The Company's executive office is located at 30 Rockefeller Plaza, New York, New York and the home office of the insurance operations of the Company is located in Farmington, Connecticut. These office facilities consist of approximately 150,000 square feet, in the aggregate, and are leased at a total annual rental of $4,650,000.
The DPIC Companies owns its office building in Monterey, California. The DPIC Companies occupy 39,900 square feet of the building and lease to others the remaining 12,200 square feet. The DPIC Companies purchased the building on January 26, 1990 for aproximately $11,950,000. In November 1990 the DPIC Companies mortgaged the leasehold interest in its office building to other subsidiaries of the Company and to Guaranty National Insurance Company for an aggregate of $9,000,000.
The other insurance operations of the Company are conducted from leased premises in or adjacent to major urban centers throughout the United States and in Canada. These operations, in the aggregate, occupy approximately 303,000 square feet, excluding the home office building in Connecticut, at an annual rental of approximately $4,483,000.
Orion Capital Corporation ("Orion") and its wholly-owned subsidiaries (collectively the "Company") operate principally in the property and casualty insurance business which is reported as three segments - Regional Operations, Reinsurance/Special Programs and Guaranty National Companies. Regional Operations markets workers compensation insurance through EBI Companies and Nation's Care, Inc. Reinsurance/Special Programs includes (i) DPIC Companies ("DPIC"), which markets the Company's professional liability insurance, (ii) Connecticut Specialty Insurance Group ("Connecticut Specialty"), which underwrites and sells specialty insurance programs, (iii) SecurityRe Companies ("SecurityRe"), which writes reinsurance and (iv) a 20.0% interest in Intercargo Corporation ("Intercargo") which underwrites insurance coverages for international trade. The third segment, Guaranty National Companies, specializes in writing 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.
Net premiums written increased 12.0% ($68,156,000) in 1993 to $635,586,000. Net premiums written in 1992 were $567,430,000, which was a decrease of 22.7% ($166,635,000) from the 1991 net premiums written of $734,065,000. The decrease in 1992 results from the exclusion of net premiums written by the Guaranty National Companies, which amounted to $181,226,000 from January 1 to November 20, 1991. The results by segment are as follows:
- Reinsurance/Special Programs' net premiums written increased 24.4% ($72,624,000) to $370,504,000 in 1993 from $297,880,000 in 1992 and 6.4% ($17,799,000) in 1992 from $280,081,000 in 1991. Premium volume for Connecticut Specialty increased 21.8% ($34,360,000) to $192,246,000 in 1993 from $157,886,000 in 1992 and increased 44.7% ($48,740,000) in 1992 from $109,146,000 in 1991. The largest increases were in the automobile personal injury protection ($17,372,000) and physical damage ($14,010,000) programs, which programs have been growing steadily throughout 1992 and 1993. Gross premiums written by DPIC for professional liability insurance, the largest special program, were $167,273,000, $161,432,000 and $184,314,000 in 1993, 1992 and 1991, respectively. The increase for 1993 is reflective of both new business and a continuation of a high level of policy renewals. Contributing to the decrease in professional liability insurance premiums written in 1992 as compared to 1991 were the impact of generally weak economic conditions in the construction industry, increased premium credits given for favorable loss experience or an insureds participation in loss prevention programs, and non-recurring premiums in 1991 representing a reimbursement of losses incurred on behalf of an insured. The percentage of treaty and facultative reinsurance assumed to total net premiums written for Reinsurance/Special Programs amounted to 14.7%, 11.7% and 10.2% in 1993, 1992 and 1991, respectively.
Premiums earned increased 10.2% ($57,199,000) in 1993 to $617,404,000. Premiums earned in 1992 were $560,205,000, which was a decrease of 20.1% ($141,181,000) versus the 1991 premiums earned of $701,386,000. Premiums earned for 1993 and 1992 reflect the recognition in income of the changing levels of net premium writings. The decrease in 1992 results from the exclusion of net premiums earned by the Guaranty National Companies, which amounted to $181,289,000 from January 1 to November 20, 1991.
