paid .................. (207,874) (195,278) Dividends paid to policyholders ................ (10,892) (7,061) Interest paid .................................. (12,000) (11,982) Federal income tax payments .................... (18,004) (16,146) Other payments ................................. (23,286) (10,144) --------- --------- Net cash provided by operating activities .... 34,941 75,775 --------- --------- Cash flows from investing activities: Maturities of fixed maturity investments ....... 62,819 96,058 Sales of fixed maturity investments ............ 158,338 139,777 Sales of equity securities ..................... 95,525 60,352 Investments in fixed maturities ................ (342,134) (190,483) Investments in equity securities ............... (79,550) (43,583) Effect on cash of consolidating Guaranty National ..................................... - 6,794 Net purchases of short-term investments ........ (49,369) (91,058) Other receipts (payments) ...................... 6,634 (10,587) --------- --------- Net cash used in investing activities ........ (147,737) (32,730) --------- --------- Cash flows from financing activities: Net proceeds from issuance of trust preferred securities ................................... 123,036 - Proceed from exercise of stock options ......... 275 - Repayment of notes payable ..................... (375) (938) Dividends paid to stockholders ................. (7,712) (6,684) Dividends paid to minority stockholders ........ (733) (1,909) Purchases of common stock ...................... (687) (9,439) Other receipts ................................. 995 42 --------- --------- Net cash provided by (used in) financing activities ................................. 114,799 (18,928) --------- --------- Effect of foreign exchange rate changes on cash... (12) (957) --------- --------- Net increase in cash ......................... 1,991 23,160 Cash balance, beginning of period ................ 11,607 3,584 --------- --------- Cash balance, end of period ...................... $ 13,598 $ 26,744 ========= ========= See Notes to Consolidated Financial Statements (Unaudited) Page 7 ORION CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - (Continued) (UNAUDITED) (000s omitted) Six Months Ended June 30, ------------------------- 1997 1996 ---- ---- Reconciliation of net earnings to net cash provided by operating activities: Net earnings ...................................... $ 54,859 $ 38,460 -------- -------- Adjustments: Depreciation and amortization ................... 6,051 5,515 Amortization of excess of cost over fair value of net assets acquired .................. 1,498 1,576 Deferred federal income taxes ................... (1,862) (523) Amortization of fixed maturity investments ...... (1,155) (1,363) Non-cash investment income ...................... (9,210) (5,542) Equity in (earnings) loss of affiliate .......... (909) 721 Dividends received from affiliate ............... 171 137 Realized investment gains ....................... (24,147) (11,126) Foreign exchange translation adjustment ......... 116 696 Minority interest in subsidiary earnings ........ 3,719 5,558 Other ........................................... 19 1,693 Change in assets and liabilities (net of effects of consolidating Guaranty National in 1996): Decrease (increase) in accrued investment income ........................................ (2,558) 114 Decrease (increase) in accounts and notes receivable .................................... (17,326) 3,730 Decrease (increase) in reinsurance recoverables and prepaid reinsurance ....................... 16,614 (23,106) Increase in deferred policy acquisition costs.... (5,564) (12,390) Increase in other assets ........................ (4,469) (9,136) Increase (decrease) in losses ................... (14,864) 38,839 Increase in loss adjustment expenses ............ 22,558 12,940 Increase in unearned premiums ................... 6,551 40,375 Increase (decrease) in policyholders' dividends.. (1,024) 1,831 Increase (decrease) in other liabilities ........ 5,873 (13,224) -------- -------- Total adjustments and changes ................. (19,918) 37,315 -------- -------- Net cash provided by operating activities ......... $ 34,941 $ 75,775 ======== ======== See Notes to Consolidated Financial Statements (Unaudited) Page 8
ORION CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Six Months Ended June 30, 1997 and 1996 Note A - Basis of Financial Statement Presentation The consolidated financial statements and notes thereto are prepared in accordance with generally accepted accounting principles for property and casualty insurance companies. The consolidated financial statements include Orion Capital Corporation ("Orion") and its majority-owned subsidiaries (collectively the "Company"). The Company's investment in its unconsolidated affiliate is accounted for using the equity method. All material intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the Company's results of operations, financial position and cash flows for all periods presented. Although these consolidated financial statements are unaudited, they have been reviewed by the Company's independent accountants, Deloitte & Touche LLP, for conformity with accounting requirements for interim financial reporting. Their report on such review is included herein. