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: April 28, 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 April 27, 1999, Farm Family Holdings, Inc. issued a press release announcing
an increase in operating income for the first quarter ended March 31, 1999.
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)
April 28, 1999 /s/ Philip P. Weber
- -------------------------------- ---------------------------------------
(Date) Philip P. Weber
President and CEO
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FOR IMMEDIATE RELEASE CONTACT: Timothy A. Walsh
Executive Vice President
Finance & Treasurer
(518) 431-5410
Farm Family Holdings Reports Increased Operating Income for the First Quarter
Ended March 31, 1999 and Announces Share Repurchase Program
Glenmont, New York - April 27, 1999 - - Farm Family Holdings, Inc. (NYSE:
FFH) today announced that operating income for the first quarter ended March 31,
1999 increased 21.1% to $3,562,000 compared to $2,940,000 for the same period in
1998. On a diluted per share basis, operating income increased to $0.67 for the
first quarter ended March 31, 1999 compared to $0.55 for the same period in
1998. Operating income excludes realized investment gains (losses), nonrecurring
charges, and the related taxes thereon. Net income for the first quarter of 1999
was $3,743,000 compared to $3,022,000 for the first quarter of 1998. On a
diluted per share basis, net income was $0.71 for the first quarter of 1999
compared to $0.57 for the same period in 1998.
Premiums
Premium revenue increased $5,519,000 or 12.9% to $48,334,000 for the first
quarter of 1999 compared to $42,815,000 for the same period in 1998. The
increase in premium revenue for the first quarter of 1999 was primarily
attributable to an increase of $2,555,000 in premium revenue from our direct
writings, an increase of $1,000,000 in our voluntary assumed reinsurance
business, and a reduction of $2,025,000 in premiums ceded to the Company's
reinsurers.
Net written premiums increased $1,388,000 or 2.9% to $48,743,000 for the
first quarter of 1999 compared to $47,355,000 for the same period in 1998. The
increase in net written premiums for the first quarter of 1999 was primarily
attributable to an increase of $1,761,000 or 4.0% in direct writings to the
customers we serve (excluding assigned risk automobile business premiums
received by the Company) which was partially offset by a reduction in the
Company's written voluntary assumed reinsurance business.
Combined Ratio
Farm Family Casualty Insurance Company's statutory combined ratio was
100.2% for the first quarter of 1999 compared to 100.7% for the same period in
1998. Loss and loss adjustment expenses were 75.5% of premium revenue for the
first quarter of 1999 compared to 75.1% for the same period in 1998.
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Annual Meeting
At the Annual Meeting of Shareholders held today, the nominees for
Directors were elected and the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for 1999 was ratified. Clark W. Hinsdale III was
elected Chairman of the Board and Stephen J. George was elected Vice Chairman of
the Board at today's meeting of the Board of Directors.
Stock Repurchase Plan
Today, the Company's Board of Directors adopted a stock repurchase plan
that authorizes the Company to repurchase shares of the Company's common stock
in an aggregate amount of up to $7,500,000. Subject to price and market
considerations and applicable securities laws, such repurchase may be made from
time to time in open market, privately negotiated or other transactions. The
repurchase program has been authorized for a one year period ending on April 27,
2000. The extent and timing of any repurchases will depend on market conditions
and other corporate considerations. No assurances can be given that any stock
purchases will be consummated.
New Jersey Personal Automobile Business
Effective March 22, 1999, all insurers in New Jersey were required to
reduce personal automobile rates by approximately 15% pursuant to the Automobile
Insurance Cost Reduction Act of 1998 ("The Act"). The Company's direct written
premium for New Jersey personal automobile business for the three months ended
March 31, 1999 was $6,452,000 which was approximately 13.6% of its total direct
written premium for the first quarter of 1999. The Act also made coverage and
other changes to the statutory requirements governing personal automobile
insurance in New Jersey which are intended to reduce losses and loss adjustment
expenses. The impact on the Company's losses and loss adjustment expenses, if
any, cannot be determined at this time.
