UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
Commission File No. 1-11941
FARM FAMILY HOLDINGS, INC.
A Delaware Corporation IRS No. 14-1789227
344 Route 9W, Glenmont, New York 12077-2910
Registrant's telephone number: (518) 431-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of the issuer's common stock as of May 13, 1998
is 5,253,813.
<PAGE>
FARM FAMILY HOLDINGS, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements of Farm Family Holdings, Inc.
(unaudited)
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
Consolidated Statements of Income and Comprehensive Income
Three months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flow Three months ended
March 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
( $ in thousands)
<CAPTION>
(Unaudited)
March 31, 1998* December 31, 1997*
- -----------------------------------------------------------------------------------------------------------------------
Assets
Investments:
Fixed Maturities
Available for sale, at fair value
<S> <C> <C>
(Amortized cost: $250,002 in 1998 and $248,984 in 1997 ) $259,956 $259,199
Held to maturity, at amortized cost
(Fair value: $8,949 in 1998 and $9,194 in 1997) 8,602 8,855
Equity securities
Available for sale, at fair value
(Cost: $3,363 in 1998 and 1997) 4,730 4,521
Mortgage loans 745 1,660
Other invested assets 544 553
Short-term investments 11,609 5,643
- -----------------------------------------------------------------------------------------------------------------------
Total investments 286,186 280,431
- -----------------------------------------------------------------------------------------------------------------------
Cash 5,327 5,841
Insurance receivables:
Reinsurance receivables 15,630 12,343
Premiums receivable, net 31,912 28,141
Deferred acquisition costs 13,401 12,613
Accrued investment income 4,820 5,408
Deferred income tax asset, net 4,463 4,422
Prepaid reinsurance premiums 643 2,044
Receivable from affiliates, net 18,191 17,786
Other assets 3,194 2,202
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $383,767 $371,231
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES aND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $163,498 $156,622
Unearned premium reserve 69,119 66,069
Reinsurance premiums payable 1,640 2,564
Accrued expenses and other liabilities 22,024 21,474
Debt 1,264 1,268
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 257,545 247,997
- -----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock $.01 par value 1,000,000 shares authorized
and no shares issued and outstanding - -
Common stock $.01 par value 10,000,000 shares authorized
and 5,253,813 shares issued and outstanding 53 53
Additional Paid in Capital 92,906 92,906
Retained earnings 25,904 `22,883
Accumulated other comprehensive income 7,359 7,392
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 126,222 123,234
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $383,767 $371,231
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.
*Amounts have been restated for certain items as more fully described in Note
2-Prior Period Adjustments.
</TABLE>
<PAGE>
<TABLE>
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
($ in thousands, except per share data)
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1998* 1997*
- ------------------------------------------------------------------------------------------------------------------------
Revenues:
<S> <C> <C>
Premiums $42,815 $34,973
Net investment income 4,767 4,416
Realized investment gains (losses), net 126 (90)
Other income 219 220
- ------------------------------------------------------------------------------------------------------------------------
Total revenues 47,927 39,519
- ------------------------------------------------------------------------------------------------------------------------
Losses and Expenses:
Losses and loss adjustment expenses 32,139 24,697
Underwriting expenses 11,474 10,490
Interest expense 25 26
Dividends to policyholders 50 38
- ------------------------------------------------------------------------------------------------------------------------
Total losses and expenses 43,688 35,251
- ------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense 4,239 4,268
Federal income tax expense 1,217 1,474
- ------------------------------------------------------------------------------------------------------------------------
Net income 3,022 2,794
- ------------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
Unrealized holding gain (loss) arising during the period
(net of deferred tax of ($53) and $1,632, respectively) 100 (3,031)
Reclassification adjustment for gains (losses) included in net income
(net of tax expense (benefit) of $72 and ($19), respectively) (133) 36
- ------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (33) (2,995)
- ------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $2,989 $(201)
- ------------------------------------------------------------------------------------------------------------------------
Per Common Share:
Basic earnings per common share $0.58 $ 0.53
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $0.57 $ 0.53
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 5,253,813 5,253,813
- ------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 5,301,498 5,253,813
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.
*Amounts have been restated for certain items as more fully described in Note
2-Prior Period Adjustments.
</TABLE>
<PAGE>
<TABLE>
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
For the Three Months
Ended March 31,
- -------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $3,022 $2,794
- -------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income
to net cash provided by operating activities:
<S> <C> <C>
Realized investment (gains) losses (126) 90
Amortization of bond discount 76 48
Deferred income taxes (24) (298)
Changes in:
Reinsurance receivables (3,287) 342
Premiums receivable (3,771) (2,891)
Deferred acquisition costs (788) (39)
Accrued investment income 588 388
Prepaid reinsurance premiums 1,401 (447)
Receivable from affiliates (405) 54
Other assets (991) 57
Reserves for losses and loss adjustment expenses 6,876 1,985
Unearned premium reserve 3,050 2,198
Reinsurance premiums payable (924) 1,418
Accrued expenses and other liabilities 550 2,100
- -------------------------------------------------------------------------------------------------------------------------
Total adjustments 2,225 5,005
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,247 7,799
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTiNG ACTIVITIES Proceeds from sales:
Fixed maturities available for sale - 3,514
Investment collections:
Fixed maturities available for sale 14,553 3,303
Fixed maturities held to maturity 239 207
Mortgage loans 915 20
Investment purchases:
Fixed maturities available for sale (15,507) (15,528)
Fixed maturities held to maturity - (131)
Equity securities - (56)
Change in short-term investments, net (5,966) 784
Change in other invested assets 9 (125)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,757) (8,012)
- -------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Principal payments on debt (4) (11)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (4) (11)
- -------------------------------------------------------------------------------------------------------------------------
Net decrease in cash (514) (224)
Cash, beginning of period 5,841 4,110
- -------------------------------------------------------------------------------------------------------------------------
Cash, end of period $5,327 $3,886
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.