investment portfolio were 7.4% for both 1993 and 1992, and 8.5% for 1991, reflecting the increase in earnings from limited partnership investments in 1993, offset by a change in the Company's mix of investments toward higher amounts of tax-advantaged securities which generally yield less than fully taxable securities, issuers calling their securities in order to refinance at lower rates and generally lower yields on new investments due to current market conditions. The decrease in net investment income for 1992 as compared to 1991 was the result of the deconsolidation of Guaranty National and lower pre-tax investment yields, offset by the investment of the proceeds of the Guaranty Sale. The impact of the lower interest rates for 1992 and 1993 on net income is offset in part by reductions in interest expense on the Company's variable rate bank loans. The carrying value of the Company's investment portfolio increased $165,921,000 in 1993 (including the change attributable to a new in accounting principle discussed in the following paragraph) to $1,322,536,000 at December 31, 1993 from $1,156,615,000 at December 31, 1992.
The Company's investment philosophy is to achieve a superior rate of return after taxes and maintain a high degree of safety and liquidity. Effective December 31, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which establishes the "available-for-sale" category of investment securities and requires such securities to be recorded at market value, with unrealized gains and losses reported in a separate component of stockholders' equity. As a result of the adoption of this standard, the Company increased its investments recorded at market value on December 31, 1993 by $452,102,000, and its unrealized appreciation on investments, a component of stockholders' equity, by $20,720,000, net of deferred income taxes. Fixed maturity investments which the Company has both the positive intent and the ability to hold to maturity are recorded at amortized cost. Investments which may be sold in response to, among other things, changes in interest rates, prepayment risk, income tax strategies or liquidity needs are included in the available-for-sale category at market value. The carrying value of fixed maturity and short-term investments amounted to $1,029,211,000 and $934,496,000 at December 31, 1993 and 1992, respectively, or approximately 77.8% and 80.8% of the investment portfolio.
The performance of the Company's investments, including net investment income, net realized gains (losses) and unrealized appreciation (depreciation), and excluding the $33,931,000 gain on the sale of Guaranty National stock in 1991, is as follows for the three most recent years:
Year Ended December 31, -------------------------------- 1993 1992 1991 ---- ---- ----
Provisions for losses and loss adjustment expenses include development of loss and loss adjustment expense reserves relating to prior accident years, which increased the calendar year combined ratio by 3.9 percentage points in 1993, 4.7 percentage points in 1992 and 9.1 percentage points in 1991 including the impact of the cumulative loss provision. The loss ratios were adversely affected by such factors as higher than anticipated reported losses for automobile liability business and reserve strengthening for certain other lines of business. Other sources of loss development included pool and association business (including assigned risk pools) where loss reserves are established by the Company based on information provided by the pools and associations and loss patterns which were significantly different than in the past.
Management believes that the Company's reserves for loss and loss adjustment expenses make reasonable and sufficient provision for the ultimate net cost of all losses on claims incurred. However, there can be no assurance that changes in loss trends will not result in additional development of prior years' reserves in the future. Variability in claim emergence and settlement patterns and other trends in loss experience can result in future development patterns different than expected. The Company believes that any such development will continue to be substantially lower than that experienced in years prior to 1992, considering the actions taken to increase reserving levels, to improve underwriting standards and to emphasize loss control and prevention. The Company's loss ratios in recent years, including development of prior years' losses, have compared favorably with loss ratios experienced by the industry.
settlement of each claim and continually evaluates them. In 1993 and 1992, the Company paid $5,557,000 and $4,221,000, respectively, for the costs of defending and settling claims. Payments in 1993 and 1992 related to 216 and 117 claims, respectively, for the Company's direct business. Claim counts have been aggregated by the Company by year of coverage for each alleged occurrence for which policyholders are being defended, and often include numerous claimants.
Interest expense was $13,044,000 in 1993, $12,754,000 in 1992 and $16,131,000 in 1991. The 2.3% increase from 1992 to 1993 reflects an increase in the average amount of debt outstanding in 1993 as compared to 1992, including debt incurred to redeem the Company's Adjustable Rate Preferred Stock, offset for the most part by lower average interest rates. The 20.9% decrease from 1991 to 1992 is the result of declining average interest rates and a reduction in the amount of debt outstanding. Interest expense for both 1993 and 1992 was impacted by the issuance of $110,000,000 of 9 1/8% Senior Notes on September 8, 1992, and the reduction of average bank debt outstanding and repayment of debentures (See "Liquidity and Capital Resources").
