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: March 1, 1999
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 25, 1999, Farm Family Holdings, Inc. issued a press release
announcing operating results for the fourth quarter and the year ended
December 31, 1998.
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)
March 1, 1999 /s/ Philip P. Weber
----------------- ---------------------
(Date) Philip P. Weber
President and CEO
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News Release
For Release: Immediate Contact:Timothy A. Walsh
Executive Vice President - Finance & Treasurer
(518) 431 - 5410
Farm Family Holdings Reports Continued Profitable Growth and Increase in
Operating Income for the Fourth Quarter
Glenmont, New York - February 25, 1999 - - Farm Family Holdings, Inc.
(NYSE: FFH) today announced that operating income for the fourth quarter ended
December 31, 1998 increased 5.2% to $4,534,000 from $4,309,000 for the same
period in 1997. On a diluted per share basis, operating income for the fourth
quarter of 1998 was $0.86 compared to $0.81 for the same period in 1997.
The increase in operating income for the fourth quarter ended December 31,
1998 was primarily attributable to increases in premium revenue, net investment
income, and the results of the Company's continuing expense management program.
Operating income for the year ended December 31, 1998 was $14,271,000
compared to $14,990,000 for the same period in 1997. On a diluted per share
basis, operating income for the year ended December 31, 1998 was $2.69 compared
to $2.84 for the same period in 1997. Operating income for the year ended
December 31, 1998 decreased compared to operating income for 1997 primarily as a
result of an increase in weather related losses incurred during the first and
second quarters of 1998.
Operating income excludes realized investment gains (losses), the gain on
the partial reduction of the Company's extended earnings liability, the
adjustments to restate prior period financial statements for the Company's
extended earnings liability, extraordinary items, non-recurring charges, and the
related taxes thereon.
Philip P. Weber, President & CEO of Farm Family Holdings, said, "During
1998, 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 1998. The growth in our premiums and investment
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income coupled with our expense management program and aggregate stop loss
reinsurance program enabled us to increase our operating earnings during the
third and fourth quarters of 1998 compared to the same periods in 1997."
Premiums
Premium revenue increased 20.8% to $48,352,000 for the fourth quarter of
1998 compared to $40,029,000 for the same period in 1997. For the year ended
December 31, 1998, premium revenue increased 21.8% to $181,756,000 compared to
$149,220,000 for the same period in 1997. The increase in premium revenue for
the year ended December 31, 1998 was primarily attributable to an increase of
$20,008,000 in premium revenue from our direct writings, a $4,110,000 increase
in revenue from the Company's voluntary assumed reinsurance business, and a
reduction of $8,960,000 in premiums ceded to the Company's affiliate, United
Farm Family Insurance Company ("United Farm Family"). 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 23.5% to $46,599,000 for the fourth quarter
of 1998 compared to $37,740,000 for the same period in 1997. For the year ended
December 31, 1998, net written premiums increased 18.6% to $188,824,000 compared
to $159,245,000 for the same period in 1997. The increase in net written
premiums for the year ended December 31, 1998 was primarily attributable to an
increase of $16,431,000 in direct writings, a $2,423,000 increase in the
Company's voluntary assumed reinsurance business, and a $11,204,000 reduction in
premiums ceded to the Company's reinsurers. The growth in the Company's direct
writings (excluding assigned risk auto business) in New Jersey accounted for
$8,697,000 or 45.3% of the increase in the direct writings during 1998.
Mr. Weber said, "We continue to increase direct writings of all of our
primary products: personal and commercial automobile, the Special Farm Package,
businessowners, homeowners, and Special Home Package policies. Direct writings
(excluding assigned risk auto business) in New York increased by $5,014,000 or
8.8% during 1998. In addition, direct writings from the agribusiness and rural
and suburban markets in Connecticut, Delaware, Massachusetts, New Jersey, and
West Virginia each increased by more than 10% during 1998 compared to 1997."
Combined Ratio
Farm Family Casualty Insurance Company's statutory combined ratio was 96.4%
for the fourth quarter of 1998 compared to 94.0% for the same period in 1997.
The statutory combined ratio for the year ended December 31, 1998 was 98.4%
compared to 95.6% for the same period in
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1997. Loss and loss adjustment expenses were 73.9% of premium revenue for the
year ended December 31, 1998 compared to 69.2% 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 1998
compared to 1997 which impacted the Company's direct writings as well as its
voluntary assumed reinsurance business. Losses related to the Company's direct
writings believed to be weather related aggregated $11,692,000 in 1998 compared
to $5,234,000 in 1997. The Company's aggregate stop loss reinsurance program
partially offset the impact of the increased losses incurred by the Company
during 1998. In addition, the Company reduced its underwriting expense ratio to
26.0% in 1998 from 29.0% in 1997.
