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RELIANCE GROUP HOLDINGS REPORTS THIRD-QUARTER RESULTS

       RELIANCE GROUP HOLDINGS REPORTS THIRD-QUARTER RESULTS
    NEW YORK, Nov. 14 /PRNewswire/ -- Reliance Group Holdings, Inc. (NYSE: REL) today reported a net loss of $165.9 million, or $2.25 per share of common stock, for the third quarter of 1991 as a result of after-tax charges of $103 million to increase the loss reserves of its property and casualty insurance operations and $63 million to write down its investment in Telemundo Group, Inc.
    In the third quarter of 1990 Reliance earned $4.5 million, or 6 cents per share.  Revenues in the third quarter of 1991 totaled $710.9 million, vs. $862.1 million in the year-ago period, reflecting lower premium volume in certain property and casualty lines and in life insurance operations.
    For the first nine months of 1991, Reliance reported a net loss of $161.1 million, or $2.17 per share.  This compares with net income of $178.9 million, or $2.39 per share, in the first nine months of 1990, which included a gain on the sale of a subsidiary.  The 1991 nine-month revenues totaled $2.41 billion, vs. $2.94 billion in the 1990 period.
    Reliance said the addition to its property and casualty loss reserves in the third quarter was primarily to cover increased loss adjustment expenses in standard commercial lines and losses associated with non-retrospectively rated workers' compensation insurance.
    "Adverse development in these areas reflects inflation in medical costs and higher legal costs to settle claims, as well as an overly broad interpretation by the courts of what constitutes coverage," said Saul P. Steinberg, chairman and chief executive officer of Reliance.
    "In recent year, we have been writing most workers' compensation business on a retrospectively priced basis, which eliminates much of the uncertainty about the company's ultimate claims cost," Steinberg said. "At the same time, we have put in place a comprehensive program to control legal expenses, including the accelerated closing of old cases, usage of fewer outside law firms and increased use of staff counsel," he said.
    "We have a well-capitalized property and casualty business with a sound long-term strategy in place, and I am very optimistic about its future profitability as market conditions improve," Steinberg said.
    Reliance's other businesses posted mixed results in the quarter, with lower operating profits from life insurance more than offsetting an improvement in the operating results of the title and mortgage insurance segment.
    Commenting on the write down of Reliance's investment in Telemundo, a Spanish-language television network, Steinberg said the decision reflects the substantial decline in the market value of Telemundo's common stock.
    "The company is building a strong franchise among Hispanics in the United States, but there is growing concern in the financial markets about Telemundo's ability to fund its own operations in the near term," he said.
    The write down will have no impact on Reliance's balance sheet because the Telemundo investment is carried at market value, Steinberg noted.
                      RELIANCE GROUP HOLDINGS, INC.
                Property and Casualty Insurance Operations
                         (Dollars in thousands)
    Periods ended                  Quarter               Nine Months
     Sept. 30                  1991      1990         1991        1990
    Revenues:
     Premiums earned        $365,491  $419,984   $1,125,765  $1,279,519
     Net investment income    45,179    55,085      152,390     162,788
     Loss on sales of
      investments            (77,788)   (2,371)     (71,759)    (41,945)
     Gain on sale of sub.         --        --           --     380,500
     Total                   332,882   472,698    1,206,396   1,780,862
     Pretax income (loss)   (229,799)   19,833     (193,596)    391,546
     Statutory combined ratio,
      after policyholders'
      dividends (pct.)         127.7     110.2        115.9       108.6
     Premiums written        375,869   421,357    1,249,656   1,403,256
    Premiums written and premiums earned declined in 1991, reflecting the company's strategy, implemented in the latter part of 1990, of purchasing quota share reinsurance on its personal lines of business, which reduced premiums written and premiums earned by $160.2 million and $154.1 million in the first nine months of 1991.  The decline in premium levels for the first nine months of 1991 also reflects the April 1990 sale of the company's General Casualty subsidiary.  Partially offsetting these declines was the growth in certain specialty commercial lines of business and workers' compensation coverage written on a retrospective premium basis.
    Underwriting losses were $195.7 million and $266.8 million in the third quarter and first nine months of 1991, compared to $30.4 million and $100.6 million in the corresponding prior-year periods.  The 1991 underwriting loss includes a $156 million third-quarter provision to strengthen prior-year loss reserves, including increases in loss adjustment expenses in standard commercial lines, and increased losses primarily related to non-retrospectively rated workers' compensation business.  The effect of the reserve strengthening on the 1991 statutory combined ratios was substantially offset by a change in the statutory accounting method to begin discounting certain workers' compensation reserves.
    The underwriting results also continue to be adversely affected by soft pricing and increases severity of losses in standard commercial lines of business and by higher assessments from involuntary insurance facilities.  The company anticipates fourth-quarter losses of approximately $12 million, net of reinsurance resulting from the recent Oakland, Calif., fire.
    Net investment income for the property and casualty insurance operations declined in 1991 reflecting changes in the investment portfolio mix towards lower-yielding equity securities as well as the overall decline in interest rates which has result in lower investment yields.
    Loss on sales of investments in the third quarter and first nine months of 1991 primarily resulted from the write down of the company's investment in Telemundo Group, Inc.
    Pretax income in the first nine months of 1990 included a gain of $380.5 million from the sale of General Casualty, which was partially offset by a loss on the sales of investments resulting from the sale or write-down of certain fixed-income securities.
                      RELIANCE GROUP HOLDINGS, INC.