Operating earnings before income taxes were $72,505,000, $46,714,000 and $46,069,000 for 1993, 1992 and 1991, respectively. The 55.2% increase in pre- tax earnings from 1992 to 1993 reflects an improvement in insurance operations profitability of $19,980,000 and an increase in realized investment gains of $5,811,000. Pre-tax earnings for 1991 were increased by the gain of $33,931,000 realized on the Guaranty Sale and decreased by the $25,000,000 cumulative loss provision. Excluding these items, the 25.8% increase in pre- tax earnings for 1992 over 1991 is the result of an increase in insurance operations profitability of $4,900,000 and an increase in realized investment gains of $4,676,000.
Guaranty National from November 1, 1988 through November 20, 1991. Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Upon adoption of SFAS No. 109, the Company recorded a benefit of $16,881,000 which was principally attributable to its deferred tax benefits that had not been recognized due to limitations under prior accounting standards. The Company's effective tax rate for 1993 reflects the absence of such deferred tax benefits, as well as a continuation of the Company's shift in its investment portfolio toward more tax-advantaged securities. The tax rate for 1993 reflects a tax benefit of $450,000 from the effect of the increase in the federal tax rate on the Company's deferred tax asset. The consolidated federal income tax provisions for 1991 through 1993 were computed by the regular tax method, reduced by alternative minimum and other tax credits in 1991 and the recognition of deferred tax benefits in 1991 and 1992 to the extent that the Company was able to utilize its NOL for financial reporting purposes under SFAS No. 96, "Accounting for Income Taxes."
Effective January 1, 1993 the Company recorded the cumulative effect of adopting SFAS No. 109 (discussed above) and SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions." SFAS No. 106 requires the accrual of the estimated cost of retiree benefit payments during the years the employees provide services. Upon adoption of SFAS No. 106 the cumulative effect of the Company's accumulated obligation for providing medical benefits to retirees was $5,056,000, after a related tax benefit of $2,604,000. Included in the cumulative effects of adopting these accounting principles is the Company's portion of Guaranty National's benefit from changes in accounting principles in 1993 of $360,000, net of $185,000 of federal income taxes provided by the Company.
Common stock and per common share data have been restated to give effect to the 5-for-4 stock splits paid on both November 15, 1993 and December 7, 1992. Primary earnings per share amounted to $4.69 ($3.88 before the effect of adopting new accounting principles) in 1993, $3.35 ($3.62 before extraordinary item) in 1992 and $3.75 in 1991. Reflected in the calculation of 1993, 1992 and 1991 earnings per common share are dividends of $409,000, $6,358,000 and $7,276,000, respectively, on the Company's Adjustable Rate Preferred Stock, (redeemed in 1993), $1.90 Preferred Stock (converted into common stock or redeemed in 1992) and $2.125 Preferred Stock (converted into common stock or redeemed in 1993). All of these conversions and redemptions were effected pursuant to the terms of the preferred stock. The $1.90 Preferred Stock and the $2.125 Preferred Stock were assumed to be converted, if dilutive, for the purpose of computing fully-diluted earnings per common share. Fully-diluted earnings per share amounted to $4.67 ($3.86 before the effect of adopting new accounting principles in 1993, $2.85 ($3.05 before extraordinary item) in 1992 and $3.05 in 1991. Reflected in the calculation of fully-diluted earnings per share in 1993, 1992 and 1991 are Adjustable Rate Preferred Stock dividends of $407,000, $1,581,000 and $1,679,000, respectively.
Cash provided by operating activities increased $42,621,000 to $123,154,000 in 1993 from $80,533,000 in 1992 and decreased $59,371,000 in 1992 from $139,904,000 in 1991. The increase in operating cash flow for 1993 is primarily due to an increase in premiums collected, particularly for
Connecticut Specialty, and a receipt of $17,096,000 under a retrospectively rated program written by DPIC, offset in part by an increase in paid losses. Also, cash provided by operations in 1992 was decreased by an $18,410,000 payment for reinsurance applicable to a 1991 contract. The decrease in 1992 is attributable to the exclusion of Guaranty National's cash flow which amounted to $17,048,000 from January 1 through November 20, 1991, as well as a decrease in premiums collected and increases in payments for reinsurance and federal income taxes, offset by a decrease in paid losses and loss adjustment expenses, policy acquisition costs and interest expense.