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 annual report on Form 10-K. Note B - Investments in Affiliate As of June 30, 1997 the Company owned 24.8% of the common stock of Intercargo Corporation ("Intercargo"), a publicly held company. The Company records its share of Intercargo's operating results in the subsequent quarter, after Intercargo has reported its financial results. Summarized financial information of Intercargo for the three-month and six-month periods ended June 30, 1997 and 1996 is as follows: Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- (000s omitted) Revenues: Premiums earned .................... $ 13,725 $ 14,740 $ 30,082 $ 36,368 Investment and other income ........ 1,256 1,163 5,007 3,414 -------- -------- -------- -------- 14,981 15,903 35,089 39,782 -------- -------- -------- -------- Expenses: Insurance expenses ................. 13,626 14,915 31,327 42,780 Interest ........................... 184 217 449 499 -------- -------- -------- -------- 13,810 15,132 31,776 43,279 -------- -------- -------- -------- Earnings (loss) before equity in earnings of affiliate and federal income taxes ....................... 1,171 771 3,313 (3,497) Equity in earnings of affiliate ...... 967 552 1,952 552 Federal income (taxes) benefit ....... (343) (207) (607) 422 -------- -------- -------- -------- Net earnings (loss) .................. $ 1,795 $ 1,116 $ 4,658 $ (2,523) ======== ======== ======== ======== The Company's proportionate share, including amortization of goodwill.. $ 322 $ 119 $ 909 $ (721) ======== ======== ======== ======== Page 9 Note C - Reinsurance In the normal course of business, the Company's insurance subsidiaries reinsure certain risks, generally on an excess-of-loss or pro rata basis, with other companies to limit exposure to losses. Reinsurance does not discharge the primary liability of the original insurer. The table below summarizes certain reinsurance information: Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- (000s omitted) Direct premiums written ........... $376,782 $350,457 $748,293 $698,316 Reinsurance assumed ............... 29,986 47,292 55,228 94,336 -------- -------- -------- -------- Gross premiums written ............ 406,768 397,749 803,521 792,652 Reinsurance ceded ................. (66,534) (72,667) (129,062) (146,624) -------- -------- -------- -------- Net premiums written .............. $340,234 $325,082 $674,459 $646,028 ======== ======== ======== ======== Direct premiums earned ............ $372,038 $342,488 $734,157 $670,698 Reinsurance assumed ............... 29,042 42,887 62,564 84,262 -------- -------- -------- -------- Gross premiums earned ............. 401,080 385,375 796,721 754,960 Reinsurance ceded ................. (65,854) (66,266) (137,532) (133,449) -------- -------- -------- -------- Net premiums earned ............... $335,226 $319,109 $659,189 $621,511 ======== ======== ======== ======== Loss and loss adjustment expenses recoverable from reinsurers ..... $ 41,616 $ 35,591 $ 74,192 $ 59,011 ======== ======== ======== ======== Note D - Trust Preferred Securities On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior Subordinated Deferrable Interest Debentures due January 1, 2037 (the "Debentures") to Orion Capital Trust I (the "Trust"), a Delaware statutory business trust sponsored by Orion. The Trust simultaneously sold $125,000,000 of 8.73% Capital Securities (the "Trust Preferred Securities") which have substantially the same terms as the Debentures. The Trust Preferred Securities are subordinate to all liabilities of the Company, and may be redeemed without premium on or after January 1, 2007. Orion registered the Trust Preferred Securities under the Securities Act of 1933 in April 1997. The Trust is wholly owned by Orion and the sole assets of the Trust are the Debentures issued by Orion. Orion has provided a full and unconditional guaranty of the Trust's obligations under the Trust Preferred Securities, including all costs, expenses, debts and liabilities of the Trust. Page 10 Note E - Stockholders' Equity and Earnings Per Common Share On June 5, 1997 the Company declared a 2-for-1 split of its common stock payable on July 7, 1997 to shareholders of record on June 23, 1997. All common stock and per common share data presented in the financial statements has been restated to give effect to this stock split. The Company repurchased 26,854 shares of its common stock at an aggregate cost of $851,000 in the first six months of 1997. The remaining authorization for the stock repurchase program from the Company's Board of Directors' was $4,017,000 as of June 30, 1997. Earnings per common share was computed using the weighted average common and dilutive common equivalent shares outstanding for the three-month and six- month periods ended June 30, 1997 and 1996. The weighted average common shares amounted to 27,803,000 and 27,698,000 shares for the three months ended June 30, 1997 and 1996, and 27,801,000 and 27,846,000 shares for the six months ended June 30, 1997 and 1996, respectively. Note F - Contingencies Orion and its subsidiaries are routinely engaged in litigation incidental to their businesses. Management believes that there are no significant legal proceedings pending against the Company which, net of reserves established therefor, are likely to result in judgments for