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CITATION INSURANCE REPORTS HIGHER REVENUES AND EARNINGS FOR THIRD QUARTER; DONALD MCCOMBER JOINS BOARD OF DIRECTORS

 CITATION INSURANCE REPORTS HIGHER REVENUES AND EARNINGS FOR
 THIRD QUARTER; DONALD MCCOMBER JOINS BOARD OF DIRECTORS
 SAN JOSE, Calif., Oct. 27 /PRNewswire/ -- Citation Insurance Group (NASDAQ-NMS: CITN) today announced revenues for the quarter ended Sept. 30, 1992 increased 10 percent to $20.5 million up from $18.6 million in the same quarter a year ago, due to growth in both net premiums earned and investment income. Net income for the quarter increased 20 percent to $1.2 million, or 28 cents per share, compared with $956,000, or 23 cents per share.
 Through the first nine months of 1992, total revenues grew 14 percent to $61.0 million, up from $53.3 million in the same period of 1991 due to a 13 percent increase in net premiums earned and a 27 percent increase in net investment income. However, higher loss and loss adjustment expenses, resulting from the ongoing effects of the weak California economy, dampened income growth. As a result, net income was $2.5 million, or 59 cents per share on 4.2 million shares outstanding, compared with $2.6 million, or 72 cents per share on 3.6 million shares outstanding.
 Don Young, president and chief executive officer, said, "The expansion of our commercial property and casualty business contributed to both revenue and earnings growth during the quarter. Net premiums earned for our property and casualty products jumped 73 percent to $2.8 million from the same quarter a year ago, accounting for almost 90 percent of our total growth in net premiums earned. In addition, we continue to find our niche-focused property and casualty products are considerably more profitable than workers' compensation. During the third quarter we achieved a combined ratio of 91.3 percent on our property and casualty compared to a combined ratio of 111.0 percent in our workers' compensation business."
 Donald McComber Joins Board of Directors
 In other news, the company announced that Donald H. McComber has joined Citation's Board of Directors, increasing the board to seven members. McComber recently retired as executive vice-president of Fireman's Fund after a distinguished 37-year career in the property and casualty insurance industry. McComber also served as the chairman of the Association of California Insurance Companies from 1988 to 1990. Young said, "We are proud to have a man of Mr. McComber's stature as a member of our board. His expertise in property and casualty insurance and his strong industry connections will be invaluable as Citation continues its move to become a regional, multi-line insurer."
 Third Quarter Financial Performance
 For the quarter, workers' compensation net premiums earned were $15.1 million compared with $15.0 million in the third quarter of last year. "As previously reported, we have strategically de-emphasized writing workers' compensation coverage in the Los Angeles area, as it has been the region most adversely affected by the recession. We are focusing on writing various sized accounts in other areas of the state. While year-to-date workers' compensation net premiums earned have increased, we expect slow overall growth in this line until the environment for workers' compensation improves," Young said.
 Property and casualty net premiums earned increased by 73 percent during the quarter to $2.8 million in 1992 versus $1.6 million in 1991, as a result of management's focused marketing efforts. "We are well on our way to being a true multi-line insurer," Young said.
 "Our property and casualty marketing efforts have been quite successful in attracting new independent insurance brokers to our distribution system. In addition, as we expand into other Western states, we believe property and casualty will continue to grow as a percentage of our total business."
 Net investment income increased 27 percent to $2.5 million, up from $2.0 million in the same quarter a year ago, reflecting both a continued increase in our average investment portfolio and realized capital gains. Total revenues for the quarter grew 10 percent to $20.5 million, up from $18.6 million in the third quarter of 1991.
 Loss and loss adjustment expenses increased 12 percent to $14.8 million, up from $13.2 million, reflecting higher premiums and a further increase in Citation's balance sheet reserves.
 The company increased its reserves by $2.4 million during the third quarter to $90.5 million at quarter end. The company has added more than $9.9 million to reserves since the beginning of the year. "Higher reserves reflect both our increased premium volume and our conservative response to current industry conditions," Young explained. "Given ongoing economic uncertainty, a continued absence of meaningful regulatory reform and a lack of adequate workers' compensation rate increases, we will continue to focus on maintaining our strong financial position and only doing business in those areas where we perceive a strong profit potential," Young explained.
 As a percentage of net premiums earned, loss and loss adjustment expenses were 82.8 percent, up from 79.8 percent a year ago, but down from 84.0 percent in the second quarter of this year.
 Underwriting expenses during the quarter increased by 15 percent to $4.1 million, up from $3.5 million a year ago, due to the increase in net premiums earned and the higher percentage of net premiums earned generated by the property and casualty lines, which carry a higher underwriting expense ratio. As a percentage of net premiums, underwriting expenses were 22.8 percent for the third quarter compared with 21.3 percent in the same quarter of 1991.
 Policyholder dividends remain at a low level, reflecting the high workers' compensation loss experience. Policyholder dividends for the quarter were $414,000, or 2.3 percent of net premiums earned, compared with $760,000, or 4.6 percent a year ago.
 The combined ratio for the quarter was 107.9 percent, compared with 105.7 percent a year ago. However, the combined ratio has steadily improved during the year, down from 109.2 percent in the first quarter and 108.0 percent in the second quarter.
 Income before taxes and extraordinary items was $1,172,000, up 31 percent from $897,000 in the third quarter of 1991. Net income was $1,152,000, or 28 cents per share, compared with $956,000, or 23 cents per share, a year ago.
 Financial Position
 Net cash provided by operating activities during the nine months was $14.5 million, up 43 percent from $10.1 million in the same period of 1991. Cash flow was used to increase the company's investment portfolio. At Sept. 30, 1992, invested assets, including cash and cash equivalents, totaled $120.7 million, or $29.88 per share, up 13 percent from $107.2 million, or $25.66 per share, at the beginning of the year. Stockholders' equity was $33.1 million, or $8.19 per share, up from $31.8 million, or $7.62 per share at Dec. 31, 1991.
 Citation also reported that under its previously announced stock repurchase program, year-to-date the company has purchased 168,100 shares of its common stock at an average price of $5.50 per share for a total of $925,500. "We believe at current levels our shares offer an attractive investment opportunity," Young said. "At approximately $6.25 per share, Citation continues to trade significantly below book value. We believe this reflects the industry-wide problems and the market's uncertainty about the direction of regulatory reform. However, we also believe that our conservative targeted niche strategy, our diversification efforts and our solid financial position will allow Citation to continue to expand in a controlled and profitable manner."
 Headquartered in San Jose, Citation Insurance Group specializes in writing workers' compensation and commercial property and casualty insurance in California through its subsidiary, Citation Insurance Co. Citation's 4.2 million common shares are traded on NASDAQ's National Market System, symbol: CITN. The company is rated B(plus, plus) (Very Good) by the A.M. Best insurance rating organization. Citation has approximately 160 employees at offices in San Jose, Sacramento, Fresno, Tustin and San Diego.
 -0- 10/27/92
 /CONTACT: Dennis Pastirik of Citation Insurance, 408-292-0222, or Lise Needham of the Financial Relations Board, 415-986-1591, for Citation Insurance/
 (CITN) CO: Citation Insurance Co. ST: California IN: INS SU: ERN


ML-TM -- SF005 -- 5161 10/27/92 07:56 EST
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Date:Oct 27, 1992
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