*Amounts have been restated for certain items as more fully described in Note
2-Prior Period Adjustments.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts of
Farm Family Holdings, Inc. ("Farm Family Holdings") and its wholly owned
subsidiaries (collectively referred to as the "Company"). The primary
subsidiary of Farm Family Holdings is Farm Family Casualty Insurance
Company ("Farm Family Casualty"). The operations of the Company are closely
related with those of its affiliates, Farm Family Life Insurance Company
("Farm Family Life"), and Farm Family Life's wholly owned subsidiary,
United Farm Family Insurance Company ("United Farm Family").
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. In the opinion
of management, these statements contain all adjustments including normal
recurring accruals, which are necessary for a fair presentation of the
consolidated financial position at March 31, 1998, and the consolidated
results of operations for the three months ended March 31, 1998 and 1997.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for a
full fiscal year. The year end balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Comprehensive Income", which established
standards for the reporting and disclosure of comprehensive income and its
components, and restated prior period financial statements to conform to
this reporting standard.
2. Prior Period Adjustments
Previously, the Company accounted for its extended earnings program
pursuant to Statement of Financial Accounting Standards No. 5. The
restatement of certain amounts within the Company's consolidated financial
statements relates to the Company's retroactive adoption effective January
1, 1994 of Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" ("Statement 112") to account for
the Company's extended earnings program with its agents and agency
managers. Pursuant to agreements between the Company and its agents and
agency managers (collectively referred to hereafter as "agents"), subject
to certain conditions including length of service, confidentiality, and
non-competition, certain agents are eligible to receive monthly extended
earnings payments for a period of up to eight years subsequent to the
termination of their association with the Company. Historically, such
payments have been funded by deductions from the commissions earned by
successor agents who have assumed the right to service the books of
business previously serviced by eligible former agents subsequent to the
termination of the former agent's association with the Company.
<PAGE>
The Company has restated certain amounts within its consolidated financial
statements as of March 31, 1998 and December 31, 1997 and for the three
months ended March 31, 1998 and 1997. The following table presents the
restated and previously reported amounts:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
March 31, 1998 December 31, 1998
As As As As
Reported Restated Reported Restated
Balance Sheet:
<S> <C> <C> <C> <C>
Deferred income tax asset, net $1,435 $4,463 $1,469 $4,422
Total assets 380,739 383,767 368,278 371,231
Accrued expenses and other liabilities 12,116 22,024 11,828 21,474
Total liabilities 247,637 257,545 238,351 247,997
Stockholders' equity 133,102 126,222 129,927 123,234
Total liabilities and stockholders' equity 380,739 383,767 368,278 371,231
For the three months ended March 31
1997 1998
---- ----
As As As As
Reported Restated Reported Restated
Statements of Income:
Underwriting expenses 11,213 11,474 $10,090 $10,490
Federal income tax expense 1,292 1,217 1,612 1,474
Net income 3,208 3,022 3,056 2,794
Per share data:
Net income-Basic $0.61 $0.58 $0.58 $0.53
Net income-Diluted $0.61 $0.57 $0.58 $0.53
</TABLE>
3. Earnings Per Share
The following table presents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
<S> <C> <C>
1998 1997
Net income available to common stockholders $3,022,000 $2,794,000
------------------------
Weighted average number of shares in basic earnings per share 5,253,813 5,253,813
Effect of stock options 47,685 ---
------------------------
Weighted average number of shares in diluted earnings per share 5,301,498 5,253,813
------------------------
Basic net income per share $0.58 $0.53
------------------------
Diluted net income per share $0.57 $0.53
------------------------
</TABLE>
<PAGE>
4. Future Application of Accounting Standards
In February of 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Statement (SFAS) 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," effective
for years beginning after December 15, 1997. SFAS 132 revises the
disclosure requirements but does not change the measurement or recognition
of pensions and other post retirement benefits. The adoption of SFAS 132
will result in revised and additional disclosures but will have no effect
on the financial position, results of operations, or liquidity of the
Company.
5. Contingencies
The Company is party to numerous legal actions arising in the normal course
of business. Management believes that resolution of these legal actions
will not have a material adverse effect on its consolidated financial
condition.
Catastrophes are an inherent risk in the property and casualty insurance
industry and could produce significant adverse fluctuations in the
Company's results of operations and financial condition. The Company is
subject to a concentration of risk within the Northeastern United States.
For the three months ended March 31, 1998 and 1997, approximately 62% and
60%, respectively, of the Company's direct premiums were written in the
states of New York and New Jersey. As a result of the concentration of the
Company's business in the states of New York and New Jersey, and more
generally, in the Northeastern United States, the Company's results of
operations may be significantly affected by weather conditions,
catastrophic events and regulatory developments in these two states and in
the Northeastern United States, despite the Company's reinsurance program
designed to mitigate the impact of these factors.
As a condition of its license to do business in various states, the Company
is required to participate in a variety of mandatory residual market
mechanisms (including mandatory pools) which provide certain insurance
(most notably automobile insurance) to consumers who are otherwise unable
to obtain such coverages from private insurers. The amount of future losses
or assessments from residual market mechanisms can not be predicted with
certainty and could have a material adverse effect on the Company's future
results of operations.