amounts that are material to the financial condition, liquidity or results of operations of Orion and its consolidated subsidiaries, taken as a whole. Note G - Accounting Standards Not Yet Adopted In February 1997 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share" which establishes new guidelines for the computation and disclosure of earnings per share. SFAS No. 128 is required to be adopted at the end of 1997. Current earnings per share ("EPS") disclosures will be replaced by Basic EPS and Diluted EPS as defined in SFAS No. 128. Pro forma Basic EPS and Diluted EPS computed in accordance with SFAS No. 128 would be $.93 and $.91 for the second quarter of 1997 and $.75 and $.74 for the second quarter of 1996, respectively. The pro forma six-month Basic EPS and Diluted EPS would be $2.01 and $1.97 for 1997 and $1.40 and $1.38 for 1996, respectively. In June 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income", which requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. This statement is effective for periods beginning after December 15, 1997. Management is currently evaluating the effects of this change on the Company's financial statements. In June 1997 the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", which changes the way public companies report information about segments. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the effects of this change on the Company's financial statements. Page 11 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Board of Directors Orion Capital Corporation New York, New York We have reviewed the accompanying consolidated balance sheet of Orion Capital Corporation and subsidiaries (the "Company") as of June 30, 1997, and the related consolidated statements of earnings for the three-month and six- month periods ended June 30, 1997 and 1996 and the statements of stockholders' equity and cash flows for the six-month periods ended June 30, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Orion Capital Corporation and subsidiaries as of December 31, 1996, and the related consolidated statements of earnings, stockholders' equity and cash flows for the year then ended; and in our report dated February 14, 1997, we expressed an unqualified opinion on those consolidated financial statements. The consolidated statements of earnings and cash flows for the year ended December 31, 1996 are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1996 and related consolidated statement of stockholders' equity for the year then ended is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. DELOITTE & TOUCHE LLP Hartford, Connecticut July 23, 1997 Page 12 ORION CAPITAL CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Six Months Ended June 30, 1997 and 1996 RESULTS OF OPERATIONS Orion Capital Corporation ("Orion") and its majority-owned subsidiaries (collectively the "Company") operate principally in the property and casualty insurance business. The Company reports its insurance operations in three segments. In addition, the miscellaneous income and expenses (primarily interest, general and administrative expenses and other consolidating elimination entries) of the parent company are reported as a fourth segment. The three insurance segments are as follows: Regional Operations - this segment includes the workers compensation insurance products and services sold by the EBI Companies. Special Programs - this segment is comprised of several parts - DPIC Companies, which markets professional liability insurance; - Connecticut Specialty, which writes specialty insurance programs; - Wm. H. McGee, an underwriting management company that specializes in ocean marine, inland marine and commercial property insurance; and - the Company's 24.8% interest in Intercargo Corporation, which sells insurance coverages for international trade. Guaranty National - this segment specializes primarily in non-standard automobile insurance and other property insurance. Earnings (loss) by segment before federal income taxes and minority interest expense are summarized as follows for the quarterly and six-month periods ended June 30, 1997 and 1996: Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- (000s omitted) Regional Operations ............... $16,763 $17,286 $37,461 $30,101 Special Programs .................. 11,051 12,514 27,956 24,461 Guaranty National ................. 15,256 6,945 26,310 14,186 ------- ------- ------- ------- Total ........................... 43,070 36,745 91,727 68,748 Other ............................. (3,755) (5,834) (9,048) (10,963) ------- ------- ------- ------- $39,315 $30,911 $82,679 $57,785 ======= ======= ======= ======= Page 13 REVENUES Premiums written and premiums earned - ------------------------------------ Net premiums written for the Company by segment are as follows: Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- (000s omitted) Regional Operations ........... $ 90,013 $ 87,553 $177,795 $179,158 Special Programs .............. 110,317 116,787 218,463 222,515 Guaranty National ............. 