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 ALIC, ANSC and Dublin (collectively, the "Target Corporations") for $30.2 million in cash and to sell to Lyndon Property Insurance Company the vehicle extended service contract business of ACCEL's wholly owned subsidiary, 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 stockholder's equity in accordance with generally accepted accounting principles ("GAAP") 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. As discussed further below, the after-tax net gain on sale of the Auto Aftermarket Group was $3.2 million which is comprised of $10.3 million in continuing operations and ($7.1 million) in discontinued operations (excluding the provision for operating loss of $495,000 during the phase-out period). The gain was based upon the purchase price of approximately $41 million offset by the Company's equity in the sold subsidiaries of approximately $32.1 million, the write-off of goodwill related to ALIC of $.6 million, costs associated with the sale of $.8 million and federal income taxes related to the sale of $4.3 million.
The gain of $10.3 million from the sale of the vehicle extended service contract business was reflected within continuing operations of the Company in 1997 as a result of this business comprising only a portion of the Company's property and casualty business segment. Income before federal income taxes related to the vehicle extended service contract business included in continuing operations was $360,000, $740,000 and $879,000 for 1997, 1996 and 1995, respectively.
The Company's income before income taxes and discontinued operations for 1997 was $8.1 million. This income was primarily the result of the gain on the sale of the vehicle extended service contract business to Lyndon which amounted to $10.3 million. The Company's other products within the property and casualty segment continued their growth, producing $31.2 million in gross premiums written in 1997 compared to $17.3 million in 1996.
The loss before income taxes and discontinued operations for 1995 was $3.6 million. This loss was primarily driven by three factors; the foremost factor was adverse loss development on discontinued lines of business within the property and casualty segment. The adverse development aggregated $2.4 million and included a $1.2 million year-end reserve increase on the discontinued REO product. The adverse development was partially offset by a $500,000 favorable development on the discontinued medical business. The second factor was the incurral of legal fees related to the REO program litigation during 1995, including the Company's legal action against the entities involved in the REO program. These actions caused the incurral of legal fees of $550,000 in 1995. Lastly, during 1995 the Company incurred approximately $350,000 in severance expenses related to departed employees.
Net premium earned was $18.7 million, $12.5 million and $7.5 million for 1997, 1996 and 1995, respectively. The increase in 1997 as compared to 1996 and 1995 is due to the development and expansion by the Company into property and casualty lines of business. The net loss and loss adjustment expense ratios remained relatively consistent at 82.1% in 1997 compared to 81.4% in 1996 and improved from 92.2% in 1995. See Table I following the narrative in Management's Discussion and Analysis.
The effect of the Company's material lines of business that are in runoff was as follows for 1997: net incurred losses and loss adjustment expenses ("LAE") for the discontinued REO line of business were ($355,000) in relation to zero earned premium. This result was due in large part to a re-evaluation of LAE reserves that lowered the reserve to the expected ultimate cost of settling the claims. The total number of open claims at December 31, 1997 was 10 and the related reserves were $351,000. Net incurred losses and LAE for the discontinued Agriculture lines of business at December 31, 1997 were ($77,000). The net impact on the loss ratio and net income for these discontinued lines of business in 1997 was immaterial.
The Company's general and administrative expenses increased in 1997 by $955,000 or 25% and decreased $296,000 or 7.2% between 1996 and 1995. The 1997 increase in general and administrative expenses is primarily attributed to the following expense categories: salaries and wages which increased due to an increase in the number of personnel related to the Property and Casualty product lines as well as normal salary increases; employee welfare which increased as a result of expenses associated with the Company's 401(K) plan and additional group insurance expenses; and rent which increased as a result of the sale of the Company's Dublin, Ohio office building in March 1996 and the subsequent rental of office space in Dublin, Ohio and Stafford, Texas. In addition, the Company wrote-off in 1997 approximately $150,000 in capitalized software costs related to software which was included in the sale of assets for the vehicle extended service contract business. The decrease in general and administrative expenses of 7.2% between 1996 and 1995 was primarily due to increased legal fees in 1995 as a result of the REO litigation.
