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 2, 2000
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 29, 2000, Farm Family Holdings, Inc. issued a press release
announcing the results of its operations for the fourth quarter and year ended
December 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)
March 2, 2000 /s/ Philip P. Weber
- ----------------- --------------------------------------------------
(Date) Philip P. Weber
President and CEO
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IMMEDIATE RELEASE Contact: Timothy A. Walsh
Executive Vice President
Finance & Treasurer
(518) 431-5410
Farm Family Holdings Reports Increased Operating Income for
the Fourth Quarter and Year Ended December 31, 1999
Glenmont, New York - February 29, 2000 - Farm Family Holdings, Inc.(NYSE: FFH)
(the "Company") today announced results of its operations for the fourth quarter
and year ended December 31, 1999, which includes the operations of Farm Family
Life Insurance Company ("Farm Family Life") and Farm Family Life's wholly-owned
subsidiary, United Farm Family Insurance Company ("United Farm Family"), since
April 6, 1999, the effective date of the acquisition of Farm Family Life by the
Company.
Consolidated operating income for the fourth quarter of 1999 increased 14.3% to
$5,182,000 compared to $4,534,000 for the same period in 1998. On a diluted per
share basis, consolidated operating income was $0.84 for the fourth quarter of
1999 compared to $0.86 for the same period in 1998.
Consolidated operating income for the year ended December 31, 1999 was
$19,131,000 compared to $14,271,000 for the same period in 1998. On a diluted
per share basis, consolidated operating income for the year ended December 31,
1999 was $3.22 compared to $2.69 for the same period in 1998. Operating income
excludes realized investment gains (losses), nonrecurring items, and the related
taxes thereon.
Net income for the fourth quarter of 1999 was $4,653,000 compared to $4,480,000
for the fourth quarter of 1998. On a diluted per share basis, net income was
$0.75 for the fourth quarter of 1999 compared to $0.85 for the same period in
1998. Net income for the year ended December 31, 1999 was $18,618,000 compared
to $18,671,000 for the same period in 1998. On a diluted per share basis, net
income for the year ended December 31, 1999 was $3.13 compared to $3.52 for the
same period in 1998. Net income for the year ended December 31, 1998 included a
net gain of $4,107,000 or $0.77 per share ($6,318,000 less taxes of $2,211,000)
as a result of the reduction of a significant portion of the Company's liability
for its extended earnings program with its agents.
Philip P. Weber, President and CEO of Farm Family Holdings, said, "Our fourth
quarter and 1999 results were generally consistent with our expectations. We
continue to see opportunities to deliver comprehensive financial services to the
agribusiness and rural and suburban markets we serve. We believe our revised
agent contracts and focus on service demonstrate our commitment to profitable
growth and enhancing shareholder value. In addition, we are developing
web-enabled systems initiatives aimed at increasing the accessibility and
usability of our primary product systems for our agents."
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The Company replaced its existing lines of credit with a revolving credit
agreement with three banks during January 2000. The credit agreement, which
expires during January 2003, provides for uncollateralized borrowings of up to
$30,000,000 (reducing by $10,000,000 per year unless otherwise extended) at the
lending banks'prime rate or LIBOR plus 0.8%.
Property and Casualty Insurance Business
For the fourth quarter of 1999, property and casualty premium revenue was
$46,466,000 compared to $48,352,000 for the same period in 1998. The decrease in
premium revenue for the fourth quarter of 1999 was primarily attributable to an
increase of $2,739,000 in premium revenue ceded to Farm Family Casualty's
reinsurers and a decrease of $668,000 in premium revenue from Farm Family
Casualty's voluntary assumed reinsurance business. The increase in premium
revenue ceded to reinsurers was primarily attributable to an increase in
premiums ceded pursuant to Farm Family Casualty's aggregate stop loss
reinsurance program which also reduced losses and loss adjustment expenses for
the fourth quarter of 1999. These decreases in premium revenue were partially
offset by an increase in premium revenue derived from Farm Family Casualty's
direct writings of $1,168,000 and premium revenue of $420,000 from United Farm
Family.