Many of the Company's existing computer programs use only two digits to
identify a year in the date field. These programs were designed and
developed without considering the impact of the upcoming change in the
century. If not corrected, many of these computer applications could fail
or create erroneous results by or at the Year 2000. The Year 2000 issue
affects virtually all companies and organizations . Therefore, the Company
must also coordinate with other entities with which it interacts to ensure
these entities are also addressing the Year 2000 issue. If not successfully
addressed, the Year 2000 issue could have material adverse consequences on
the Company. The Company has an on-going, enterprise-wide project to
address its Year 2000 issue. During 1998, the Company will perform
system-wide testing to support its plan of having policy administration
systems Year 2000 compliant by December 31, 1998. Year 2000 work on
remaining systems will continue through 1999. In addition, the Company has
contacted other entities on which it relies to process and support its
business. The Company will react to their plans to achieve Year 2000
compliance and will adjust operations as required. The Company believes it
will successfully address its Year 2000 issue without material adverse
consequences to the Company. However, there can be no assurance that other
entities with which the Company interacts will achieve Year 2000 compliance
or that the failure by such entities to achieve Year 2000 compliance would
not have a material adverse effect on the Company.
Pursuant to agreements between the Company and its agents and agency
managers (collectively referred to hereafter as "agents"), subject to
certain conditions including length of service, confidentiality, and
non-competition, certain agents are eligible to receive monthly extended
earnings payments for a period of up to eight years subsequent to the
termination of their association with the Company. Historically, such
payments have been funded by deductions from the commissions earned by
successor agents who have assumed the right to service the books of
business previously serviced by eligible former agents subsequent to the
termination of the former agent's association with the Company. As
described in note 2 - Prior Period Adjustments, the Company has recorded a
$10,157,000 liability for the extended earnings program (the "Program") in
accordance with Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" ("Statement 112") to
account for the Program. During the third quarter of 1998, the Company
intends to modify the agreements with its agents to include revised
conditions under which eligible agents may receive extended earnings
payments. In addition to the conditions described previously, extended
earnings will be paid only if a successor agent(s) assumes the right to
service the book of business of the eligible former agent and agrees to
become primarily responsible for making the extended earnings payments. In
the event that no successor agent(s) assumes the right to service the book
of business of an eligible former agent, the Company has no obligation to
make the extended earnings payments. The Company has no intention to waive
this provision of its agreements with its agents. As a result, the
successor agent(s), not the Company, will be the primary obligor
responsible for extended earnings payments. Since the inception of the
Program in 1986, the Company has always been able to identify successor
agents willing to assume the rights to service such books of business. The
Company will act as guarantor of the amounts payable to eligible former
agents who have terminated their association with the Company by successor
agents who agree to make the extended earnings payments. The Company
expects to enforce the terms of the guarantee in the event of default by a
successor agent. When the Company's modified agreements with its agents
become effective, which the Company expects to be during the third or
fourth quarter of 1998, approximately $6,319,000 of the Company's Statement
112 liability will be extinguished and the Company expects to record a net
gain on this extinguishment of approximately $4,171,000 ($6,319,000 less
taxes of $2,148,000). The Company is primary liable for its remaining
Statement 112 liability which will be approximately $3,838,000 and
represents the aggregate amount owed by the Company to eligible former
agents that have terminated their association with the Company and are
currently receiving extended earnings payments. The Company's remaining
Statement 112 liability is being funded by deductions from the commissions
earned by successor agents who have assumed the right to service the books
of business previously serviced by eligible former agents who have
terminated their association with the Company pursuant to agreements with
such agents. Funding from successor agents is subject to the ability of the
successor agents to generate sufficient commissions to satisfy the
liability.
<PAGE>
6 Acquisition of Farm Family Life
Farm Family Holdings entered into an Option Purchase Agreement with the
shareholders of Farm Family Life pursuant to which Farm Family Holdings
has, for a two-year period commencing on July 26, 1996, the option to
acquire Farm Family Life subject to certain conditions. On February 26,
1998, the Board of Directors of Farm Family Holdings approved the exercise
of the option to acquire Farm Family Life and its wholly owned subsidiary
United Farm Family. Under the terms of the Option Purchase Agreement, Farm
Family Holdings will pay an exercise price of $37.5 million to acquire Farm
Family Life, consisting of $31.5 million of common stock of Farm Family
Holdings, and $6 million stated value of 6-1/8% voting preferred stock of
Farm Family Holdings, less certain expenses to be paid by Farm Family Life
in the acquisition on behalf of the shareholders of Farm Family Life. The
proposed acquisition of Farm Family Life is subject to the approval of the
shareholders of Farm Family Holdings and receipt of all required
governmental approvals. Management expects that the acquisition of Farm
Family Life will be brought to the shareholders of Farm Family Holdings for
their approval in 1998.
The following unaudited pro forma consolidated financial information
reflects the acquisition by the Company of Farm Family Life under the
purchase method of accounting. The pro forma consolidated balance sheet
combines balance sheets of the Company and Farm Family Life as of March 31,
1998, as if the acquisition had occurred as of March 31, 1998. The pro
forma consolidated statements of income combines the operations of the
Company and Farm Family Life for the year ended December 31, 1997 and the
three months ended March 31, 1998 as if the acquisition had occurred on
January 1, 1997
The pro forma adjustment and pro forma combined amounts are provided for
informational purposes only and are not necessarily indicative of the
actual financial position or results of operations that would have been
achieved had the acquisition been consummated at the dates indicated or of
future results. The pro forma financial statements should be read in
conjunction with the historical financial statements of the Company and
Farm Family Life.