The Company maintains liquidity in its investment portfolio to generally correspond with the liabilities outstanding on its lines of business. At December 31, 1997, the estimated duration of the Company's fixed income investment portfolio was 2.4 years while the estimated liability duration was approximately 1.4 years. Currently, an interest rate change of 1% would impact the fair value of the fixed maturity portfolio and stockholders' equity by a decline of approximately $.6 million if interest rates rose and an increase of approximately $.6 million if interest rates declined.
The Company's "available for sale" fixed maturity securities at December 31, 1997 included $3 million of mortgage-backed securities, $2.4 million of collateralized mortgage obligation securities and $9.6 million of 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 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 will utilize the remainder for general corporate purposes.
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.
The Company has adopted Financial Accounting Standards Board ("FASB") Statement of Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which became effective in 1997, and determined that this SFAS did not have a material impact on the financial condition of the Company.
In 1997, the FASB issued SFAS No. 128, Earnings per Share ("SFAS No. 128"). This statement, which did not have an impact on net income, establishes standards for computing and presenting earnings per share. Earnings per share for all years presented have been restated to comply with SFAS No. 128. The Company will adopt the disclosure requirements of SFAS No. 130, Reporting Comprehensive Income, in 1998. Adoption of this SFAS will have no effect on the net income of the Company. The Company will also adopt the presentation requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, in 1998. Management is currently in the process of evaluating the segment reporting disclosure requirements. Adoption of this SFAS will have no effect on net income of the Company.
The National Association of Insurance Commissioners is in the final stages of a project to codify statutory accounting principles to provide a comprehensive basis of statutory accounting and reporting for use by insurance departments, insurers, and auditors. Implementation of the codified statutory accounting 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.
The Company is aware of the issues associated with the programming code in existing computer systems as the millennium (Year 2000) approaches. The Company is utilizing internal resources to identify, correct, reprogram and test the systems for the Year 2000 compliance. All systems utilized by the Company are currently Year 2000-compliant with the exception of the general ledger system for which reprogramming efforts will be complete by December 1998, allowing adequate time for testing. Since January 1, 1996, the Company has incurred approximately $60,000 in costs to ensure Year 2000 compliance for continuing operations and expects to incur approximately $40,000 in 1998 related to the final phase of Year 2000 compliance. To date, confirmations have been received from the Company's primary processing vendors that plans are being developed to address processing of transactions in the Year 2000. Management has assessed the Year 2000 compliance issue and has determined that the effect on the Company's financial condition and earnings is not material.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ACCEL International Corporation and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
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.
The following is a description of the most significant risks facing property/casualty insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or regulatory environment in which an insurer operates will create additional expenses not anticipated by the insurer in pricing its products. That is, regulatory initiatives, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those currently recorded in the consolidated financial statements. The Company mitigates this risk by operating throughout the United States, thus reducing its exposure to any single jurisdiction and also by employing underwriting and loss adjusting practices which identify and minimize the adverse impact of this risk.
INTEREST RATE RISK is the risk that interest rates will change and cause a decrease in the value of an insurer's investments. The Company mitigates this risk by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer would have to borrow funds or sell assets prior to maturity and potentially recognize a gain or loss.
Realized gains and losses on the disposal of investments are determined by specific identification and are included in the consolidated statements of operations.
FAIR VALUES OF FINANCIAL INSTRUMENTS: The fair value of a financial instrument is the amount at which the financial instrument could be exchanged in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques.
The tax ramifications of the related unrealized gains and losses may have a significant effect on fair value estimates and have not been considered in the estimates.
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.
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 consolidated statements of operations.
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 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.