139,904 120,742 278,201 244,355 -------- -------- -------- -------- $340,234 $325,082 $674,459 $646,028 ======== ======== ======== ======== Regional Operations' net premiums written increased 2.8% in the second quarter of 1997 over the second quarter of 1996, and decreased .8% in the first half of 1997 as compared to the first half of 1996. The increase in premiums written for the second quarter of 1997 was from EBI Companies' selective geographic expansion and penetration, including the opening of five branch offices in 1997 and seven in 1996 in territories where the Company believes it will benefit from its service oriented approach. The increase in premiums was mitigated in part by the effects of legislative reforms in certain states that have led to an increasingly competitive workers compensation marketplace with lower premium rates commensurate with reduced benefit levels. Commission expenses were proportionately reduced by the lower rates. The slight decrease in year-to-date net premiums written was also attributable to the impact of these legislative reforms. Special Programs' net premiums written decreased 5.5% during the second quarter of 1997 and 1.8% in the first half of the year in comparison to the respective periods in 1996. In November 1996, the Company sold the renewal book of business of its reinsurance operations to concentrate on businesses where the Company can better service specialized niche markets. Excluding premiums from the assumed reinsurance business, this segment's net premiums written increased 11.5% for the second quarter and 13.9% for the six-month period ended June 30, 1997. Premiums written by DPIC Companies for professional liability insurance increased 2.8% to $90,955,000 in the first six months of 1997 from $88,492,000 for the first half of 1996. The increase is primarily attributable to the continuation of a high level of policy renewals offset in part by rate reductions in a very competitive professional liability insurance market. Premium volume for Connecticut Specialty in the first six months of the year increased 19.4% to $89,961,000 in 1997 from $75,351,000 in 1996. The increase in premiums was primarily from transportation programs, including truck liability and physical damage coverages, and from increases in low exposure professional liability programs. Also, premiums written for most Connecticut Specialty programs increased in 1997 over the first half of 1996 from higher retentions after a change in reinsurance effective May 1996. Premiums written by Wm. H. McGee increased 42.0% to $28,611,000 for the first six months of 1997 from $20,146,000 in 1996's first six months. The increase is principally the result of the Company's greater participation in the underwriting pools managed by McGee. Page 14 Guaranty National's net premiums written for the second quarter of 1997 increased 15.9% and 1997's six-month premiums increased 13.9% over the same periods in 1996. Net premiums written for personal lines increased 30.4% to $164,444,000 in the first six months of 1997 from $126,137,000 in the same period of 1996. This premium volume growth was a consequence of legislation in California which requires all drivers to have liability insurance. Commercial lines premiums decreased 13.3% to $69,725,000 in 1997 from $80,387,000 during the first half of 1996. The majority of the decrease for commercial lines was from lower production in the commercial auto and umbrella programs, increased competition by standard carriers in the nonstandard marketplace, and the effect of both agent and program cancellations during 1996. Premiums written by the collateral protection unit were $44,033,000 for the first six months of 1997, up 16.4% from $37,831,000 for the comparable period in 1996. The premium volume growth for this unit comes from increased writing in mortgage fire coverages, and from a new mechanical breakdown program. Premiums earned by the Company increased 5.1% to $335,226,000 in the second quarter of 1997 compared to $319,109,000 in the second quarter of 1996, and 6.1% to $659,189,000 in the first six months of 1997 from $621,511,000 in 1996. Premiums earned reflects the recognition in income of the changing levels of net premium writings. Net investment income - --------------------- Pre-tax net investment income increased 13.8% to $41,316,000 for the second quarter of 1997 versus $36,291,000 for the second quarter of 1996, and 15.2% to $81,537,000 for the first six months of 1997 as compared to $70,793,000 for 1996. The pre-tax yields on the average investment portfolio were 7.1% for the first six months of 1997 and 6.6% for the first half of 1996, and the after-tax yields were 5.4% and 5.2%, respectively. The increase in net investment income results from increased earnings both on a higher investment base and from investments in limited partnerships. The higher investment base includes the proceeds related to the issuance of $125,000,000 of trust preferred securities in January 1997 and the effects of operating cash flow, offset in part by the July 1996 cash outlay of approximately $88,000,000 for the purchase of Guaranty National common shares. Limited partnership earnings increased to $3,948,000 and $8,565,000 for the second quarter and first six months of 1997, respectively, versus $3,117,000 and $6,072,000 for the respective 1996 periods. Fixed maturity investments which the Company has both the positive intent and the ability to hold to maturity are recorded at amortized cost. Fixed maturity investments which may be sold in response to, among other things, changes in interest rates, prepayment risk, income tax