The pro forma financial statements are based upon available information and
certain assumptions that the Company believes are reasonable in the
circumstances. The Company's preliminary allocation of purchase price was
based upon the estimated fair value of assets acquired and liabilities
assumed. The actual allocation will be based upon valuations as of the
closing date of the acquisition and, accordingly, the final allocations
will be different from the amounts herein.
<PAGE>
<TABLE>
<CAPTION>
Farm Family Holdings, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1998
($ in thousands)
Pro
Forma
Farm Family Farm Family Adjustments
Holdings Life Dr. Cr. Pro Forma
ASSETS
Investments
Fixed maturities
<S> <C> <C> <C> <C> <C>
Available for sale $259,956 $698,929 $ $ $958,885
Held to maturity, at amortized cost 8,602 8,602
Equity securities 4,730 40,393 45,123
Mortgage loans 745 13,361 14,106
Policy loans 29,386 29,386
Other invested assets 544 724 1,268
Short-term investments 11,609 6,582 18,191
-------------------------------------------------------------------------
Total investments 286,186 789,375 1,075,561
-------------------------------------------------------------------------
Cash 5,327 1,378 6,705
Insurance receivables:
Reinsurance receivables 15,630 1,960 17,590
Premiums receivable 31,912 (D) 107 31,805
Deferred acquisition costs 13,401 30,661 (B) 30,661 13,401
Present value of future profits (B) 20,941 20,941
Accrued investment income 4,820 12,765 17,585
Property and equipment, net 12,416 (B) 4,235 16,651
Deferred income tax asset, net 4,463 4,463
Prepaid reinsurance premiums 643 643
Receivable from affiliates, net 18,191 (D) 18,191 0
Other assets 3,194 1,827 (A) 824 4,197
-------------------------------------------------------------------------
Total Assets $383,767 $850,382 $25,176 $49,783 $1,209,542
-------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $163,498 $ $ $ $163,498
Future policy and contract benefits 216,619 216,619
Funds on deposit from policyholders 423,112 (B) 2,251 420,861
Unearned premium reserve 69,119 69,119
Accrued dividends to policyholders 5,023 5,023
Reinsurance premiums payable 1,640 1,640
Deferred income tax liability 33,780 (B) 1,133 32,647
Payable to affiliate 18,298 (D) 18,298 0
Accrued expenses and other liabilities 22,024 4,800 (B) 100 26,924
Debt 1,264 1,264
Participating policyholders' interest 109,125 109,125
-------------------------------------------------------------------------
Total liabilities 257,545 810,757 21,682 100 $1,046,720
-------------------------------------------------------------------------
Commitments and contingencies
Mandatory redeemable preferred stock (A) 5,856 5,856
Stockholders' equity:
Common stock 53 3,001 (C) 3,001 (A) 8 61
Additional Paid in Capital 92,906 (A) 30,736 123,642
Retained earnings 25,904 34,931 (C) 34,931 25,904
Accumulated other comprehensive income 7,359 1,693 (C) 1,693 7,359
-------------------------------------------------------------------------
Total stockholder's equity 126,222 39,625 39,625 30,744 156,966
-------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $383,767 $850,382 $61,307 $36,700 $1,209,542
-------------------------------------------------------------------------
See accompanying notes to unaudited pro forma consolidated balance sheet
</TABLE>
<PAGE>
Farm Family Holdings, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1998
($ in thousands)
(A) The following pro forma adjustments reflect the funding of the acquisition
and consideration given ($37,500 less certain expenses currently estimated to be
equal to approximately $900 to be paid by Farm Family Life in the acquisition on
behalf of the selling stockholders)
Series A Preferred stock ($5,856)
Unregistered common stock issued (824,650 shares issued,
$.01 par value) in the acquisition assuming an average
closing price of $37 9/32 if the closing had occurred on
April 6, 1998. The actual average closing price and the
actual number of shares of Common Stock that will be issued
to the selling stockholders may vary significantly from
these amounts. (8)
Paid in capital (30,736)
Expenses relating to acquisition 824
(B) The following pro forma adjustments result from the allocation of the
purchase price for the acquisition based on the fair value of the underlying net
assets acquired.
Assets Adjustment of carrying amount of properties occupied
by Farm Family Life based on a current appraisal of the
estimated fair market value of the building. In addition,
based on information contained in the current appraisal and
an evaluation of the current condition of the building, the
estimated useful life has been changed to 20 years. $4,235
Elimination of historical deferred acquisition costs (30,661)
Adjustment to record present value of future profits
calculated based on a discount rate equal to each year's
earned rate for traditional insurance products, which range
from 8% to 9%, and each year's credited rate for annuities
and universal life products, which range from 6% to 7%, less
the excess of net assets acquired over the purchase price.
The earned rate for traditional life insurance products and
the credited rate for annuities and universal life products
is the rate used by Farm Family Life to credit interest to
policyholders' funds held by these products. The amount of
interest accrued on the unamortized present value of future
profits balance during the year was $0.4 million. The
interest accrual rate was 6.5% for universal life products,
6.3% for annuities, and 9.0% for traditional life products.
For traditional insurance products, the present value of
future profits is amortized, with interest in proportion to
the ratio of estimated annual revenues over the contract
period. For universal life contracts and annuity contracts,
the present value of future profits is amortized at a
constant rate based upon the amount expected to be realized
over the life of the contracts, which is reevaluated
annually. For most life insurance, a 15-year to 40-year
amortization period is used, and a 20-year period is used
for annuities. Approximately $2.1 million is expected to be
amortized during each of the years ended December 31, 1998,
1998, 2000, 2001 and 2002. 20,941
Farm Family Holdings, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1998
($ in thousands)
Liabilities Adjustment to reflect the net deferred tax benefit of purchase
accounting adjustments using a statutory rate of 34% $1,133
Adjustment to record liability for Guaranty Funds (100)
Adjustment of carrying amount of funds on deposit from policyholders based on
fair market value. Policyholder funds held at variable rates are carried at
their account value which approximates fair value. The fair value of
policyholder funds held at fixed rates is the present value of the funds
calculated using current market rates. 2,251
(C) Adjustment to eliminate Farm Family Life's stockholder's equity
(D) Adjustment to eliminate intercompany balances
<PAGE>
<TABLE>
<CAPTION>
Farm Family Holdings, Inc.