Philip P. Weber, President and CEO of Farm Family Holdings said, "Overall,
we are pleased with our operating results for the first quarter. Today's
adoption of a stock repurchase program coupled with our recently completed
acquisition of Farm Family Life Insurance Company and its subsidiary, United
Farm Family Insurance Company are part of our continued program to enhance
shareholder value. In addition, we are encouraged about our future opportunities
in the two newest states which we have added to our service territory,
Pennsylvania and Maryland, as well as future prospects for Farm Family Life."
Farm Family Life
On April 6, 1999, Farm Family Holdings acquired all of the outstanding
capital stock of Farm Family Life Insurance Company.
The selected unaudited pro forma consolidated financial information
included as part of this press release gives effect to the acquisition of Farm
Family Life using the purchase method of accounting. The selected unaudited pro
forma consolidated statement of income data gives effect to the acquisition
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as if the acquisition had occurred at the beginning of the periods
presented. The selected unaudited pro forma balance sheet data gives effect to
the acquisition as if it had occurred at March 31, 1999. The pro forma
information is provided for informational purposes only and is not necessarily
indicative of actual results that would have been achieved had the acquisition
been consummated at the beginning of the periods presented or of future results.
Farm Family Holdings is the parent of Farm Family Casualty Insurance
Company and Farm Family Life Insurance Company. Farm Family Casualty and Farm
Family Life's subsidiary, United Farm Family are specialized, property and
casualty insurers of farms, agricultural related businesses and residents and
businesses of rural and suburban communities. Farm Family Life principally sells
individual whole life, term and universal life products, in addition to single
and flexible premium deferred annuities and disability income insurance
products.
- ---------------------------------
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 acquisition of Farm
Family Life, the impact of the acquisition of Farm Family Life on the earnings
and shareholder value of the Company, statements regarding the Company's stock
repurchase plan, statements regarding expansion into the states of Pennsylvania
and Maryland, 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, 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 , market
and business conditions impacting the Company's potential stock repurchases, 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 effect
of regulatory changes governing personal automobile insurance in New Jersey and
the impact thereof on the Company's direct written premium, losses and loss
adjustment expenses, 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, 1998. Additional risks and uncertainties that
may cause actual results of operations and business of Farm Family Life
Insurance Company ("the Life Company") to differ materially from those
contemplated or projected, forecasted, estimated or budgeted in such forward
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looking statements, include, among others: (i) assumptions regarding future
morbidity, persistency, lapse rates, expenses, mortality and interest rates used
in calculating reserve and liability amounts; (ii) significant variations of
actual experience from that assumed by the Life Company as to the expected
morbidity, lapse rates and other factors in developing pricing and other terms
of its life insurance products; (iii) the ability of the Life Company to
maintain its current rating from A.M. Best Company, Inc. (iv) changes in
interest rates causing a reduction of investment income, operating cash flow and
other sources which affect the Life Company's ability to pay policyholder
benefits; (v) policyholder lapses resulting form interest rate fluctuations;
(vi) inability of the Life Company to maintain appropriate levels of statutory
capital and surplus, particularly in light of continuing scrutiny by rating
organizations and state insurance regulatory authorities, and to maintain
acceptable financial strength and claim-paying ratings; (vii) a significant
change in or termination of the Life Company's relationship with the Farm
Bureaus(R) in the states where the Life Company's business is concentrated
(viii) adverse state and federal legislation and regulation, including
limitations on premium levels, increases in minimum capital and reserves and
other financial viability requirements; (ix) heightened competition, including,
specifically the intensification of price competition, the entry of new or
existing competitors and the formation of new products by new and existing
competitors which may have substantially greater technical, financial and
operating resources; (x) inability to carry out marketing and sales plans; (xi)
loss of key executives; (xii) general economic and business conditions which are
less favorable than expected; (xiii) unanticipated changes in industry trends;
and (xiv) the reserving policies and the adequacy of the reinsurance and
retrocession programs of the Life Company. Accordingly, there can be no
assurance that actual results will conform to the forward-looking statements in
this press release.
