UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 27, 1998
FARM FAMILY HOLDINGS, INC.
A Delaware Corporation Commission File No. 1-11941 IRS No. 14-1789227
344 Route 9W, Glenmont, New York 12077-2910
Registrant's telephone number: (518) 431-5000
<PAGE>
Item 5. Other Events
On October 27, 1998, Farm Family Holdings, Inc. issued a press release
announcing the results of its operations for the three months and the nine
months ended September 30, 1998 and that the Board of Directors approved the
exercise of the Company's option to aquire Farm Family Life Insurance Company.
Item 7. Financial Statements and Exhibits
The following exhibits are filed as part of this report:
Exhibit Index
Exhibit 99 - Press Release
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 thereunto duly authorized.
FARM FAMILY HOLDINGS, INC.
(Registrant)
October 27, 1998 /s/ Philip P. Weber
- -------------------------------- ---------------------------------------------
(Date) Philip P. Weber
President and CEO
<PAGE>
Exhibit 99
News Release
FOR IMMEDIATE RELEASE CONTACT:Timothy A. Walsh
Executive Vice President - Finance
& Treasurer
(518) 431-5410
Farm Family Holdings Reports Continued Premium Growth and
Increase in Operating Earnings
Glenmont, New York - October 27, 1998 - - Farm Family Holdings, Inc. (NYSE: FFH)
today announced that operating earnings for the third quarter ended September
30, 1998 increased 14.0% to $4,227,000 from $3,707,000 for the same period in
1997. On a diluted per share basis, operating earnings for the third quarter of
1998 were $0.80 compared to $0.70 for the same period in 1997.
Operating earnings for the nine months ended September 30, 1998 were $9,737,000
compared to $9,922,000 for the same period in 1997. On a diluted per share
basis, operating earnings for the nine months ended September 30, 1998 were
$1.84 compared to $1.88 for the same period in 1997. Operating earnings exclude
the impact of realized investment gains (losses), non-recurring items, and the
related taxes thereon.
The increase in operating earnings for the third quarter was primarily
attributable to increased premium revenue and net investment income, the
Company's reinsurance program which helped mitigate the impact of
weather-related losses, and the results of the Company's continued expense
management program.
Philip P. Weber, President & CEO of Farm Family Holdings said, "We continue to
expand our penetration into the northeastern agribusiness and rural and suburban
markets which we serve. Our focus and commitment to this market has enabled us
to increase direct writings of all of our primary products during 1998.
Additionally, our expense management initiatives have favorably impacted our
operating results. We remain focused on executing our strategy of profitable
growth and creating value for our stockholders."
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Premiums
Premium revenue increased 18.7% to $45,660,000 for the third quarter of 1998
compared to $38,457,000 for the same period in 1997. For the nine months ended
September 30, 1998, premium revenue increased 22.2% to $133,404,000 compared to
$109,191,000 for the same period in 1997. The increase in premium revenue for
the nine months ended September 30, 1998 was primarily attributable to an
increase of $16,058,000 in premium revenue from our direct writings, a
$3,572,000 increase in premiums from the Company's voluntary assumed reinsurance
business, and a reduction of $6,594,000 in premiums ceded to the Company's
affiliate, United Farm Family Insurance Company ("United Farm Family"). These
increases were partially offset by a $1,189,000 increase in premiums ceded to
the Company's reinsurers. Effective December 31, 1997, the Company's reinsurance
agreements with United Farm Family which reinsured the Company's incurred losses
greater than $100,000 up to $300,000 were terminated. As a result, the Company's
retention per loss, net of reinsurance, increased from $100,000 in 1997 to
$300,000 in 1998.
Net written premiums increased 10.6% to $46,273,000 for the third quarter of
1998 compared to $41,823,000 for the same period in 1997. For the nine months
ended September 30, 1998, net written premiums increased 17.1% to $142,226,000
compared to $121,505,000 for the same period in 1997. The increase in net
written premiums for the nine months ended September 30, 1998 was primarily
attributable to an increase of $15,422,000 or 12.6% in direct writings
(excluding assigned risk automobile business premiums received by the Company)
and to a lesser extent, a reduction in premiums ceded to the Company's
reinsurers and an increase in the Company's written voluntary assumed
reinsurance business.