strategies or liquidity needs are classified as available-for-sale and are carried at market value. The carrying value of fixed maturity and short-term investments amounted to $2,042,598,000 and $1,858,045,000, or approximately 80.9% and 80.0% of the Company's cash and investments at June 30, 1997 and December 31, 1996, respectively. Page 15 The Company's investment philosophy is to achieve a superior rate of return after taxes while maintaining a proper balance of safety, liquidity, maturity and marketability. The Company invests primarily in investment grade securities and strives to enhance the average return of its portfolio through limited investment in a diversified group of non-investment grade fixed maturity securities or securities that are not rated. At June 30, 1997 and December 31, 1996, the Company's investments in non-investment grade and unrated fixed maturity securities were carried at $256,555,000 and $219,473,000, respectively. These investments represented a total of 10.2% and 9.5% of cash and investments and 7.0% and 6.3% of total assets at June 30, 1997 and December 31, 1996, respectively. Realized investment gains - ------------------------- Net realized investment gains increased $2,597,000 and $13,021,000 to $8,358,000 and $24,147,000 in the second quarter and first six months of 1997, respectively, from net realized investment gains of $5,761,000 and $11,126,000 in the respective periods of 1996. Realized investment gains are net of provisions for losses on securities deemed to be other than temporarily impaired of $1,778,000 for the first six months of 1997, all from the first three months of the year. Such provisions were $700,000 and $1,868,000 for the three and six-month periods ended June 30, 1996, respectively. Realized gains (losses) vary from period to period, depending on market conditions relative to the Company's investment holdings, the timing of investment sales generating gains and losses, the occurrence of events which give rise to other than temporary impairment of investments, and other factors. EXPENSES AND OTHER Operating ratios - ---------------- The following table sets forth certain ratios of insurance operating expenses to premiums earned for the Company and the ratio of loss and loss adjustment expenses to premiums earned (the "loss ratio") by segment: Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Loss and loss adjustment expenses.. 67.3% 68.7% 67.5% 69.4% Policy acquisition costs and other insurance expenses .............. 31.0 29.3 31.0 29.1 ----- ----- ----- ----- Total before policyholders' dividends ................... 98.3 98.0 98.5 98.5 Policyholders' dividends .......... 1.4 1.6 1.5 1.4 ----- ----- ----- ----- Total after policyholders' dividends ................... 99.7% 99.6% 100.0% 99.9% ===== ===== ===== ===== Loss and loss adjustment expense ratio by segment: Regional Operations ........... 59.0% 61.4% 58.8% 63.5% Special Programs .............. 70.7 72.9 71.8 71.5 Guaranty National ............. 70.0 70.3 69.6 71.9 Page 16 Management believes that the Company's reserves for losses and loss adjustment expenses make reasonable and sufficient provision for the ultimate cost of all losses on claims incurred. Adverse development of prior years' losses amounted to $3,695,000 in the first six months of 1997 compared with $3,612,000 in the first half of 1996. The current year improvement in the loss ratios for the Regional Operations segment results from favorable loss experience achieved by EBI Companies through its service oriented approach of working with its customers to prevent losses and reduce claim costs. The increase in the year-to-date loss ratio for the Special Programs segment is mainly attributable to losses from certain programs cancelled by Connecticut Specialty. The increase in the loss ratio for this segment was offset in part by the impact of the change in the mix of business for this segment, particularly the lower premiums and losses from the assumed reinsurance business that the Company exited in November 1996. The improvement in the loss ratios for Guaranty National is primarily attributable to lower claim frequency for the personal lines and commercial lines units. The improvement in the loss ratio has been offset in part by costs incurred to improve claim handling and reduce insurance fraud in the personal lines unit and by higher estimates for loss adjustment expenses for the commercial lines unit. The increase in the ratio of deferred policy acquisition costs and other insurance expenses to premiums earned (the "expense ratio") is attributable to the Company's continued investment in building its loss prevention and claims management competencies as well as the costs of opening EBI Companies offices in new territories. The increase for 1997 was also the result of the change in Connecticut Specialty's reinsurance in May 1996, which provides for lower ceding commissions. Interest expense - ---------------- Interest expense was $6,179,000 in the second quarter of 1997 compared to $6,143,000 in 1996, and $12,302,000 in the first six months of 1997 versus $12,318,000 in 1996, reflecting consistent levels of debt outstanding and interest rates on the Company's debt for the first two quarters of both years. Equity in earnings (loss) of affiliate - -------------------------------------- Equity