For the year ended December 31, 1999, property and casualty premium revenue
increased 3.9% to $188,921,000 compared to $181,756,000 for the same period in
1998. The increase in property and casualty premium revenue for the year ended
December 31, 1999 was attributable to an increase of $7,154,000 in premium
revenue derived from Farm Family Casualty's direct writings, an increase of
$1,036,000 in premium revenue assumed from Farm Family Casualty's reinsurers and
premium revenue of $977,000 from United Farm Family. These increases were
partially offset by an increase of $2,002,000 in premium revenue ceded to Farm
Family Casualty's reinsurers.
For the fourth quarter of 1999, property and casualty net written premiums were
$44,345,000 compared to $46,599,000 for the same period in 1998. For the year
ended December 31, 1999, property and casualty net written premiums increased
1.5% to $191,702,000 compared to $188,824,000 for the same period in 1998. The
increase in property and casualty net written premiums for the year ended
December 31, 1999 was attributable to an increase of $5,356,000 or 3.0% in
direct writings by Farm Family Casualty (excluding assigned risk automobile
business premiums), an increase of $855,000 in Farm Family Casualty's assigned
risk automobile business premiums, and the inclusion of United Farm Family's net
written premiums of $1,435,000. These increases were partially offset by an
increase of $3,981,000 in premiums ceded to Farm Family Casualty's reinsurers
and a decrease of $787,000 in premiums assumed by Farm Family Casualty.
Excluding premiums from personal automobile business in the state of New Jersey
and premiums from assigned risk automobile business, Farm Family Casualty's
direct writings increased $2,011,000 or 5.5% for the fourth quarter of 1999
compared to the same period in 1998 and $9,405,000 or 6.1% for the year ended
December 31, 1999 compared to the same period in 1998.
Direct written premiums for personal automobile business in New Jersey decreased
$901,000 or 13.1% for the fourth quarter of 1999 compared to the same period in
1998 and decreased $4,049,000 or 14.9% for the year ended December 31, 1999
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compared to the same period in 1998. This reduction was primarily attributable
to the New Jersey legislation mandating a rate roll back for personal automobile
business in the state. In addition, certain changes in the New Jersey Farm
Bureau's membership requirements have had a favorable impact on reducing the
growth of Farm Family Casualty's personal automobile policies in New Jersey. For
the year ended December 31, 1999, the number of personal automobile policies
Farm Family Casualty had in New Jersey decreased by 2.3% compared to an increase
of 18.8% during the year ended December 31, 1998.
The statutory combined ratio for property and casualty business was 99.7% for
the fourth quarter of 1999 compared to 96.4% for the same period in 1998. Losses
and loss adjustment expenses for property and casualty business were 74.7% of
premium revenue for the fourth quarter of 1999 compared to 72.9% for the same
period in 1998. An increase in weather-related losses for Farm Family Casualty
during the fourth quarter of 1999 to $2,885,000 from $1,652,000 during the same
period in 1998, and the inclusion of United Farm Family contributed to the
increase in the loss and loss adjustment expense ratio. Excluding United Farm
Family, the combined ratio for property and casualty business was 98.4% for the
fourth quarter of 1999 and the loss and loss adjustment expense ratio was 73.9%
during the same period.
The statutory combined ratio for property and casualty business was 100.0% for
the year ended December 31, 1999 compared to 98.4% for the same period in 1998.
Losses and loss adjustment expenses for property and casualty business were
74.9% of premium revenue for the year ended December 31, 1999 compared to 73.9%
for the same period in 1998. Excluding United Farm Family, the combined ratio
for property and casualty business was 98.5% in 1999 and the loss and loss
adjustment expense ratio was 73.8% in 1999.
The GAAP combined ratio for property and casualty business was 100.2% for the
fourth quarter of 1999 compared to 97.0% for the same period in 1998 and was
99.5% for the year ended December 31, 1999 compared to 99.1% for the same period
in 1998. Excluding United Farm Family, the GAAP combined ratio was 99.1% for the
fourth quarter of 1999 compared to 97.0% for the same period in 1998 and was
98.1% for the year ended December 31, 1999 compared to 99.1% for the same period
in 1998.