Mr. Weber said, "We have continued to increase writings of all of our primary
products: personal and commercial automobile, the Special Farm Package,
businessowners, and homeowners products. The increase in our direct writings
during the nine months ended September 30, 1998 compared to the same period in
1997 came from New Jersey, New York, Massachusetts, Connecticut, West Virginia,
Delaware, Vermont, Rhode Island, and New Hampshire. In addition, we have begun
to see a favorable reduction in the growth of our personal auto business in New
Jersey as a result of certain changes in the New Jersey Farm Bureau's membership
requirements."
Combined Ratio
Farm Family Casualty Insurance Company's statutory combined ratio was 97.6% for
the third quarter of 1998 compared to 95.4% for the same period in 1997. The
statutory combined ratio for the nine months ended September 30, 1998 was 99.1%
compared to 96.1% for the same period in 1997. Loss and loss adjustment expenses
were 74.3% of premium revenue for the nine months ended September 30, 1998
compared to 70.0% for the same period in 1997. The increase in the loss and loss
adjustment expense ratio was primarily attributable to an increase in
weather-related losses incurred during the nine months ended September 30, 1998
compared to the same period in 1997.
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Investment Income
Net investment income for the third quarter of 1998 was $4,815,000 compared to
$4,603,000 for the same period in 1997. For the nine months ended September 30,
1998, net investment income was $14,333,000 compared to $13,529,000 for the same
period in 1997. The increase in net investment income was primarily attributable
to an increase in invested assets resulting from the investment of available
operating cash flows. The increase in net investment income was partially offset
by the Company's continued emphasis on investing a significant portion of its
available cash flow in high quality tax exempt municipal bonds.
Net Income
The Company's attached condensed consolidated financial statements and the
financial information included within this press release reflect the Company's
adoption of the guidance of Statement of Financial Accounting Standards No. 112
("FAS 112") to account for its extended earnings program with its agents and the
restatement of certain of the Company's previously issued consolidated financial
statements to reflect the retroactive adoption of FAS 112. During the third
quarter of 1998, the Company recorded a net gain for the reduction of a
significant portion of its extended earnings liability as a result of
modifications to the agreements with its agents. These modifications included
revised conditions under which eligible agents may receive extended earnings
payments.
Net income for the third quarter of 1998 increased to $8,458,000 compared to
$3,828,000 for the same period in 1997. On a diluted per share basis, net income
for the third quarter of 1998 was $1.59 compared to $0.72 for the same period in
1997. Net income for the third quarter of 1998 increased primarily as a result
of the net gain of $4,107,000 ($6,318,000 less taxes of $2,211,000) recognized
as a result of the reduction of a significant portion of the Company's liability
for its extended earnings program with its agents.
Net income for the nine months ended September 30, 1998 increased to $14,191,000
compared to $13,594,000 for the same period in 1997. On a diluted per share
basis, net income for the nine months ended September 30, 1998 was $2.67
compared to $2.58 for the same period in 1997. Net income for the nine months
ended September 30, 1998 included a net gain of $4,107,000 related to the
extinguishment of a significant portion of the Company's liability for its
extended earnings program with its agents and net income for the nine months
ended September 30, 1997 included net realized investment gains of $5,649,000.
Acquisition of Farm Family Life Insurance Company
On February 26, 1998, the Company's Board of Directors approved the exercise of
the Company's option to acquire Farm Family Life Insurance Company ("Farm Family
Life") pursuant to the terms of an Amended and Restated Option Purchase
Agreement (the "Amended and Restated Option Purchase Agreement") among the
Company and the stockholders of Farm Family Life.
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The Company will pay an exercise price of $37.5 million to acquire Farm Family
Life consisting of $31.5 million of the Company's common stock and $6 million
stated value of the Company's 6-1/8% voting preferred stock, less certain
expenses to be paid by Farm Family Life. The number of shares of common stock to
be issued will depend upon the average closing price of the Company's common
stock during the 20 trading days prior to the third business day preceding the
closing of the acquisition. The proposed acquisition is subject to approval by
the Company's stockholders and the satisfaction of certain closing conditions. A
special meeting of stockholders has been called for December 2, 1998 at which
the Company's stockholders will vote on a proposal to approve the proposed
acquisition. If the stockholders approve the transaction, the Company expects to
close the acquisition of Farm Family Life in December 1998.
