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: February 26, 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
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Item 5. Other Events
On February 26, 1998, Farm Family Holdings, Inc. issued a press release
announcing the company's operating results for the three months and the year
ended December 31, 1997.
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)
February 26, 1998 /s/ Philip P. Weber
- -------------------------- ---------------------------------------------------
(Date) Philip P. Weber
President and CEO
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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 Record Operating
Income; Board Approves Exercise of Option to Acquire Farm Family Life Insurance
Company
Glenmont, New York - February 26, 1998 - - Farm Family Holdings, Inc. (NYSE:
FFH) today announced that operating income for the fourth quarter ended December
31, 1997 increased 53.2% to $4,309,000 from $2,813,000 for the same period in
1996. On a per share basis, operating earnings for the fourth quarter of 1997
were $0.81 compared to $0.54 for the same period in 1996.
Operating income for the year ended December 31, 1997 increased to $14,990,000
from $9,648,000 for the same period in 1996. On a per share basis, operating
income for the year ended December 31, 1997 was $2.84 compared to $2.42 for the
same period in 1996. Operating income excludes the impact of realized investment
gains (losses), extraordinary items, non-recurring charges, and the related
taxes thereon.
The increase in operating income for the fourth quarter and year ended December
31, 1997 was primarily attributable to increased premium revenue and net
investment income, reductions in weather-related losses, and the results of the
Company's continuing expense management program.
Philip P. Weber, President & CEO of Farm Family Holdings, said, "1997 was an
outstanding year for Farm Family. We continued to expand our penetration into
the northeastern agribusiness, rural and suburban markets which we serve. Our
focus on and commitment to this market has enabled us to increase direct
writings of all of our primary products throughout 1997. Additionally,
reductions in weather-related losses and our expense management initiatives have
favorably impacted our 1997 operating results."
Premiums
Premium revenue increased 18.1% to $40,029,000 for the fourth quarter of 1997
compared to $33,899,000 for the same period in 1996. For the year ended December
31, 1997, premium revenue increased 14.1% to $149,220,000 compared to
$130,780,000 for the same period in 1996.
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The increase in premium revenue for the year ended December 31, 1997 was
primarily attributable to an increase of $18,194,000 in premium revenue from our
direct writings and a $5,416,000 increase in revenue from the Company's
voluntary assumed reinsurance business. These increases were partially offset by
an increase in premiums ceded to reinsurers. From a product perspective, the
growth in premium revenue from our direct writings was derived primarily from
the Company's personal and commercial automobile, Special Farm Package,
businessowners, workers' compensation, and homeowners products. Geographically,
the increase in premium revenue from direct writings came primarily from New
Jersey, as well as, New York, Massachusetts, Connecticut, West Virginia,
Delaware, and Rhode Island.
Net written premiums increased 19.6% to $37,740,000 for the fourth quarter of
1997 compared to $31,563,000 for the same period in 1996. For the year ended
December 31, 1997, net written premiums increased 19.0% to $159,245,000 compared
to $133,844,000 for the same period in 1996. The increase in net written
premiums for the year ended December 31, 1997 was primarily attributable to an
increase of $22,299,000 in direct writings and a $8,415,000 increase in the
Company's voluntary assumed reinsurance business. These increases were partially
offset by an increase in premiums ceded to reinsurers that is directly tied to
the increase in the Company's voluntary writings. Direct writings for 1997
increased primarily as a result of an increase in writings of all of the
Company's primary products and to a lesser extent as a result of assigned risk
automobile business in New Jersey and our re-entry into the Massachusetts
workers compensation market. Geographically, direct writings in New Jersey
accounted for $11,324,000, or 50.8%, of the increase in direct writings during
1997.
Mr. Weber said, "The fastest rate of growth occurred in New Jersey during 1997
which significantly contributed to the increase in our direct writings. Direct
writings in New York increased by $5,012,000 or 8.9% during 1997. In addition,
direct writings from the agribusiness and rural and suburban markets in
Connecticut, Delaware, Massachusetts, Rhode Island, and West Virginia all
increased by more than 11% during 1997."