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, ANSC and Dublin that comprised the Life/Health business segment. Accordingly, the assets, liabilities, revenues, benefits and expenses, and cash flows of ALIC and Dublin have been excluded from the respective captions in the consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows for all periods presented. The net operating results of these entities have been reported, net of applicable income taxes, as "Income from discontinued operations", the assets and liabilities of these entities have been reported as "Assets of discontinued operations" and "Liabilities of discontinued operations", and the net cash flows of these entities have been reported as "Net cash (used in) provided by discontinued operations."
At December 31, 1997 and 1996, investments in cash and securities with a carrying value of $5,484,000 and $5,427,000, respectively, were on deposit with state insurance departments to satisfy regulatory requirements.
Proceeds from the sale of securities available-for-sale during 1997, 1996 and 1995 were $18,011,000, $8,728,000 and $7,535,000, respectively. Gross gains of $1,308,000 ($432,000 in 1996 and $223,000 in 1995) and gross losses of $257,000 ($0 in 1996 and $22,000 in 1995) were realized on those sales.
In 1991, ACCEL issued $5.8 million of subordinated notes (the "Subordinated Notes"). The Subordinated Notes had a nine- year term with no principal payable until maturity, and with interest at 10.125% per annum. Effective June 30, 1992, ACCEL amended the notes to permit the issuance of additional notes for the purpose of making interest payments, provided, however, that ACCEL could at its option pay cash in lieu of issuing additional notes in any denomination of less than $1,000. As a result, ACCEL issued additional notes totaling $403,000 and $569,000 for the 1996 and 1995 interest payments, respectively.
On July 25, 1996, the Company commenced an offering of non-transferable rights (the "Rights Offering") to stockholders of record as of June 18, 1996. Under the provisions of the Rights Offering, the Company permitted CIHC and its affiliate to tender the principal amount of their Subordinated Notes for cancellation as consideration (in lieu of cash) for the purchase of shares of common stock pursuant to the Rights Offering. On August 23, 1996, CIHC and its affiliate tendered the $5.6 million principal amount of their Subordinated Notes plus an additional $83,759 of accrued interest thereon under the terms of the Rights Offering. At the conclusion of the offering, CIHC and its affiliate had reduced their holding of Subordinated Notes to $0.
In a separate transaction, the Company retired $731,533 principal amount of Subordinated Notes held by an unrelated third party for consideration of $600,000. The Company recognized an extraordinary gain on this transaction of $131,533 in 1996. No federal income tax was recognized related to this gain due to the consolidated tax position of the Company.
The result of the two aforementioned transactions was to retire all outstanding Subordinated Notes.
On December 29, 1995, the Company issued senior notes (the "Senior Notes") totaling $16.5 million at 9.50%, maturing on April 1, 2001. The proceeds from these notes were used to retire a previous loan outstanding and to liquidate an intercompany loan between ACCEL and an insurance subsidiary. The Senior Notes were payable to the same unaffiliated company which was a party to a reinsurance agreement with ALIC. This reinsurance agreement was structured such, that as future profits emerged on the reinsured block of business, the profits would be held by the reinsurance company, and ultimately applied to pay interest on and to redeem the Senior Notes. Profits in excess of the amount required to retire the Senior Notes were to be returned to ALIC. As of December 31, 1996, $1.5 million of the profits on this block of business were released to ALIC in the form of the aforementioned Senior Notes. This release resulted in a balance of $15.0 million of Senior Notes outstanding as of December 31, 1996. The reinsurance agreement between ALIC and the unaffiliated company was commuted on December 31, 1997 as a condition of the sale of the Auto Aftermarket Group. The Senior Notes were transferred from the unaffiliated company to ALIC in connection with the commutation of the reinsurance agreement on December 31, 1997 and retired with proceeds from the sale.
During 1997, 1996 and 1995, ACCEL paid interest on notes of $1,069,000, $403,000 and $1,125,000, respectively.