in earnings (loss) of affiliate includes the Company's portion of earnings of $322,000 and $119,000 from the Intercargo investment in the second quarters of 1997 and 1996, respectively, and earnings of $909,000 in the first six months of 1997 versus a loss of $721,000 recorded in the first half of 1996. The Company records its share of Intercargo's results in the subsequent quarter. Page 17 Federal income taxes - -------------------- Federal income taxes on pre-tax operating results and the related effective tax rates amounted to $10,042,000 (25.5%) and $7,701,000 (24.9%) in the second quarters of 1997 and 1996, respectively. The corresponding amounts for the first six months of 1997 and 1996 were $20,791,000 (25.1%) and $13,767,000 (23.8%), respectively. The Company's effective tax rate is less than the statutory tax rate of 35% primarily because of income derived from tax-advantaged securities. Minority interest expense - ------------------------- Minority interest in subsidiary earnings of $2,120,000 and $2,637,000 for the second quarters and $3,719,000 and $5,558,000 for the first six months of 1997 and 1996, respectively, represents the portion of Guaranty National's earnings, net of federal income taxes, attributable to Guaranty National's minority shareholders. The 1997 expense was lower due to the increase in the Company's ownership of Guaranty National in July 1996. Minority interest in subsidiary trust of $1,772,000 for the second quarter of 1997 and $3,310,000 year-to-date, represents the financing cost after the federal income tax deduction on Orion's $125,000,000 of 8.73% trust preferred securities issued in January 1997. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities decreased by $40,834,000 for the first six months of 1997 from $75,775,000 in 1996 to $34,941,000 in 1997. The decrease in operating cash flow for 1997 was the result of higher payments for losses, policy acquisition costs and policyholders' dividends, consistent with the Company's growth level in recent years and including the payment of losses for the assumed reinsurance business the Company exited in November 1996. Partially offsetting these increased cash outflows were higher premiums collected, reflective of the Company's current rate of growth. Cash used in investment activities increased to $147,737,000 for the first six months of 1997 from $32,730,000 in 1996. Cash is used in investment activities primarily for purchases of investments. The purchases are funded by maturities and sales of investments, as well as by the net cash from operating cash flows after cash provided by or used in financing activities. Cash invested in 1997 includes the investment of the net proceeds from $125,000,000 of trust preferred securities issued by Orion in January 1997. Cash provided by financing activities was $114,799,000 for the first half of 1997 and cash used in financing activities was $18,928,000 for the same period of 1996. Cash was provided by the net proceeds from the issuance of $125,000,000 of trust preferred securities by Orion. Cash was used for dividend payments and the Company's stock repurchase program in both 1997 and 1996. Orion increased its quarterly dividend rate by 14.3% in the second quarter of 1997 and by 8.7% and 12.0% in the first and fourth quarters of 1996, respectively. Page 18 Orion's uses of cash consist of debt service, dividends to stockholders and overhead expenses. These cash uses are funded from existing available cash, financing transactions and receipt of dividends, reimbursement of overhead expenses and amounts in lieu of federal income taxes from Orion's insurance subsidiaries. Payments of dividends by Orion's insurance subsidiaries must comply with insurance regulatory limitations concerning stockholder dividends and capital adequacy. Limitations under current regulations are well in excess of Orion's cash requirements. Orion's insurance subsidiaries maintain liquidity in their investment portfolios substantially in excess of that required to pay claims and expenses. The insurance subsidiaries held cash and short-term investments of $211,005,000 and $293,477,000 at June 30, 1997 and December 31, 1996, respectively. Orion's insurance subsidiaries had combined policyholders' surplus of $737,149,000 at June 30, 1997 and $670,572,000 at December 31, 1996, and statutory operating leverage ratios based on trailing twelve months net premiums written to policyholders' surplus of 1.8:1 at June 30, 1997 and 2.0:1 at December 31, 1996. The terms of Orion's indentures for its $100,000,000 of 7 1/4% Senior Notes due 2005 and its $110,000,000 of 9 1/8% Senior Notes due 2002 limit the amount of liens and guaranties by the Company, and the Company's ability to incur secured indebtedness without equally and ratably securing the senior notes. Management does not believe that these limitations unduly restrict the Company's operations or limit Orion's ability to pay dividends on its stock. At June 30, 1997, the Company was in compliance with the terms of its senior note indentures. Management believes that the Company continues to have substantial sources of capital and liquidity from the capital markets and bank borrowings. As of June 30, 1997, Guaranty National has $100,000,000 outstanding under an agreement with several banks which provides for an unsecured