Unaudited Pro Forma Consolidated Statement of Income
For the three months ended March 31, 1998
($in thousands, except per share data)
Pro
Forma
Farm Family Farm Family Adjustments
Holdings Life Dr. Cr. Pro Forma
Revenues:
<S> <C> <C> <C> <C> <C>
Premiums from property/casualty operations $42,815 $0 $ $ $42,815
Premiums from life and health operations 7,827 7,827
Net investment income 4,767 13,889 18,656
Realized investment gains (losses), net 126 663 789
Policy and contract charges 1,167 1,167
Other income 219 264 (c) 217 266
------------------------------------------------------------------------
Total revenues 47,927 23,810 217 71,520
------------------------------------------------------------------------
Losses, Benefits and Expenses:
Losses and loss adjustment expenses 32,139 469 32,608
Benefits to policyholders 6,052 6,052
Underwriting & operating expenses 11,474 1,994 (a) 37 (c) 217 13,288
Non-recurring charges 92 92
Interest credited to policyholders 6,309 6,309
Amortization of policy acquisition costs 1,782 (a) 1,782 0
Amortization of present value of future profits (a) 516 516
Interest expense 25 25
Dividends to policyholders 50 50
Participating policyholders' interest 5,753 (a) 1,579 (a) 444 6,888
------------------------------------------------------------------------
Total losses and expenses 43,688 22,451 2,132 2,443 65,828
------------------------------------------------------------------------
Net Income before federal income tax expense 4,239 1,359 2,349 2,443 5,692
Federal income tax expense 1,217 455 (b) 32 1,704
------------------------------------------------------------------------
Net Income before preferred stock dividends 3,022 904 2,381 2,443 3,988
Preferred stock dividends (a) 90 90
------------------------------------------------------------------------
Net Income applicable to common shareholders $3,022 $904 $2,471 $2,443 $3,898
------------------------------------------------------------------------
Net Income per Common Share - Basic $0.58 $0.64
-------------- --------------
Net Income per Common Share - Diluted $0.57 $0.64
-------------- --------------
Weighted average shares - Basic 5,253,813 (d) 824,650 6,078,463
-------------- --------------
Weighted average shares - Diluted 5,301,498 (d) 824,650 6,126,148
-------------- --------------
See accompanying notes to unaudited pro forma consolidated statements of income
</TABLE>
<PAGE>
Farm Family Holdings, Inc.
Notes to Unaudited Pro Forma Consolidated Statements of Income
For the three months ended March 31, 1998
($ in thousands, except per share data)
(a) Adjustment resulting from the allocation of the purchase price for the
acquisition based on the estimated fair value of the underlying net assets are
as follows:
Additional depreciation expense incurred due an adjustment
of the fair market value of the building based on a current
appraisal and a change in the estimated useful life of the
building to 20 years based on information contained in the
current appraisal and an evaluation of the current condition
of the building $37
Adjustment to reverse amortization of deferred acquisition
costs (1,782)
Participating policyholders' share of amortization of
deferred acquisition costs 1,579
Adjustment to record amortization of present value of future
profits 516
Participating policyholders' share of amortization of
present value of future profits (444)
Series A Preferred stock dividends on estimated fair value
of $5,856 of preferred stock at a rate of 6 1/8% per annum 90
(b) Adjustment to reflect the federal income tax effect of item
(a) above using statutory rate of 34% 32
(c) Adjustment to eliminate intercompany balances 217
(d) Adjustment to reflect estimated additional shares of common stock issued in
the acquisition assuming an average closing price of $37 9/32 if the closing had
occurred on April 6, 1998. The actual average closing price and the actual
number of shares of common stock that will be issued to the selling stockholders
may vary significantly from these amounts. 824,650
<PAGE>
<TABLE>
<CAPTION>
Farm Family Holdings, Inc.
Unaudited Pro Forma Consolidated Statement of Income
For the year ended December 31, 1997
($ in thousands, except per share data)
Pro
Forma
Farm Family Farm Family Adjustments
Holdings Life Dr. Cr. Pro Forma
Revenues:
<S> <C> <C> <C> <C> <C>
Premiums from property/casualty operations $149,220 $9,020 $ $ $158,240
Premiums from life and health operations 30,505 33,356
Net investment income 18,077 54,964 73,041
Realized investment gains (losses), net 5,406 2,914 8,320
Policy and contract charges 5,041 5,041
Other income 1,020 1,153 (c) 808 1,365
----------------------------------------------------------------------
Total revenues 173,723 103,597 808 279,363
----------------------------------------------------------------------
Losses, Benefits and Expenses:
Losses and loss adjustment expenses 103,301 9,975 113,276
Benefits to policyholders 26,843 26,843
Underwriting & operating expenses 43,320 7,748 (a) 158 (c) 808 50,418
Non-recurring charges 707 707
Interest credited to policyholders 24,813 24,813
Amortization of policy acquisition costs 6,852 (a) 6,852 0
Amortization of present value of future profits (a) 2,233 2,233
Interest expense 102 102
Dividends to policyholders 282 282
----------------------------------------------------------------------
Participating policyholders' interest 21,617 (a) 5,994 (a) 1,929 25,682
----------------------------------------------------------------------
Total losses and expenses 147,005 98,555 8,385 9,589 244,356
----------------------------------------------------------------------
Net Income before federal income tax expense 26,718 5,042 9,193 9,589 32,156
Federal income tax expense 9,218 1,702 (b) 135 11,055
----------------------------------------------------------------------
Net Income before preferred stock dividends 17,500 3,340 9,328 9,589 21,101
Series A Preferred stock dividends (a) 359 359
----------------------------------------------------------------------
Net Income applicable to common shareholders $17,500 $3,340 $9,687 $9,589 20,742
----------------------------------------------------------------------
Net Income per Common Share - Basic $3.33 $3.41
--------------- -------------
Net Income per Common Share - Diluted $3.32 $3.40
--------------- -------------
Weighted average shares - Basic 5,253,813 (d) 824,650 6,078,463
--------------- -------------
Weighted average shares - Diluted 5,270,947 (d) 824,650 6,095,597
--------------- -------------
See accompanying notes to unaudited pro forma consolidated statements of income
</TABLE>
<PAGE>
Farm Family Holdings, Inc.