The ceding of insurance through reinsurance agreements does not discharge the primary liability of the original underwriter to the insured, but it is the practice of insurers to treat risks that have been reinsured with other companies, to the extent of the reinsurance, as though they were not risks for which the original insurer is liable. Should the reinsurer not be able to meet its obligations, those obligations are the ultimate responsibility of the Company. Therefore, in financial statement presentation, premiums and policy benefits are presented net of that portion of risks reinsured with other companies.
In 1996, the Company entered into reinsurance contracts associated with its property and casualty lines. Under these agreements, the Company transfers a percentage of risk to the related reinsurer. The Company also has agreements which transfer risks after a predetermined loss has been reached. Premiums ceded amounted to $17.1 million, $9.4 million and $5.4 million for 1997, 1996 and 1995, respectively. Unearned premium reserves associated with these agreements at December 31, 1997 and 1996 are $9.6 million and $5.6 million, respectively, and the liability for insurance claims is $14.3 million and $5.8 million at December 31, 1997 and 1996, respectively.
Premiums written and earned in 1997, 1996 and 1995 are summarized as follows:
Loss and loss adjustment expenses incurred in 1997, 1996 and 1995 are summarized as follows:
In 1997, 1996 and 1995 the Company paid $825,000, $1,100,000 and $410,000, respectively, in federal income taxes.
The Company has $5.6 million of net operating losses that are available to reduce future income taxes and will expire as follows: $1.9 million in 2008 and $3.7 million in 2009.
The Company has determined the valuation allowance related to the deferred tax assets based on its analysis of future deductible amounts. This analysis included a schedule of the deductibility of non-life items pursuant to Section 801 of the Internal Revenue Code and a determination of the realization of losses generated by available for sale securities. The Company recorded a valuation allowance of $1,767,000 and $1,353,000 as of December 31, 1995 and January 1, 1995, respectively.
During 1982, ACCEL adopted a stock option plan (the "82 Plan") under which shares of common stock were made available to eligible officers and key personnel. Under the terms of the 82 Plan, the option price had to be at least 100% of the fair value at the date of grant, and, accordingly, there were no charges to income resulting from grants. Options were granted at prices ranging from $2.769 to $11.750 per share from April 1982 through April 1992. The options become exercisable after one year of continuous employment in installments of 50% at the end of the first and the second year from the date of grant and expired ten years from the date of grant. A total of 300,000 (349,672 after giving effect to all subsequent stock dividends) shares had been reserved for options under the 82 Plan. No additional shares may be granted under the 82 Plan.
At the end of their first and second years of service, the status of these two key employees was evaluated by the Compensation Committee and based on the value of their services, began receiving compensation effective June 1, 1996. As part of their compensation both were granted stock options pursuant to the 1996 Stock Incentive Plan (the "96 Plan"). In 1996, options for 165,000 shares were granted at an option price per share of $2.50, the fair value of ACCEL's common stock on the date of grant. In 1997, options for 90,000 shares were granted at an option price per share of $2.75, the fair value of ACCEL's common stock on the date of grant. The terms are identical to the aforementioned options granted in May 1995.
Options granted to employees or independent agents of the Company under the 96 Plan will be priced at not less than 100% of the fair value of the common stock on the date of grant and will become exercisable as to 25% of the shares subject to the option upon completion of each full year of employment until fully vested. Grants of options to outside directors under the 96 Plan will also be priced at 100% of fair value on the date of grant but, in the absence of any provisions in an option to the contrary, the options will become exercisable as to 50% of the shares subject to the option upon completion of each full year until vested. In substantially all other respects, the 96 Plan contains provisions similar to the previous plans.
On August 28, 1996, the Board of Directors of the Company approved a resolution to offer to all key employees holding options outstanding that were priced in excess of the current market value the opportunity to receive "re-priced" options. Such key employees were permitted to surrender, cancel and terminate any or all outstanding options (whether vested or not) and receive options for an equal number of shares under the 96 Plan at the then current price of $2.50 per share. The re-priced or "replacement" options would be newly granted options and become exercisable in accordance with the vesting provisions of the 96 Plan. A total of 161,371 shares were surrendered by key employees as part of the re-pricing opportunity and 4,500 shares were not surrendered.