reducing revolving credit facility. Principal payments are due from April 1999 until 2002. Interest is payable quarterly at interest rates based on the floating LIBOR rate, plus a margin of 0.375% to .75%. Guaranty National has two interest rate swap agreements which effectively change the interest rate exposure on $80,000,000 of these borrowings to a fixed rate of approximately 6.3% through March 31, 1998. Guaranty National is in compliance with the various covenants and restrictions in its bank loan agreement. On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior Subordinated Deferrable Interest Debentures due January 1, 2037 (the "Debentures") to Orion Capital Trust I (the "Trust"), a Delaware statutory business trust sponsored by Orion. The Trust simultaneously sold $125,000,000 of 8.73% Capital Securities (the "Trust Preferred Securities") which have substantially the same terms as the Debentures. The net proceeds from the sale of the Trust Preferred Securities will be used for general corporate purposes. The Trust Preferred Securities are subordinate to all liabilities of the Company, and may be redeemed without premium on Page 19 or after January 1, 2007. The Company may defer interest distributions on the Trust Preferred Securities, however, during any period when such cumulative distributions have been deferred, Orion may not declare or pay any dividends or distributions on its common stock. Orion registered the Trust Preferred Securities under the Securities Act of 1933 in April 1997. On June 5, 1997 the Company declared a 2-for-1 split of its common stock payable on July 7, 1997 to shareholders of record on June 23, 1997. All common stock and per common share data presented in the financial statements has been restated to give effect to this stock split. The Company repurchased 26,854 shares of its common stock at an aggregate cost of $851,000 in the first six months of 1997. The remaining authorization for the sock repurchase program from the Company's Board of Directors' was $4,017,000 as of June 30, 1997. FORWARD-LOOKING STATEMENTS All statements made in this Quarterly Report on Form 10-Q that do not reflect historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward- looking statements. Such risks, uncertainties and other factors include, among other things, (i) general economic and business conditions; (ii) interest rate and financial market changes; (iii) competition and the regulatory environment in which we operate; (iv) claims frequency; (v) claims severity; (vi) medical cost inflation; (vii) increases in the cost of property repair; (viii) the number of new and renewal policy applications submitted to us; and (ix) other factors over which we have little or no control. The Company disclaims any obligation to update or to publicly announce the impact of any such factors or any revisions to any forward looking statements to reflect future events or developments. Page 20 PART II OTHER INFORMATION Items 1 - 3. - ------------ None. Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------- At the Orion Annual Meeting of Stockholders held on May 29, 1997 ("Annual Meeting"), 13,757,551 shares of Orion Common stock were outstanding and entitled to vote (the "Outstanding Common Stock"), and 12,419,808 shares of Outstanding Common Stock (90.3%), consisting of a quorum, were represented at the Annual Meeting in person or by proxy. At the Annual Meeting, the directors nominated were elected by the following votes: Number of Shares Number of Shares Voted For Withheld ---------------- ------------------ W. Marston Becker 12,356,406 63,402 Gordon F. Cheesbrough 12,354,452 65,356 Bertram J. Cohn 12,353,281 66,527 John C. Colman 12,353,581 66,227 Victoria R. Fash 12,354,315 65,493 Robert H. Jeffrey 12,356,296 63,512 Warren R. Lyons 12,356,452 63,356 James K. McWilliams 12,356,082 63,726 Ronald W. Moore 12,356,406 63,402 Robert B. Sanborn 12,355,471 64,337 William J. Shepherd 12,353,831 65,977 John R. Thorne 12,354,031 65,777 Roger B. Ware 12,356,094 63,714 No director received fewer than 12,353,281 votes or 89.8% of the Outstanding Common Stock (99.5% of the shares voted at the Annual Meeting). There were no broker non-votes on this proposal. At the Annual Meeting, the approval of an amendment to the Corporation's Restated Certificate of Incorporation to increase the authorized shares of Common Stock that the Corporation can issue from 30,000,000 shares to 50,000,000 shares was ratified by a vote of 11,301,099 shares or 82.1% of the Outstanding Common Stock (91.0% of the shares voted at the Annual Meeting). Holders of 1,052,996 or 7.7% of the Outstanding Common Stock voted against the amendment and holders of 65,803 shares or 0.5% of the Outstanding Common Stock abstained from voting. There were no broker non- votes on this proposal. At the Annual Meeting, the Corporation's Equity Incentive Plan ("Equity Plan"), a new stock benefit plan for key employees of the Corporation, was approved by a vote of 7,372,927 shares or 53.6% of the Outstanding Common stock (59.4% of the shares voted at the Annual Meeting). Holders of 2,851,037 shares or approximately 20.7% of the Outstanding Common Stock voted against the Equity Plan. Holders of 270,089 shares or approximately 2.0% of the Outstanding Common Stock abstained from voting on the Equity Plan. Page 21 There