Notes to Unaudited Pro Forma Consolidated Statements of Income
For the year ended December 31, 1997
($ in thousands, except per share data)
(a) Adjustment resulting from the allocation of the purchase price for the
Acquisition based on the estimated fair value of the underlying net assets are
as follows:
Additional depreciation expense incurred due an adjustment
of the fair market value of the building based on a current
appraisal and a change in the estimated useful life of the
building to 20 years based on information contained in the
current appraisal and an evaluation of the current condition
of the building $158
Adjustment to reverse amortization of deferred acquisition
costs (6,852)
Participating policyholders' share of amortization of
deferred acquisition costs 5,994
Adjustment to record amortization of present value of future
profits 2,233
Participating policyholders' share of amortization of
present value of future profits (1,929)
Series A Preferred stock dividends on estimated fair value
of $5,856 of preferred stock at a rate of 6 1/8% per annum
359
(b) Adjustment to reflect the federal income tax effect of
item (a) above using statutory rate of 34% 135
(c) Adjustment to eliminate intercompany balances 808
(d) Adjustment to reflect estimated additional shares of
Common Stock issued in the acquisition assuming an average
closing price of $37 9/32 if the closing had occurred on
April 6, 1998. The actual average closing price and the
actual number of shares of common Stock that will be issued
to the selling stockholders may vary significantly from
these amounts. 824,650
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The following discussion includes the operations of Farm Family Holdings, Inc.
("Farm Family Holdings") and its wholly owned subsidiaries (collectively
referred to as the "Company"). The primary subsidiary of Farm Family Holdings is
Farm Family Casualty Insurance Company ("Farm Family Casualty"). The operations
of the Company are closely related with those of its affiliates, Farm Family
Life Insurance Company ("Farm Family Life"), and Farm Family Life's wholly owned
subsidiary, United Farm Family Insurance Company ("United Farm Family").
Farm Family Casualty is a specialized property and casualty insurer of farms,
other generally related businesses and residents of rural and suburban
communities primarily in the Northeastern United States. Farm Family Casualty
provides property and casualty insurance coverages to members of the state Farm
Bureau(R) organizations in New York, New Jersey, Delaware, West Virginia and all
of the New England states. Membership in a state Farm Bureau organization is a
prerequisite for voluntary insurance coverage (except for employees of the
Company and its affiliates).
The Company's operating results are subject to significant fluctuations from
period to period depending upon, among other factors, the frequency and severity
of losses from weather related and other catastrophic events, the effect of
competition and regulation on the pricing of products, changes in interest
rates, general economic conditions, tax laws and the regulatory environment. As
a condition of its license to do business in various states, the Company is
required to participate in a variety of mandatory residual market mechanisms
(including mandatory pools) which provide certain insurance (most notably
automobile insurance) to consumers who are otherwise unable to obtain such
coverages from private insurers. In all such states, residual market premium
rates are subject to the approval of the state insurance department and have
generally been inadequate. The amount of future losses or assessments from
residual market mechanisms cannot be predicted with certainty and could have a
material adverse effect on the Company's results of operations.
For the three month periods ended March 31, 1998 and 1997, 33.2% and 36.3%,
respectively, of the Company's direct written premiums were derived from
policies written in New York and, for the same periods, 28.4% and 23.8%,
respectively, were derived from policies written in New Jersey. For these same
periods, no other state accounted for more than 10.0% of the Company's direct
written premiums. As a result, the Company's results of operations may be
significantly affected by weather conditions, catastrophic events and regulatory
developments in these two states and in the Northeastern United States
generally.
