Orion Capital Corporation ("Orion") and its wholly-owned subsidiaries (collectively the "Company") operate principally in the property and casualty insurance business. The Company reports its insurance operations in three segments - Regional Operations, Reinsurance/Special Programs and Guaranty National Companies. Regional Operations provides workers compensation insurance products through EBI Companies. Reinsurance/Special Programs includes (i) DPIC Companies ("DPIC"), which markets professional liability insurance, (ii) Connecticut Specialty, which writes specialty insurance programs, (iii) SecurityRe Companies ("SecurityRe"), a reinsurer, (iv) Wm. H. McGee & Co., Inc. ("McGee"), an underwriting management company that specializes in ocean marine, inland marine and property insurance and (v) a 20.0% interest in Intercargo Corporation ("Intercargo") which underwrites insurance coverages for international trade. The third segment consists of the Company's 49.1% interest in Guaranty National Corporation, which specializes in nonstandard commercial and personal automobile insurance. 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.
- Reinsurance/Special Programs' net premiums written decreased 1.7% ($7,479,000) to $424,838,000 in 1995 from $432,317,000 in 1994 and increased 16.7% ($61,813,000) in 1994 from $370,504,000 in 1993. Net premiums written by DPIC for professional liability insurance, the largest special program, were $184,130,000, $173,205,000 and $123,637,000 in 1995, 1994 and 1993, respectively. The increase in 1994 was primarily attributable to the discontinuation on January 1, 1994 of a reinsurance contract, including a $13,704,000 premium refund received in 1994, in order to retain more of DPIC's profitable business. Excluding this refund, DPIC premiums written in 1995 increased 15.4% over premiums written in 1994. The premium increases in 1995 and 1994 reflect both new business and a continuation of a high level of policy renewals. Premium volume for Connecticut Specialty decreased 8.3% ($15,165,000) to $168,262,000 in 1995 from $183,427,000 in 1994 and 4.6% ($8,819,000) in 1994 from $192,246,000 in 1993. The decreases in 1995 and 1994 resulted from the cancellation in the second half of 1994 of a personal injury
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. The risk of loss due to default is generally considered greater for non-investment grade securities than for investment grade securities because the former, among other things, are often subordinated to other indebtedness of the issuer and are often issued by highly leveraged companies. At December 31, 1995 and 1994, the Company's investment in non-investment grade and unrated fixed maturity securities were carried at $139,075,000 and $119,853,000 with market values of $139,067,000 and $119,277,000, respectively. These investments represented a total of 8.7% and 9.0% of cash and investments and 5.6% and 5.7% of total assets at December 31, 1995 and 1994, respectively.
The performance of the Company's investments, including net investment income, net realized gains (losses) and unrealized appreciation (depreciation) is as follows for the three most recent years:
On December 21, 1992, Orion called for redemption its $2.125 Preferred Stock on January 21, 1993. The market price of the shares of common stock that a holder would receive upon conversion of the preferred stock was substantially higher than the redemption price of $25.76 per share. Consequently, most holders converted into common stock prior to the redemption date, resulting in the issuance of 3,579 shares of common stock prior to December 31, 1992 and 1,423,544 shares of common stock in January 1993. Holders of 21,605 shares of $2.125 Preferred Stock who did not elect to convert redeemed their shares for an aggregate of $557,000.
During 1995, the Company repurchased 173,181 shares of its common stock at an aggregate cost of $7,183,000. The Company repurchased 442,327 shares for $13,745,000 in 1994 and 177,658 shares for $5,473,000 in 1993.