were broker non-votes representing 1,925,755 shares of Common Stock (approximately 14.0% of the Outstanding Common Stock) on the Equity Plan proposal. At the Annual Meeting, the approval of the adoption of certain amendments to the 1994 Stock Option Plan for Non-Employee Directors ("Directors' Plan") was ratified by a vote of 9,415,467 shares or 68.4% of the Outstanding Common Stock (75.8% of the shares voted at the Annual Meeting). Holders of 799,899 shares or 5.8% of the Outstanding Common Stock voted against the ratification of the amendments to the Directors' Plan and holders of 278,688 shares or 2.0% of the Outstanding Common Stock abstained from voting. There were broker non-votes representing 1,925,754 shares of Common Stock (approximately 14.0% of the Outstanding Common Stock) on the Directors' Plan proposal. At the Annual Meeting, the selection of Deloitte & Touche LLP, independent certified public accountants, as auditors for the Corporation for the year 1997 was ratified by a vote of 12,364,104 shares or 89.9% of the Outstanding Common Stock (99.6% of the shares voted at the Annual Meeting). Holders of 20,380 shares or approximately 0.1% of the Outstanding Common Stock voted against the ratification of Deloitte and Touche as auditors and holders of 35,324 shares or approximately 0.3% of the Outstanding Common Stock abstained from voting. There were no broker non-votes on this proposal. Item 5. - ------- None Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits Exhibit 11: Computation of Earnings Per Common Share. Exhibit 15: Deloitte & Touche Letter re unaudited interim financial information. Exhibit 27: Financial Data Schedule. (b) Reports on Form 8-K. None. Page 22 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. ORION CAPITAL CORPORATION Date: July 30, 1997 By: /s/ W. Marston Becker -------------------------------- Chairman of the Board and Chief Executive Officer Date: July 30, 1997 By: /s/ Daniel L. Barry -------------------------------- Senior Vice President and Chief Financial Officer Page 23 EXHIBIT INDEX Page No. Exhibit 11: Computation of Earnings Per Common Share 25 Exhibit 15: Deloitte & Touche Letter re unaudited interim financial information 26 Exhibit 27: Financial Data Schedule 27 Page 24 EX-11 2
EXHIBIT 11 ORION CAPITAL CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED) (000s omitted - except for per common share data) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- Computation of weighted average number of common and equivalent shares outstanding: PRIMARY - Weighted average number of shares outstanding ............................. 27,299 27,324 27,302 27,477 Dilutive effect of stock options and stock awards .................................. 504 374 499 369 ------- ------- ------- ------- Weighted average number of common and equivalent shares ....................... 27,803 27,698 27,801 27,846 ======= ======= ======= ======= Net earnings attributable to common stockholders .............................. $25,381 $20,573 $54,859 $38,460 ======= ======= ======= ======= Net earnings per common share ............... $ .91 $ .74 $ 1.97 $ 1.38 ======= ======= ======= ======= FULLY DILUTED Weighted average number of shares outstanding ............................. 27,299 27,324 27,302 27,477 Dilutive effect of stock options and stock awards .................................. 556 415 525 390 ------- ------- ------- ------- Weighted average number of common and equivalent shares ....................... 27,855 27,739 27,827 27,867 ======= ======= ======= ======= Net earnings attributable to common stockholders .............................. $25,381 $20,573 $54,859 $38,460 ======= ======= ======= ======= Net earnings per common share ............... $ .91 $ .74 $ 1.97 $ 1.38 ======= ======= ======= ======= Page 25
EX-15 3 EXHIBIT 15 July 23, 1997 Orion Capital Corporation 600 Fifth Avenue New York, New York We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Orion Capital Corporation and subsidiaries for the periods ended June 30, 1997 and 1996, as indicated in our report dated July 23, 1997; because we did not perform an audit, we expressed no opinion on the information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, is incorporated by reference in Registration Statements No. 2-65348 on Form S-8 and S-16 relating to the Orion Capital Corporation 1976 and 1979 Stock Option Plans, No. 2-80636 on Form S-8 relating to the Orion Capital Corporation 1982 Long-Term Performance Incentive Plan, No. 2-63344 on Form S-8 relating to the Orion Capital Corporation Employees' Stock Savings and Retirement Plan and No. 33-59847 on Form S-8 relating to the Orion Capital Corporation 1994 Stock Option Plan for Non-Employee Directors. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Hartford, Connecticut Page 26 EX-27 4
7 EXHIBIT 27 THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORION CAPITAL CORPORATION'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-1-1997 JUN-30-1997 1,342,885 324,640 331,164 382,264 1,280 0 2,511,966 13,598 420,615 141,732 3,677,293 1,793,358 502,800 0 21,465 310,565 173,531 0 0 457,287 3,677,293 659,189 81,537 24,147 10,119 444,696 188,075 26,487 82,679 20,791 54,859 0 0 0 54,859 1.97 1.97 1,368,420 441,001 3,695 163,377 266,521 1,383,218 3,695
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