<PAGE>
Safe Harbor Statement under The Private Securities Litigation Reform Act of
1995: With exception of historical information, the matters discussed or
incorporated by reference in this Report on Form 10-Q contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that are based on management's current knowledge, expectations, estimates,
beliefs and assumptions. The forward-looking statements in this Form 10-Q
include, but are not limited to, statements with respect to the Company's
potential acquisition of Farm Family Life, the impact of the potential
acquisition of Farm Family Life on the earnings and shareholder value of the
Company, projections of revenue, earnings, capital structure and other financial
items, statements of the plans and objectives of the Company or its management,
and statements of future economic performance and assumptions underlying
statements regarding the Company or its business. Readers are hereby cautioned
that certain events or circumstances could cause actual results to differ
materially from those estimated, projected, or predicted. The forward-looking
statements in this Form 10-Q are not guarantees of future performance and are
subject to a number of important risks and uncertainties, many of which are
outside the Company's control, that could cause actual results to differ
materially. These risks and uncertainties include, but are not limited to, the
results of operations of the Company and Farm Family Life, fluctuations in the
market value of shares of the Company's common stock, the satisfaction of the
closing conditions set forth in the Amended and Restated Option Purchase
Agreement (which conditions include, but are not limited to, the approval of the
Company's shareholders and receipt of all required government approvals),
exposure to catastrophic loss, geographic concentration of loss exposure,
general economic conditions and conditions specific to the property and casualty
insurance industry, including its cyclical nature, regulatory changes and
conditions, rating agency policies and practices, competitive factors, claims
development and the impact thereof on loss reserves and the Company's reserving
policy, the adequacy of the Company's reinsurance programs, developments in the
securities markets and the impact thereof on the Company's investment portfolio,
factors relating to the Company's ability to successfully address its Year 2000
issues and other risks listed from time to time in the Company's Securities and
Exchange Commission filings, including the Form 10-K filed for the fiscal year
ended December 31, 1997 and the Prospectus dated July 22, 1996. Accordingly,
there can be no assurance that actual results will conform to the
forward-looking statements in this Form 10-Q.
Results of Operations
The Three Months Ended March 31, 1998 Compared to the Three Months Ended
March 31, 1997
Premiums
Premium revenue increased $7.8 million or 22.4%, during the three months ended
March 31, 1998 to $42.8 million from $35.0 million for the same period in 1997.
The increase in premium revenue in 1998 resulted from an increase of $5.9
million in earned premiums on additional business directly written by the
Company, and an increase of $0.1 million in earned premiums from assumed
business and a decrease of $1.8 million in earned premiums ceded to reinsurers
and not retained by the Company. The $5.9 million increase in earned premiums on
additional business directly written by the Company was primarily attributable
to an increase of $4.8 million, or 15.6%, in earned premiums from the Company's
primary products (personal and commercial automobile products other than
assigned risk automobile business, the Special Farm Package, businessowners
products, homeowners products, and Special Home Package), as well as an increase
of $0.7 million in earned premiums from the Company's workers' compensation
business. The Company has approximately 158,600 total policies in force. The
number of policies in force related to the Company's primary products increased
by 11.7% to approximately 130,600 as of March 31, 1998 from approximately
116,900 as of March 31, 1997 and the average premium earned for each such policy
increased by 3.4% during the three months ended March 31, 1998 compared to the
same period in 1997. Net written premiums increased 28.9% to $47.4 million for
the three months ended March 31, 1998 compared to $36.7 million for the same
period in 1997. The increase in net written premiums is primarily attributable
to the growth in direct writings to customers, a decrease in written premium
ceded to reinsurers and, to a lesser extent, an increase in the Company's
voluntary assumed reinsurance business. Geographically, the increase in the
Company's direct writings came from New Jersey, New York, Massachusetts,
Connecticut, Delaware, West Virginia, and Rhode Island. In addition, direct
writings of all the Company's primary products, particularly personal
automobile, increased during the first quarter of 1998.
Net Investment Income
Net investment income increased $0.4 million or 7.9% to $4.8 million for the
three months ended March 31, 1998 from $4.4 million for the same period in 1997.
The increase in net investment income was primarily the result of an increase in
average cash and invested assets (at amortized cost) of approximately $44.3
million, or 18.8% from March 31, 1998 compared to March 31, 1997. The return
realized on the Company's cash and investments was 6.9% for the three months
ended March 31, 1998 and 7.5% for the same period in 1997. The reduction in the
return realized on the Company's cash and invested assets is primarily
attributable to an increase in investment in tax-exempt bonds which provide for
a larger after tax return.
Losses and Loss Adjustment Expenses
Losses and loss adjustment expenses increased $7.4 million, or 30.1%, to $32.1
million for the three months ended March 31, 1998 from $24.7 million for the
same period in 1997. Loss and loss adjustment expenses were 75.1% of premium
revenue for the three months ended March 31, 1998 compared to 70.6% of premium
revenue for the same period in 1997. The increase in loss and loss adjustment
expenses as a percent of premium revenue was primarily attributable to the
increase in weather related losses during the first three months of 1998. Losses
believed to be weather related aggregated $4.1 million in the three months ended
March 31, 1998 compared to $2.1 million for the same period in 1997. The
increase in weather related losses was primarily attributable to severe ice
storms which impacted the upstate New York and Maine territories in which the
Company writes business.
Underwriting Expenses
Underwriting expenses increased $1.0 million, or 9.4%, to $11.5 million for the
three months ended March 31, 1998 from $10.5 million for the same period in
1997. For the three months ended March 31, 1998, underwriting expenses were
26.8% of premium revenue compared to 30.0% for the same period in 1997. The
decrease in underwriting expenses as a percent of premium revenue was primarily
attributable to a greater relative increase in the Company's premium revenue
than in the level of overhead expenses, as well as the continuation of a
company-wide expense management program.
Federal Income Tax Expense
Federal income tax expense decreased $0.3 million to $1.2 million in 1998 from
$1.5 million in 1997. Federal income tax expense was 28.7% of income before
federal income tax expense for the three months ended March 31, 1998 compared to
34.5% for the same period in 1997.
Net Income Net income increased $0.2 million to $3.0 million for the three
months ended March 31, 1998 from $2.8 million for the same period in 1997
primarily as a result of the foregoing factors.