Combined Ratio
Farm Family Casualty Insurance Company's statutory combined ratio was 94.0% for
the fourth quarter of 1997 compared to 98.7% for the same period in 1996. The
statutory combined ratio for the year ended December 31, 1997 was 95.6% compared
to 100.7% for the same period in 1996. Loss and loss adjustment expenses were
69.2% of premium revenue for the year ended December 31, 1997 compared to 72.6%
for the same period in 1996. The reduction in the loss and loss adjustment
expense ratio was primarily attributable to a reduction in weather-related
losses incurred during 1997 as compared to the same period in 1996.
Net Investment Income
Net investment income for the fourth quarter of 1997 was $4,548,000 compared to
$4,317,000 for the same period in 1996. For the year ended December 31, 1997,
net investment income was $18,077,000 compared to $15,952,000 for the same
period in 1996. The increase in net investment income was primarily attributable
to the investment of available operating cash flows.
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Net Income
Net income for the fourth quarter of 1997 increased to $4,151,000 compared to
$1,649,000 for the same period in 1996. On a per share basis, net income for the
fourth quarter of 1997 was $0.78 compared to $0.31 for the same period in 1996.
During the fourth quarter of 1996, net income included a nonrecurring charge of
$765,000, net of tax, related to the Company's voluntary early retirement
program.
Net income for the year ended December 31, 1997 increased to $18,504,000
compared to $6,924,000 for the same period in 1996. On a per share basis, net
income for the year ended December 31, 1997 was $3.51 compared to $1.74 for the
same period in 1996. Net income for the year ended December 31, 1997 included
net realized investment gains of $5,406,000 compared to a net realized
investment loss of $640,000 during 1996. The results for the year ended December
31, 1996 included abnormally high weather related losses incurred in the first
quarter of 1996, nonrecurring charges of $765,000, net of tax, related to the
Company's voluntary early retirement program, and $1,543,000 related to the
conversion of Farm Family Casualty from a mutual company to a stockholder owned
company.
Surplus Note Redemption
At December 31, 1997, Farm Family Casualty had outstanding debt of $1.3 million
consisting of surplus notes. The surplus notes bear interest at the rate of
eight percent per annum, have no maturity date, and principal and interest are
repayable only with the approval of the Insurance Department of the State of New
York. Farm Family Casualty has received conditional approval from the Insurance
Department of the State of New York to redeem all of the surplus notes, and
plans to do so effective April 1, 1998.
Approval to Exercise Option to Acquire Farm Family Life
Today, the Company's Board of Directors approved the exercise of the Company's
option to acquire Farm Family Life Insurance Company (the "Life Company")
pursuant to the terms of an Amended and Restated Option Purchase Agreement (the
"Amended and Restated Option Purchase Agreement") among the Company and the
shareholders of the Life Company.
The Company will pay an exercise price of $37.5 million to acquire the Life
Company consisting of $31.5 million of the Company's common stock and $6 million
stated value of 6-1/8% of the Company's voting preferred stock. The proposed
acquisition is subject to certain closing conditions, including the approval of
the Company's stockholders and receipt of all required governmental approvals.
Philip P. Weber, President & CEO of the Company, said "We expect the proposed
acquisition to be brought to the Farm Family shareholders for their approval in
1998 and to be slightly accretive to Farm Family's earnings during 1998. We
remain focused on executing our strategy of profitable growth and creating value
for our shareholders."
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If ultimately approved by our shareholders, this acquisition will unite all the
Farm Family companies under the umbrella of Farm Family Holdings, Inc. and
provide additional strategic growth opportunities. For example, Farm Family Life
Insurance Company and its subsidiary, United Farm Family Insurance Company, are
licensed to do business in the states of Pennsylvania and Maryland and can be
utilized to expand the Company's operation into those territories.
The Life Company was established in 1953 by certain Farm Bureaus(R) to provide
life insurance products for Farm Bureau members principally in the Northeast.