Cash used in financing activities decreased $16,250,000 to $5,046,000 in 1993 from $21,296,000 in 1992 and decreased $11,255,000 in 1992 from $32,551,000 in 1991. Cash provided in 1993 from an increase in bank borrowings was more than offset by the redemption of the Company's Adjustable Rate Preferred Stock, purchase of common stock and the payment of dividends. Dividends paid to stockholders were lower in 1993 due to the conversions and redemptions of the $1.90 Preferred Stock and $2.125 Preferred Stock into common stock and the redemption of the Adjustable Rate Preferred Stock. Proceeds from financing activities in 1992 include $107,834,000 from the issuance of 9 1/8% Senior Notes on September 8, 1992, $19,930,000 from the issuance of bank debt in December 1992 and proceeds of $9,497,000 from the issuance of common stock in April 1992. These sources of cash were offset by debt repayments in 1992, including repayment of the Company's bank loan and the retirement of the Company's 13 1/2% Senior Subordinated Debentures and its 12 1/2% Subordinated Debentures.
surplus of 1.4:1 and 1.5:1 at December 31, 1993 and 1992, respectively. Approximately $21,800,000 of the increase in surplus during 1993 relates to the elimination of a statutory valuation allowance related to the Guaranty National investment.
During 1992 and 1993, Orion reconfigured its debt structure to take advantage of generally lower interest rates and the stronger capital position of the Company, and to reduce the amount of debt maturing in the next five years. On September 8, 1992, the Company issued 9 1/8% Senior Notes due 2002 with a face value of $110,000,000 in a public offering. The net proceeds from the offering of $107,834,000 were used to repay the Company's bank debt of $80,100,000, and to retire the Company's 13 1/2% Senior Subordinated Debentures on October 9, 1992 for $20,160,000 plus accrued interest. On November 30, the Company entered into a bridge loan facility (the "Bridge Loan") with two banks aggregating $25,000,000. In December 1992, the Company borrowed $20,000,000 under the Bridge Loan to redeem the Company's 12 1/2% Subordinated Debentures on December 31, 1992 for $20,500,000 plus accrued interest.
The terms of the Loan Agreement and Orion's Indenture for its 9 1/8% Senior Notes limit the amount of additional borrowings, prepayments on existing indebtedness, liens and guarantees by the Company. Management does not believe that any of these limitations unduly restrict the Company's operations or limits Orion's ability to pay dividends on its stock. At December 31, 1993 the Company was in compliance with the terms of its debt agreements. Management believes that the Company continues to have substantial sources of capital and liquidity from the capital markets and bank borrowings.
On October 1, 1992 and December 21, 1992, Orion called for the redemption of all of its $1.90 Preferred Stock and $2.125 Preferred Stock on November 2, 1992 and January 21, 1993, respectively. In both cases, 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 $21.30 per share and $25.76 per share, respectively. Consequently, most holders converted into common stock prior to the redemption dates, resulting in the issuance of 2,558,173 shares of common stock prior to December 31, 1992 and 1,423,544 shares of common stock in January 1993. Holders of 2,730 shares of $1.90 Preferred Stock and 21,605 shares of $2.125 Preferred Stock, who did not elect to convert, redeemed their shares for an aggregate of $58,000 and $557,000, respectively.
The Company repurchased 177,658 shares, 22,420 shares and 52,700 shares of its common stock at an aggregate cost of $5,472,000, $554,000 and $655,000 in 1993, 1992 and 1991, respectively. The Company's remaining stock purchase authorization from its Board of Directors amounted to $5,819,000 at December 31, 1993.
As discussed in Note A to the consolidated financial statements, in 1993 the Company adopted four new accounting standards required by generally accepted accounting principles. On January 1, 1993 the Company changed its method of accounting for income taxes and postretirement benefits to conform with Statement of Financial Accounting Standards Nos. 109 and 106, respectively. The Company changed its method of accounting for reinsurance to conform with Statement of Financial Accounting Standards No. 113. Also, effective December 31, 1993 the Company changed its method of accounting for investments to conform with Statement of Financial Accounting Standards No. 115.
Included in other liabilities are funds held under various reinsurance treaties of $5,487,000 and $39,072,000 at December 31, 1993 and 1992, respectively. Reinsurance recoverables and prepaid reinsurance includes prepaid reinsurance of $55,043,000 at December 31, 1993 and $46,183,000 at December 31, 1992.