Farm Family Holdings is the parent of Farm Family Casualty Insurance Company, a
specialized, regional property and casualty insurer of farms, agricultural
related businesses, and residents and businesses of rural and suburban
communities.
- ---------------------------------
Safe Harbor Statement under The Private Securities Litigation Reform Act of
1995:
This press release 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 press release include, but are not limited
to, statements with respect to the Company's potential acquisition of Farm
Family Life, statements of the plans and objectives of the Company or its
management, 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 press release 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, 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 and other risks listed from time to time in the Company's
Securities and Exchange Commission filings, including Form 10-K/A 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 press release.
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Statements of Income
($ in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Premiums $45,660 $38,457 $133,404 $109,191
Net investment income 4,815 4,603 14,333 13,529
Realized investment gains, net 192 187 534 5,649
Other income 269 234 752 719
------------- ------------ ------------ ------------
Total Revenues 50,936 43,481 149,023 129,088
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Losses and Expenses:
Losses and loss adjustment expenses 32,936 26,701 99,063 76,421
Underwriting expenses (1) 11,538 10,985 35,129 31,961
Interest expense - 25 25 77
Dividends to policyholders 64 65 119 177
------------- ------------ ------------ ------------
Total Losses and Expenses(1) 44,538 37,776 134,336 108,636
------------- ------------ ------------ ------------
Gain on partial reduction of extended earnings liability 6,318 - 6,318 -
------------- ------------ ------------ ------------
Income before federal income tax expense (1) 12,716 5,705 21,005 20,452
Federal income tax expense (1) 4,258 1,877 6,814 6,858
------------- ------------ ------------ ------------
Net Income (1) $8,458 $3,828 $14,191 $13,594
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Operating Income (1) (2) $4,227 $3,707 $9,737 $9,922
------------- ------------ ------------ ------------
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Per Share Data
Net income per share-Diluted (1) $1.59 $0.72 $2.67 $2.58
------------- ------------ ------------ ------------
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Operating income per share-Diluted (1) (2) $0.80 $0.70 $1.84 $1.88
------------- ------------ ------------ ------------
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Weighted average shares outstanding-Diluted 5,303,707 5,286,348 5,306,257 5,264,658
------------- ------------ ------------ ------------
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</TABLE>
(1) These amounts for the three months ended September 30, 1997 and the nine
months ended September 30, 1998 and 1997 have been restated to reflect the
Company's retroactive adoption of FAS 112 to account for its extended
earnings program with its agents.
(2) Operating income excludes the impact of realized investment gains, non
recurring items, and the related taxes thereon.
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands except per share data)
09/30/98 12/31/97
Assets: -------- --------
<S> <C> <C>
Investments $307,911 $280,431
Cash 5,711 5,841
Insurance receivables 55,903 40,484
Deferred acquisition costs 14,095 12,613
Accrued investment income 5,035 5,408
Other assets (1) 22,386 26,454
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Total Assets(1) $411,041 $371,231
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Liabilities:
Reserves for losses and loss adjustment expenses $176,966 $156,622
Unearned premium reserve 73,116 66,069
Debt - 1,268
Other liabilities (1) 19,860 24,038
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Total Liabilities (1) 269,942 247,997
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Stockholders' equity (1) 141,099 123,234
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Total Liabilities and Stockholders' Equity (1) $411,041 $371,231
------------ -------------
------------ -------------
Book Value Per Share (1) $26.86 $23.46
------------ -------------
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Book Value Per Share (excluding SFAS 115 adjustment) (1) $24.75 $22.05
------------ -------------
------------ -------------
Shares Outstanding 5,253,813 5,253,813
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</TABLE>
(1) These amounts as of September 30, 1998 and December 31, 1997 have been
restated to reflect the Company's retroactive adoption of FAS 112 to
account for its extended earnings program with its agents.
***End***
