SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (date of earliest event reported)
May 7, 1997
HIGHLANDS INSURANCE GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-14028 75-2370945
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(Commission File Number) (IRS Employee Identification No.)
10370 Richmond Avenue, Houston, Texas 77042-4123
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(Address of principal executive offices) (Zip Code)
(713)952-9555
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Registrant's telephone number, including area code
ITEM 5. Other Events
The registrant, may at its option, report under this
item any events, with respect to which information is not
otherwise called for by this form, that the registrant
deems of importance to security holders.
(a) On May 7, 1997, the registrant, Highlands
Insurance Group, Inc. ("Highlands") issued a press release
entitled "Highlands Insurance Group, Inc. Announces First Quarter
1997 Results."
ITEM 7.
The following exhibit is filed with this report on Form 8-K:
Exhibit 1 - Press release dated May 7, 1997
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
HIGHLANDS INSURANCE GROUP, INC.
May 8, 1997 By:
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Dwayne D. Hallman
Vice President and Secretary
EXHIBIT INDEX
EXHIBIT NO.1 Press Release of May 7, 1997
Incorporated by Reference
EXHIBIT NO. 1:
FOR IMMEDIATE RELEASE Contact: Charles J. Bachand
May 7, 1997 Vice President
(713) 267-8567
(713) 267-8688 (Facsimile)
HIGHLANDS INSURANCE GROUP, INC.
ANNOUNCES FIRST QUARTER 1997 RESULTS
Houston, Texas - May 7, 1997 Highlands Insurance
Group, Inc. (NYSE:HIC) today announced its first quarter 1997
results. Highlands reported net income of $3.0 million or $.21
per share for the first quarter 1997 compared with net income of
$.2 million or $.02 per share for the first quarter 1996.
Gross premiums written declined 40.4% for the first quarter
of 1997 compared to the first quarter of 1996. The decline
results from exiting both the assumed reinsurance and probate
bond business, tightening underwriting standards and raising
rates. Both net premiums written and earned for the first
quarter of 1997 declined 36.6% from the first quarter of 1996 due
to the above actions. Loss and loss adjustment expenses incurred
and underwriting expenses also declined 33.8% and 38.1%,
respectively, for the first quarter of 1997 compared to the first
quarter of 1996.
"Pricing and adherence to our underwriting standards
continues to be a primary focus causing premium volume to
decline. However, a 93.7% loss ratio is unacceptable," said
Richard M. Haverland, Chairman and Chief Executive Officer of
Highlands. "The benefit of previous expense initiatives is being
realized, but additional cost reduction efforts continue as
premium volume declines."
Richard Haverland also noted that, "Completion of Highlands'
acquisition of VIK Brothers Insurance, Inc. on April 30, 1997
more than doubles Highlands' premium base and is a first step in
fulfilling Highlands' goal of being a platform for the
acquisition of property and casualty companies."
The $91 million acquisition was financed with a combination
of common stock, bank debt, preferred stock and cash. Highlands
issued 1.7 million shares of its common stock in connection with
the acquisition, representing 12.6% of Highlands' then
outstanding common stock. Additionally, Highlands contributed
$39 million of capital to the acquired insurance subsidiaries.
Highlands Insurance Group, Inc. is an insurance holding
company that is primarily engaged in the commercial property and
casualty insurance business, specializing in workers'
compensation, general liability and other related coverages.
"Safe Harbor" Statement under Private Securities Litigation
Reform Act of 1995
Certain sections of this press release contain statements
which represent the company's expectations or beliefs concerning
future events and are "forward looking statements" within the
meaning of Section 21E of the Exchange Act. The company cautions
that there are a variety of factors which may cause actual
results to differ materially from those in the forward looking
statements, including without limitation, changes in the
regulatory environment, the outcome of various litigation
matters, market acceptance of new products, and the effect of
general economic conditions.
Comparative figures follow
<TABLE>
HIGHLANDS INSURANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Period Ended March 31
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(Unaudited)
First Quarter
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1997 1996 Change
----- ----- ------
<S> <C> <C> <C>
Gross premiums written (a) $ 30,959 51,906 (40.4%)
Net premiums written (a) $ 27,948 44,111 (36.6%)
======= ======= =======
REVENUES:
Net premiums earned $ 29,715 46,836 (36.6%)
Net investment income 12,857 12,670 1.5%
Net realized investment gains 484 457 5.9%
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Total revenues 43,056 59,963 (28.2%)
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EXPENSES:
Loss and loss adjustment
expenses incurred 27,831 42,020 (33.8%)
Underwriting expenses 9,524 15,398 (38.1%)
Interest expense and debt
amortization 1,798 1,430 25.7%
Other expenses 354 851 (58.4%)
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Total expenses 39,507 59,699 (33.8%) ------
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INCOME BEFORE INCOME TAX 3,549 264 NM
INCOME TAX EXPENSE 592 50 NM
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NET INCOME $ 2,957 214 NM
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Earnings per share - primary (b):$ .21 .02
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Weighted average number of common
shares, common stock warrants and
stock options outstanding 14,620 11,448
====== ======
GAAP ratios:
Loss 93.7% 89.7%
Expense 32.1% 32.8%
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Combined 125.8% 122.5%
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(a) Gross and net premiums written have been redefined for 1996
to include the effects of changes in premiums due under
retrospective policies. Such changes were previously
recorded only as net premiums earned.
(b) Common stock warrants and stock options (common stock
equivalents) are antidilutive for primary earnings per share
for the first quarter 1996. Fully diluted earnings per share
is not presented as the effects of the convertible
subordinated debentures are antidulitive for all periods
presented.
</TABLE>
<TABLE>
HIGHLANDS INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
March 31, December 31,
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1997 1996
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(Unaudited)
<S> <C> <C>
Assets:
- -------
Investments:
Fixed income securities:
Available for sale, at fair value $ 314,175 324,905
Held to maturity, at amortized cost 349,663 355,492
Equity securities, at fair value 24,853 26,967
Other 3,423 3,770
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Total investments 692,114 711,134
Cash and cash equivalents 59,051 49,484
Premiums in course of collection 18,917 24,048
Premiums due under retrospective policies
119,097 121,276
Receivable from reinsurers 571,834 556,900
Funds on deposit with reinsurers 16,562 14,456
Deferred taxes 38,751 37,126
Receivable from former affiliates 250 250
Accrued investment income 10,787 12,600
Deferred policy acquisition costs 5,842 6,436
Other assets 29,701 32,321
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Total assets $1,562,906 1,566,031
========= =========
Liabilities:
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Loss and loss adjustment expense $1,162,360 1,156,824
Unearned premiums 29,257 31,474
Convertible subordinated debentures 55,646 55,452
Other liabilities 52,703 58,806
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Total liabilities 1,299,966 1,302,556
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Stockholders' equity:
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Common stock 114 114
Additional paid-in capital 192,339 192,273
Net unrealized gain (loss) on investments (522) 3,036
Retained earnings 71,009 68,052
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Total stockholders' equity 262,940 263,475
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Total liabilities and
stockholders' equity $1,562,906 1,566,031
========== ==========
Common shares outstanding 11,451 11,448
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Book value per common share $ 22.96 23.02
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Fully diluted book value per common share $ 18.69 18.71
======== ========
</TABLE>