<PAGE>
Liquidity and Capital Resources
Net cash provided by operating activities was $5.2 million and $7.8 million
during the three month periods ended March 31, 1998 and 1997, respectively. The
decrease in net cash provided by operating activities during the three months
ended March 31, 1998 was primarily attributable to an increase of $2.6 million
of loss and loss adjustment expenses paid to $25.3 million from $22.7 million
for the three months ended March 31, 1998 and 1997, respectively.
Net cash used in investing activities was $5.8 million during the three months
ending March 31, 1998 compared to $8.0 million for the same period in 1997
primarily as a result of an increase in investment collections from fixed
maturities, which was partially offset by an increase in short-term investments
by the Company.
The Company has in place unsecured lines of credit with two banks under which it
may borrow up to $12.0 million. At March 31, 1998, no amounts were outstanding
on either of the lines of credit. In addition, at March 31, 1998, Farm Family
Casualty had $1.3 million principal amount of surplus notes outstanding. The
surplus notes bear interest at the rate of eight percent per annum and have no
maturity date. Farm Family Casualty redeemed all of the surplus notes on April
1, 1998.
Future Application of Accounting Standards
In February of 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Statement No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," ("Statement 132") effective for
years beginning after December 31, 1997. Statement 132 revises the disclosure
requirements but does not change the measurement or recognition of pensions and
other post retirement benefits. The adoption of Statement 132 will result in
revised and additional disclosures but will have no effect on the financial
position, results of operations, or liquidity of the Company.
Item 6: Exhibits and Reports on Form 8-K
EXHIBIT INDEX
FARM FAMILY HOLDINGS, INC. FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
Exhibit Number Document Description
*2.1 Plan of Reorganization and Conversion dated February 14,
1996 as amended by Amendment No. 1, dated April 23, 1996
*3.1 Certificate of Incorporation of Farm Family Holdings, Inc.
*3.2 Bylaws of Farm Family Holdings, Inc.
*Incorporated by reference to Registration Statement No. 333-4446
<PAGE>
Reports on Form 8-K
A report on Form 8-K was filed on January 28, 1998 reporting a press
release issued announcing that a committee of its independent directors and a
committee representing the shareholders of Farm Family Life negotiated a
revision of the form of consideration to be paid, under the Option Purchase
Agreement pursuant to which Farm Family Holdings has an option of acquire Farm
Family Life.
A report on Form 8-K was filed on February 27, 1998 reporting a press
release issued announcing the Company's operating results for the quarter ended
and the year ended December 31, 1997.
No financial statements were filed with either Form 8-K.
<PAGE>
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 thereunto duly authorized.
FARM FAMILY HOLDINGS, INC.
(Registrant)
October 20, 1998 By: /s/ Philip P. Weber
- ------------ ----------------------------------------------------------
(Date) Philip P. Weber, President & Chief Executive Officer
(Principal Executive Officer)
October 20, 1998 By: /s/ Timothy A. Walsh
- ------------ -------------------------------------------------------------
(Date) Timothy A. Walsh, Executive Vice President - Finance & Treasurer
(Principal Financial & Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0001013564
<NAME> Farm Family Holdings, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 259,956
<DEBT-CARRYING-VALUE> 8,602
<DEBT-MARKET-VALUE> 8,949
<EQUITIES> 4,730
<MORTGAGE> 745
<REAL-ESTATE> 0
<TOTAL-INVEST> 286,186
<CASH> 5,327
<RECOVER-REINSURE> 15,630
<DEFERRED-ACQUISITION> 13,401
<TOTAL-ASSETS> 383,767
<POLICY-LOSSES> 163,498
<UNEARNED-PREMIUMS> 69,119
<POLICY-OTHER> 22,024
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 53
<OTHER-SE> 7,359
<TOTAL-LIABILITY-AND-EQUITY> 383,767
42,815
<INVESTMENT-INCOME> 4,767
<INVESTMENT-GAINS> 126
<OTHER-INCOME> 219
<BENEFITS> 32,139
<UNDERWRITING-AMORTIZATION> 11,474
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 4,239
<INCOME-TAX> 1,217
<INCOME-CONTINUING> 3,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,022
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.57
<RESERVE-OPEN> 127,568
<PROVISION-CURRENT> 34,132
<PROVISION-PRIOR> (1,991)
<PAYMENTS-CURRENT> 8,232
<PAYMENTS-PRIOR> 19,158
<RESERVE-CLOSE> 132,319
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0001013564
<NAME> Farm Family Holdings, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 223,181
<DEBT-CARRYING-VALUE> 9,563
<DEBT-MARKET-VALUE> 9,565
<EQUITIES> 8,078
<MORTGAGE> 1,725
<REAL-ESTATE> 0
<TOTAL-INVEST> 247,969
<CASH> 3,886
<RECOVER-REINSURE> 10,401
<DEFERRED-ACQUISITION> 10,721
<TOTAL-ASSETS> 329,325
<POLICY-LOSSES> 143,205
<UNEARNED-PREMIUMS> 58,143
<POLICY-OTHER> 19,774
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,293
0
0
<COMMON> 53
<OTHER-SE> 3,715
<TOTAL-LIABILITY-AND-EQUITY> 329,325
34,973
<INVESTMENT-INCOME> 4,416
<INVESTMENT-GAINS> (90)
<OTHER-INCOME> 220
<BENEFITS> 24,697
<UNDERWRITING-AMORTIZATION> 10,490
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 4,268
<INCOME-TAX> 1,474
<INCOME-CONTINUING> 2,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,794
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<RESERVE-OPEN> 114,383
<PROVISION-CURRENT> 24,847
<PROVISION-PRIOR> (150)
<PAYMENTS-CURRENT> 4,588
<PAYMENTS-PRIOR> 16,900
<RESERVE-CLOSE> 117,592
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