Orion entered into a bank loan agreement (the "Loan Agreement") in March 1993 that provided for initial borrowings of up to $60,000,000, consisting of a $50,000,000 term loan (reduced by $4,500,000 in scheduled commitment reductions through December 31, 1993) and a $10,000,000 line of credit. The proceeds were used to repay the Bridge Loan and to redeem the Company's Adjustable Rate Preferred Stock. As of December 31, 1993, the Company had $50,500,000 outstanding under the Loan Agreement, and $5,000,000 in unused commitments available under the line of credit. There is a commitment fee of 1/4% of 1% per annum on the unused portion of the revolving credit facility. The Company can elect to borrow at the prime rate, or at certain other short- term borrowing rates. The rates for notes payable under the Loan Agreement were between 4.59% and 4.90% at December 31, 1993. The terms of the Loan Agreement limit the amount of additional borrowings, prepayments on existing indebtedness, liens and guarantees by the Company, and require the Company to meet minimum net worth and certain financial ratio tests. The 9 1/8% Senior Notes Indenture limits the Company's ability to incur secured indebtedness without equally and ratably securing the 9 1/8% Senior Notes.
effect of the increase in the federal tax rate on the Company's deferred tax asset. The consolidated federal income tax deferred benefits for 1992 and 1991 result from the recognition of previously unrecorded deferred tax benefits to the extent that they could be carried back to generate the recovery of income taxes under SFAS No 96. Substantially all federal income taxes incurred by the Company and its subsidiaries relate to domestic operations.
(000s omitted) 1994 ....................................... $10,721 1995 ....................................... 9,009 1996 ....................................... 7,446 1997 ....................................... 5,898 1998 ....................................... 4,959 1999 and thereafter ........................ 45,439 ------- Minimum rental commitments ............... $83,472 =======
In November 1988, California voters passed an initiative known as Proposition 103 (the "California Proposition") which amended the California Insurance Code to provide, among other things, that rates for automobile and many other insurance policies issued or renewed on or after November 8, 1988, be rolled back to the levels of November 8, 1987 and then reduced by 20%. Workers compensation insurance and reinsurance are excluded from the California Proposition's rate rollback provisions.
Although it is not possible to predict with any degree of certainty the ultimate outcome of such regulations or their impact on the Company's rates charged since November 8, 1988, management currently believes that the effect of the regulations will not be material to the Company. Based on the foregoing, and management's belief that the rates filed by the Company comply with applicable California law, no provision has been made in the accompanying consolidated financial statements for denial or partial denial of the Company's rollback exemption applications or partial or total disapproval of the Company's rates filed since November 8, 1989.
Orion and its subsidiaries are routinely engaged in litigation incidental to their businesses; however, in the judgment of the Company's management, there are no significant legal proceedings pending against Orion or its subsidiaries, which, net of reserves established therefor and giving effect to reinsurance, are likely to result in judgments for amounts that are material to the financial condition of Orion and its consolidated subsidiaries, taken as a whole.
Orion declared a 5-for-4 split of its common stock which was paid on November 15, 1993 to shareholders of record on October 15, 1993. 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 had also paid a 5- for-4 common stock split on December 7, 1992 to shareholders of record on November 20, 1992.
During 1993, the Company repurchased 177,658 shares of its common stock at an aggregate cost of $5,472,000. The Company repurchased 22,420 shares for $554,000 in 1992 and 52,700 shares for $655,000 in 1991.
On April 15, 1992, Orion sold 515,625 shares of its common stock for $9,497,000, net of expenses. The sale was made in a private transaction, subject to the provisions of Regulation S of the Securities Act of 1933, as amended.
Orion issued 2,601,050 and 42,428 shares of common stock for conversions elected by holders of 1,581,470 and 25,800 shares of the Company's $1.90 Convertible Exchangeable Preferred Stock (the "$1.90 Preferred Stock"), in 1992 and 1991, respectively. The 1992 conversions were primarily the result of Orion calling this issue on November 2, 1992 at the redemption price of $21.30 per share including accrued dividends. The remaining 2,730 shares of $1.90 Preferred Stock were redeemed for approximately $58,000.