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<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Statements of Income
($ in thousands except per share data)
Three Months Ended
March 31,
-------------------------------
1999 1998
---- ----
Revenues:
<S> <C> <C>
Premiums $48,334 $42,815
Net investment income 4,834 4,767
Realized investment gains, net 279 126
Other income 277 219
--- ---
Total Revenues 53,724 47,927
------ ------
Losses and Expenses:
Losses and loss adjustment expenses 36,486 32,139
Underwriting expenses 11,762 11,474
Interest expense - 25
Dividends to policyholders 70 50
-- --
Total Losses and Expenses 48,318 43,688
------ ------
Income before federal income tax expense and extraordinary item 5,406 4,239
Federal income tax expense 1,663 1,217
----- -----
Net Income $3,743 $3,022
====== ======
Operating Income (1) $3,562 $2,940
====== ======
Per Share Data
Net income per share-Diluted $0.71 $0.57
===== =====
Operating income per share-Diluted (1) $0.67 $0.55
===== =====
Weighted average shares outstanding-Diluted 5,296,143 5,301,498
========= =========
(1) Operating income excludes the impact of realized investment gains (losses),
non recurring charges, and the related taxes thereon.
</TABLE>
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands except per share data)
03/31/99 12/31/98
Assets:
<S> <C> <C>
Investments $307,811 $307,524
Cash and cash equivalents 9,928 10,677
Insurance receivables 48,661 47,466
Deferred acquisition costs 13,633 13,668
Accrued investment income 5,291 5,527
Other assets 22,933 21,641
------ ------
Total Assets $408,257 $406,503
======== ========
Liabilities:
Reserves for losses and loss adjustment expenses $175,651 $174,435
Unearned premium reserve 71,632 71,209
Debt - 1,055
Other liabilities 16,025 15,566
------ ------
Total Liabilities 263,308 262,265
------- -------
Stockholders' equity 144,949 144,238
------- -------
Total Liabilities and Stockholders' Equity $408,257 $406,503
======== ========
Book Value Per Share $27.59 $27.45
====== ======
Book Value Per Share (excluding SFAS 115 adjustment) $26.32 $25.60
====== ======
Shares Outstanding 5,253,813 5,253,813
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Selected Unaudited Pro Forma Consolidated Financial Data
(dollars in millions, except per share data)
The following table presents selected unaudited pro forma financial data
for the Company. The selected unaudited pro forma consolidated financial
information gives effect to the acquisition of Farm Family Life using the
purchase method of accounting. The selected unaudited pro forma consolidated
Statement of Income data gives effect to the acquisition of Farm Family Life as
if it occurred at the beginning of the periods presented. The selected unaudited
pro forma consolidated Balance Sheet data gives effect to the acquisition as if
it occurred at March 31, 1999. The pro forma information is provided for
informational purposes only and is not indicative of the actual results that
would have been achieved had the acquisition of Farm Family Life been
consummated at the beginning of the periods presented, or of future results.
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<CAPTION>
For the Three Months Ended:
March 31, 1999 March 31, 1998
-------------- --------------
Statement of Income Data:
<S> <C> <C>
Total revenues $77.5 $71.5
Total losses, benefits and expenses 70.7 65.8
------------------------ ----------------------
Income before federal income tax expense 6.8 5.7
Federal income tax expense 2.1 1.7
------------------------ ----------------------
Income before preferred stock dividends 4.7 4.0
Preferred stock dividends 0.1 0.1
------------------------ ----------------------
Income attributable to common shareholders $4.6 $3.9
======================== ======================
Operating income(1) $4.4 $3.8
======================== ======================
Per Share Data:
Net income per common share - Diluted $0.74 $0.63
======================== ======================
Operating income per common share - Diluted (1) $0.71 $0.62
======================== ======================
Weighted average shares - Diluted 6,153,014 6,158,369
======================== ======================
Balance Sheet Data (at March 31, 1999):
Total assets $1,244.6 -
Participating policyholders' interest 109.3 -
Total liabilities 1,063.3 -
Redeemable preferred stock 5.8 -
Total equity 175.5 -
Book value per share $28.73 -
========================
(1) Operating income excludes the impact of realized investment gains (losses),
nonrecurring charges, and the related taxes thereon.
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