The Life Company principally sells traditional whole life, term and universal
life products, in addition to single and flexible premium deferred annuities,
single premium immediate annuities and disability income insurance products and
operates in the same ten states as and through a common distribution system with
Farm Family Casualty Insurance Company, the wholly owned subsidiary of Farm
Family.
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, the impact of the potential acquisition of Farm Family Life on the
earnings and shareholder value of the Company, statements regarding expansion
into the states of Pennsylvania and Maryland, statements regarding Farm Family
Casualty's plans to redeem its outstanding Surplus Notes, projections of
revenue, earnings, capital structure and other financial items, 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 (which conditions include,
but are not limited to, the approval of the Company's shareholders and receipt
of all required governmental approvals), the risks associated with the
legislative, regulatory and competitive environments in the states of
Pennsylvania and Maryland, which may delay, prohibit, or otherwise make the
Company's expansion into these states undesirable, the recision of the New York
Insurance Department's conditional approval to redeem Farm Family Casualty's
Surplus Notes, exposure to catastrophic loss, geographic concentration of loss
exposure, general economic conditions and conditions
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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 the Form 10-K
filed for the fiscal year ended December 31, 1996 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>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Statements of Income
($ in thousands except per share date)
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Premiums $40,029 $33,899 $149,220 $130,780
Net investment income 4,548 4,317 18,077 15,952
Realized investment gains (losses), net (243) (615) 5,406 (640)
Other income 301 216 1,020 905
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Total Revenues 44,635 37,817 173,723 146,997
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Losses and Expenses:
Losses and loss adjustment expenses 26,880 23,135 103,301 94,977
Underwriting expenses 10,985 11,073 41,787 38,160
Early retirement program expense - 1,177 - 1,177
Interest expense 25 26 102 167
Dividends to policyholders 105 217 282 373
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Total Losses and Expenses 37,995 35,628 145,472 134,854
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Income before federal income tax expense and extraordinary
item 6,640 2,189 28,251 12,143
Federal income tax expense 2,489 540 9,747 3,676
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Income before extraordinary item 4,151 1,649 18,504 8,467
Extraordinary item - demutualization expenses - - - 1,543
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Net Income $4,151 $1,649 $18,504 $6,924
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Operating Income (1) $4,309 $2,813 $14,990 $9,648
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Per share data:
Net income per share-Diluted $0.78 $0.31 $3.51 $1.74
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Net operating income per share-Diluted (1) $0.81 $0.54 $2.84 $2.42
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Weighted average shares outstanding (2) 5,290,569 5,253,813 5,270,947 3,979,115
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(1) Operating income excludes the impact of realized investment gains (losses),
extraordinary items, nonrecurring charges, and the related taxes thereon.
(2) Gives effect to the allocation of 3,000,000 shares to eligible policyholders
on July 26, 1996 pursuant to Farm Family Casualty Insurance Company's
conversion from a mutual company to a stockholder owned company.
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</TABLE>
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<TABLE>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands)
<CAPTION>
12/31/97 12/31/96
-------- --------
Assets:
<S> <C> <C>
Investments $280,431 $244,704
Cash 5,841 4,110
Insurance receivables 40,484 33,406
Deferred acquisition costs 12,613 10,682
Accrued investment income 5,408 4,861
Other assets 23,501 21,649
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Total Assets $368,278 $319,412
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Liabilities:
Reserves for losses and loss adjustment expenses 156,622 141,220
Unearned premium reserve 66,069 55,945
Debt 1,268 1,304
Other liabilities 14,392 10,202
--------------------------------
Total Liabilities 238,351 208,671
--------------------------------
Stockholders' equity 129,927 110,741
--------------------------------
Total Liabilities and Stockholders' Equity $368,278 $319,412
--------------------------------
Book Value Per Share $24.73 $21.08
--------------------------------
Book Value Per Share (excluding SFAS 115 adjustment) $23.32 $19.80
--------------------------------
Shares Outstanding 5,253,813 5,253,813
--------------------------------
</TABLE>
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