Orion has a Stockholder Rights Plan (the "Rights Plan") under which each outstanding share of common stock includes 64% of one preferred stock purchase right (the "Rights"). The Rights Plan is designed to assure stockholders that they will receive equitable treatment in the event of a proposed takeover. Under the Rights Plan, each holder of a Right is entitled to buy one-hundredth of a share of Series A Participating Junior Preferred Stock. The Rights become exercisable if an acquiror gains a 20% or greater beneficial ownership interest in Orion's common stock, on other than fair and favorable terms to all stockholders. Each Right not owned by such acquiror will enable the holder to purchase, at an initial exercise price of $80, common stock having a value of twice the Right's exercise price. In addition, under certain circumstances if Orion is involved in a merger each Right will entitle its holder to purchase, at the Right's then current exercise price, common shares of such other company having a value of twice the Right's exercise price.
The Company maintains a Stock Savings and Retirement Plan (the "Plan"), qualified under Internal Revenue Code Section 401(k), for eligible employees of the Company. Employee and employer matched contributions to the savings funds are limited to the extent allowable under the Plan and federal income tax law. The Plan also provides for a defined contribution retirement benefit that allows the Company to make annual contributions to the Plan based on a percentage of the participating employees' compensation. Employees vest in the Company's contributions over a six-year period with vesting credit given for prior service with the Company. The Company has adopted a Surplus Benefit Plan which provides deferred benefits for those employees who received less than the full employer contribution to the Company's 401(k) plan as a result of federal tax limitations on participation in the Plan.
The Company maintains a number of incentive plans for key employees. These plans include the Company's 1979 stock option plan and the Company's 1982 Long-Term Performance Incentive Plan. Under the latter plan, shares of restricted stock as well as stock options may be granted by Orion. Orion granted 5,688, 66,016 and 4,063 shares of restricted stock to key employees during 1993, 1992 and 1991, respectively. Restricted stock is considered issued and outstanding when awarded, and is recorded as deferred compensation. There are restrictions as to its transferability, which restrictions lapse proportionately from the second to the fifth anniversaries of grant date. As of December 31, 1993, the restrictions have not lapsed on 130,089 shares of restricted stock. All stock options granted by Orion, at fair market value at date of grant, are intended to qualify as incentive stock options becoming exercisable from the first through fourth anniversaries of the date of grant, expiring ten years after the date of grant. As of December 31, 1993, the number of shares of stock reserved under all plans is 641,113 of which 284,337 are for outstanding stock options and 197,696 of these stock options are exercisable. A summary of the option transactions is as follows:
Orion also maintains a non-qualified defined benefit retirement plan for members of the Board of Directors who are not employees. Benefits are based on years of service and director fee levels at retirement.
The total expense for 1993, 1992 and 1991 for the above pension benefit plans for employees and directors amounted to $3,277,000, $2,694,000 and $1,695,000, respectively.
(000s omitted) Retirees ................................. $2,260 Fully eligible active plan participants .. 1,425 Other active plan participants ........... 4,104 ------ $7,789 ======
The expected health care cost trend rate used as of December 31, 1993 was 16.0% for 1994, and 10% in 1995 decreasing linearly each year until it reaches 6% for 2003 and future years. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 1993 by $1,325,000 and increase net postretirement health care costs by $145,000 for 1993. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.0% at December 31, 1993.
The Company's insurance operations are organized and reported as three business segments: Regional Operations, Reinsurance/Special Programs and Guaranty National Companies. Regional Operations markets workers compensation insurance through EBI Companies and Nation's Care, Inc. Reinsurance/Special Programs includes DPIC Companies (which markets the Company's professional liability insurance), Connecticut Specialty Insurance Group (which directs the underwriting and sale of specialty insurance programs), SecurityRe Companies (which underwrites reinsurance), and a 20% interest in Intercargo (which underwrites international trade). The third segment, Guaranty National Companies, specializes in writing nonstandard commercial and personal automobile insurance. The operations of the Guaranty National Companies are included in revenues and expenses through November 20, 1991, the date that the Company sold 6,250,000 shares of Guaranty National's common stock in a public offering, reducing the Company's ownership of Guaranty National to approximately 49%. Earnings subsequent to November 20, 1991 include the Company's share of Guaranty National's earnings using the equity method of accounting. 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. Identifiable assets of the Regional Operations and Reinsurance/Special Programs segments are primarily allocated based on the cash flows of these segments, and for 1992 and 1991 have been restated to conform with SFAS No. 113.