The Company applies APB Opinion No. 25 in accounting for these plans and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below:
The Company operates primarily in the property/casualty insurance industry. 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 income taxes, discontinued operations and extraordinary item, and identifiable assets by segment are summarized as follows:
Effective July 1, 1997, the Company reorganized the Plan into two separate Plans. One plan, the ACCEL International Corporation 401K Plan ("401K Plan"), authorized contributions at a level that would fund a 75% match of the first 6% of each participating employee's tax deferred contributions. The second plan, the ACCEL International Corporation Stock Ownership Plan ("ESOP Plan"), authorized a 2% funding to the plan for each eligible employee. The Company incurred contribution expense for 1997, 1996 and 1995 of $209,000, $187,000 and $198,000, respectively.
As reflected above, the suit seeks 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's position continues to be that the Guaranty Fund has no 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 on March 31, 1998. ANIC will continue to vigorously defend itself against any such claims and its alleged liability in the suit. Although the suit is of recent origin and the Company is not in a position to estimate the magnitude of exposure for indemnification or reimbursement, it continues to believe that the ultimate resolution of the matter will not have a material adverse effect on the financial condition or results of operations of the Company.
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.
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.
As more fully described in Note E, during 1996 the Company retired all of the outstanding Subordinated Notes held by CIHC.
Certain quarterly information has been restated to reflect the sale of ALIC and Dublin, which comprised the Life/Health segment, as discontinued operations.
The financial statements of Acceleration Insurance Company, Ltd. ("AICL") were translated into U. S. dollars using the British pound as the functional currency. The balance sheets of AICL were translated into U. S. dollars using exchange rates, as of the date of the consolidated financial statements. The operating results of AICL were translated into U. S. dollars using the average exchange rates in effect during the respective period. The consolidated results of operations included $137,000 of pre-tax loss from AICL for the year ended December 31, 1995. Included in foreign currency translation adjustments were unrealized exchange gains of $85,000 in 1995.
In early 1998, the Company reached an agreement in principal to purchase 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 subject to the signing of a definitive agreement and the completion of due diligence.
In accordance with General Instruction G(3), the information required by this Item 10 is incorporated by reference herein from the material under the headings "Election of Directors" and "Executive Compensation" contained in the Company's definitive proxy statement filed with the Commission relating to the annual meeting of stockholders to be held on June 16, 1998.
The executive officers, their respective ages and business experience are as follows: Thomas H. Friedberg (58), Chairman of the Board, President and Chief Executive Officer; Douglas J. Coats (64), Executive Vice President; Cynthia A. Moore (36), Senior Vice President, Treasurer and Chief Financial Officer; Nicholas Z. Alexander (62), Senior Vice President, Secretary and General Counsel; William E. Merritt, Jr. (62), Senior Vice President - Claims and Bryce E. Farmer (46), Senior Vice President - Administration.
Ms. Moore joined the Company and on August 28, 1996, she was elected Senior Vice President and Chief Financial Officer. On December 31, 1997 she was elected Treasurer of the Company. Prior thereto she was an Audit Executive with Ernst & Young LLP for more than five years.
In accordance with General Instruction G(3), the information required by this Item 11 is incorporated by reference herein from the material under the headings "Executive Compensation" and "Incentive Stock Option Plans" contained in the Company's definitive proxy statement filed with the Commission relating to the Company's annual meeting of stockholders to be held on June 16, 1998.
In accordance with General Instruction G(3), the information required by this Item 13 is incorporated by reference herein from the material under the heading "Certain Relationships" contained in the Company's definitive proxy statement filed with the Commission relating to the Company's annual meeting of stockholders to be held on June 16, 1998.
ITEM 14 (a) (l) AND (2)--INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES COVERED BY INDEPENDENT AUDITORS' REPORT
The following consolidated financial statements of ACCEL International Corporation and subsidiaries are included in