Net Investment Income
Net investment income for the fourth quarter of 1998 was $4,786,000
compared to $4,548,000 for the same period in 1997. For the year ended December
31, 1998, net investment income was $19,119,000 compared to $18,077,000 for the
same period in 1997. The increase in net investment income was primarily
attributable to the investment of available operating cash flows.
Net Income
Net income for the fourth quarter of 1998 increased to $4,480,000 compared
to $3,906,000 for the same period in 1997. On a diluted per share basis, net
income for the fourth quarter of 1998 was $0.85 compared to $0.74 for the same
period in 1997. During the fourth quarter of 1997, net income included a charge
of $246,000 net of tax, related to the Company's restatement of prior period
financial statements for the Company's extended earnings liability.
Net income for the year ended December 31, 1998 increased to $18,671,000
compared to $17,500,000 for the same period in 1997. On a diluted per share
basis, net income for the year ended December 31, 1998 was $3.52 compared to
$3.32 for the same period in 1997. Net income for the year ended December 31,
1998 included a 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 year ended December 31, 1997 included net realized investment
gains of $5,406,000.
Philip P. Weber, President & CEO of the Company, said "Despite a difficult
beginning, 1998 was another good year for Farm Family Holdings. We have
continued to expand our presence in the markets we serve. We expect to close the
acquisition of our affiliate, Farm Family Life Insurance Company and its
subsidiary, United Farm Family Insurance Company in April 1999. This acquisition
will help to enhance our position as the premier provider of insurance to the
agribusiness, rural, and suburban markets we currently serve in our ten state
northeastern region and will add the states of Pennsylvania and Maryland to our
service territory. This acquisition, coupled with Farm Family Financial
Services, Inc.'s affiliation with a national broker-dealer, supports the
opportunities our agents have to be the primary advisors to the households they
serve. We remain focused on executing our strategy of achieving profitable
growth and creating value for our shareholders."
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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 the Form 10-K/A 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 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 Year Ended
December 31, December 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Premiums $48,352 $40,029 $181,756 $149,220
Net investment income 4,786 4,548 19,119 18,077
Realized investment gains (losses), net (83) (242) 451 5,406
Other income 281 301 1,033 1,020
--- --- ----- -----
Total Revenues 53,336 44,636 202,359 173,723
------ ------ ------- -------
Losses and Expenses:
Losses and loss adjustment expenses 35,238 26,880 134,302 103,301
Underwriting expenses 12,105 11,359 47,233 43,320
Interest expense - 25 25 102
Dividends to policyholders 73 105 192 282
-- --- --- ---
Total Losses and Expenses 47,416 38,369 181,752 147,005
------ ------ ------- -------
Gain on partial reduction of extended earnings liability - - (6,318) -
------ ------ ------- -------
Total Losses, Expenses and Other 47,416 38,369 175,434 147,005
------ ------ ------- -------
Income before federal income tax expense 5,920 6,267 26,925 26,718
Federal income tax expense 1,440 2,361 8,254 9,218
----- ----- ----- -----
Net Income $4,480 $3,906 $18,671 $17,500
====== ====== ======= =======
Operating Income (1) $4,534 $4,309 $14,271 $14,990
====== ====== ======= =======
Per Share Data
Net income per share-Diluted $0.85 $0.74 $3.52 $3.32
===== ===== ===== =====
Operating income per share-Diluted (1) $0.86 $0.81 $2.69 $2.84
===== ===== ===== =====
Weighted average shares outstanding-Diluted 5,297,267 5,290,569 5,303,965 5,270,947
========= ========= ========= =========
</TABLE>
(1) Operating income excludes realized investment gains (losses), the gain on
the partial reduction of the Company's extended earnings liability, the
adjustments to restate prior period financial statements for the Company's
extended earnings liability, nonrecurring charges, and the related taxes
thereon.
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands except per share data)
12/31/98 12/31/97
-------- --------
Assets:
<S> <C> <C>
Investments $312,162 $280,431
Cash 6,039 5,841
Insurance receivables 47,466 40,484
Deferred acquisition costs 13,668 12,613
Accrued investment income 5,527 5,408
Other assets 21,641 26,454
------ ------
Total Assets $406,503 $371,231
======== ========
Liabilities:
Reserves for losses and loss adjustment expenses $174,435 $156,622
Unearned premium reserve 71,209 66,069
Debt - 1,268
Other liabilities 16,621 24,038
------ ------
Total Liabilities 262,265 247,997
------- -------
Stockholders' equity 144,238 123,234
------- -------
Total Liabilities and Stockholders' Equity $406,503 $371,231
======== ========
Book Value Per Share $27.45 $23.46
====== ======
Book Value Per Share (excluding FAS 115 adjustment) $25.60 $22.05
====== ======
Shares Outstanding 5,253,813 5,253,813
========= =========
</TABLE>
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