                         Life Insurance Operations
                          (Dollars in thousands)
    Periods ended                  Quarter                Nine Months
     Sept. 30                   1991       1990        1991        1990
    Revenues:
    Premiums earned          $23,420    $40,540    $170,633    $233,871
    Net investment income    139,812    151,197     434,699     439,251
    Gain (loss) on sales of
     investments              15,412         (1)     26,331     (61,980)
    Total                    178,644    191,736     631,663     611,142
    Pretax income (loss)      22,980     19,722      61,047      (2,765)
    Premiums earned by the life insurance operations declined in 1991 reflecting the adverse publicity concerning the life insurance industry, which has affected the overall market for the company's products. These declines also reflect the company's plan to limit sales of life insurance products, due to a lack of acceptable fixed-income investment opportunities that provide adequate margins.  Submitted premiums, which include sales of single premium deferred annuities, likewise declined to $34.0 million and $244.0 million in the third quarter and first nine months of 1991 from $167.0 million and $569.4 million in the corresponding 1990 periods.
    In 1991, the company significantly reduced its holdings of non- investment grade securities, and is below the National Association of Insurance Commissioners' proposed guidelines pertaining to overall levels of such securities.  The lower level of high-yield non-investment grade securities has resulted in lower investment yields; accordingly, net investment income has declined in 1991.
    Pretax income in the third quarter of 1991 benefited from realized gains on sales of fixed-income securities.  The pretax loss in the first nine months of 1990 resulted from a loss on sales of investments reflecting the sale or write-down of certain fixed-income securities.
                      RELIANCE GROUP HOLDINGS, INC.
                 Title and Mortgage Insurance Operations
                         (Dollars in thousands)
    Periods ended                   Quarter              Nine Months
     Sept. 30                   1991       1990       1991       1990
    Revenues:
    Premiums & fees           $185,831   $164,783   $491,758   $441,003
    Net investment income        6,505      6,541     18,868     17,827
    Loss of sales
     of investments             (6,388)        (3)    (8,293)       (85)
    Total                      185,948    171,321    502,333    458,745
    Pretax income                1,934      5,462      7,370     16,310
    The increase in premiums and fees in the third quarter of 1991 resulted from an increase in title insurance premiums in the West, reflecting the company's expansion in those areas where it foresees profitable opportunities.  Premiums and fees in the first nine months of 1991 increased reflecting the March 30, 1990 acquisition of Transamerica's title insurance operations.
    The decrease in pretax income in the third quarter of 1991 reflects increased losses on sales of investments, which more than offset improved operating results of the company's mortgage insurance unit.
    Other Operations
    In the first nine months of 1990, the company wrote down its investment in real estate properties by $21.3 million pretax, reflecting its decision to sell certain commercial properties in the Southwest. This write-down more than offset a gain of $9.3 million from the sale of land.
    Reliance Group Holdings, Inc. headquartered in New York City, has major property and casualty, life, title and mortgage insurance operations.  The company also provides consulting and technical services.  Reliance had assets of $11.2 billion as of Sept. 30, 1991, and had revenues of $3.68 billion for the year ended Dec. 31, 1990.
             RELIANCE GROUP HOLDINGS, INC. AND SUBSIDIARIES
                  Consolidated Statement of Operations
         (Unaudited -- in thousands, except per share amounts)
    Periods ended                 Quarter               Nine Months
     Sept. 30;                 1991      1990        1991        1990
    Revenues:
     Premiums earned         $574,742  $625,307  $1,788,156  $1,954,393
     Net investment income    191,496   212,823     605,957     619,866
     Loss on sales
      of investments          (86,224)   (1,419)    (70,905)   (101,197)
     Gain of sale
      of subsidiary                --        --          --     380,500
     Other                     30,852    25,428      91,597      84,821
     Total                    710,866   862,139   2,414,805   2,938,383
    Claims & Expenses:
     Policy claims &
      settlement expenses     461,525   340,100   1,122,189   1,046,255
     Policyholders' benefits  133,686   161,457     525,787     583,662
     Policy acquisition
      costs & other
      insurance expenses      306,704   288,557     816,181     816,472
     Interest                  28,784    33,613      89,111     103,696
     Other operating expenses  38,611    32,153     114,107     122,381
     Total                    969,311   855,880   2,667,375   2,672,466
    Income (loss) before
     income taxes &
     minority interests      (258,445)    6,259    (252,570)    265,917
    Income tax
     (provision) benefit       93,600      (900)     92,900     (89,900)
    Minority interests         (1,049)   (1,132)     (3,170)     (3,467)
    Income (loss) before
     extraordinary item      (165,894)    4,227    (162,840)    172,550
    Extraordinary item --
     early extinguishment of debt  --       272       1,715       6,327
    Net income (loss)        (165,894)    4,499    (161,125)    178,877
      Per Share Information:
    Income (loss) before
     extraordinary item         (2.25)     .06        (2.19)       2.31
    Extraordinary item             --       --          .02         .08
    Net income (loss)           (2.25)     .06        (2.17)       2.39
    Average number of common
     & common equivalent
     shares outstanding        73,771    74,808      73,308      74,728
    -0-          11/14/91
    /CONTACT:  Brian T. Martin of Reliance Group Holdings, 212-909-1247/
    (REL) CO:  Reliance Group Holdings, Inc. ST:  New York IN:  INS SU:  ERN SM-CJ -- NY060 -- 4486 11/14/91 13:37 EST
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Date:Nov 14, 1991
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