Operating income for property and casualty business for the fourth quarter of
1999 was $4,285,000 compared to $4,741,000 for the same period in 1998. The
decrease in the fourth quarter operating income was largely due to the decrease
in earned premium and the increase in combined ratio, partially offset by an
increase in net investment income. Operating income for property and casualty
business for the year ended December 31, 1999 was $17,140,000 compared to
$14,884,000 for the same period in 1998. The increase in operating income for
1999 was mainly attributable to the increase in earned premiums, the decrease in
combined ratio and the increase in net investment income.
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Life Insurance Business
For the fourth quarter of 1999, life insurance premium revenue was $9,448,000,
operating income was $1,281,000, net investment income was $12,464,000 and total
assets were $812,106,000.
The operations of the life insurance business have been included in the
Company's operating results since April 6, 1999, when the Company acquired all
of the outstanding capital stock of Farm Family Life.
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 sells individual whole life, term and
universal life products, single and flexible premium deferred annuity products
and disability income insurance products.
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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 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,
exposure to catastrophic loss, geographic concentration of loss exposure in New
York, New Jersey, and the Northeastern United States generally, and conditions
specific to the 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, 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, the risks
associated with the legislative, regulatory and competitive environments in the
states in which the Company currently operates, heightened competition,
including specifically the intensification of competition, failure to obtain new
customers or to retain existing customers, the effect of the uncertainties
related to the Year 2000 issue, the Company's primary reliance, as a holding
company, on dividends from its subsidiaries and the applicable regulatory
restrictions on the ability of the Company's subsidiaries to pay such dividends,
changes in tax laws, 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 estimated in such forward looking statements, include, among
others: (i) the soundness of assumptions regarding future morbidity,
persistency, lapse rates, expenses, mortality and interest rates used in
calculating reserve and liability amounts and in developing pricing and other
terms of its life insurance products; (ii) the ability of the Life Company to
maintain its current financial strength and claims-paying ratings; (iii) 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; (iv) policyholder lapses resulting from interest rate fluctuations;
(v) ability 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; (vi) 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;
(vii) adverse state and federal legislation and regulation, including
limitations on premium levels, increases in minimum capital and reserves and
other financial viability requirements; (viii) 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; (ix) inability to carry out marketing and sales plans;
(x) loss of key executives; (xi) general economic and business conditions which
are less favorable than expected; and (xii) unanticipated changes in industry
trends.
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<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,
1999 1998 1999 1998
-------------------------------------------------
Revenues:
<S> <C> <C> <C> <C>
Premiums from property/casualty operations $46,466 $48,352 $188,921 $181,756
Premiums from life and health operations and contract charges 9,448 ---- 27,799 ----
Net investment income 17,939 4,786 58,558 19,119
Realized investment gains (losses), net (980) (83) (1,984) 451
Other income 546 281 1,569 1,033
--------------------------------------------------
Total revenues 73,419 53,336 274,863 202,359
--------------------------------------------------
Losses, benefits, expenses and other:
Losses and loss adjustment expenses on property/casualty operations 34,722 35,239 141,509 134,302
Policyholder contract benefits 12,299 ---- 38,710 ----
Amortization expense 10,410 9,224 38,182 35,019
Other operating costs and expenses 5,653 2,953 20,434 12,431
Participating policyholders' interest 4,018 ---- 9,692 ----
--------------------------------------------------
Total losses, benefits and expenses 67,102 47,416 248,527 181,752
Gain on partial reduction of extended earnings liability ---- ---- ---- (6,318)
--------------------------------------------------
Total losses, benefits, expenses and other 67,102 47,416 248,527 175,434
Income before federal income tax expense and preferred stock dividends 6,317 5,920 26,336 26,925
Federal income tax expense 1,575 1,440 7,440 8,254
--------------------------------------------------
Income before preferred stock dividends 4,742 4,480 18,896 18,671
Preferred stock dividends 89 ---- 278 ----
--------------------------------------------------
Net income attributable to common stockholders $4,653 $4,480 $18,618 $18,671
==================================================
Operating income (1) $5,182 $4,534 $19,131 $14,271
==================================================
Per Share Data
Net income per share-Diluted $0.75 $0.85 $3.13 $3.52
==================================================
Operating income per share-Diluted (1) $0.84 $0.86 $3.22 $2.69
==================================================
Weighted average shares outstanding-Diluted 6,200,265 5,297,267 5,948,213 5,303,965
==================================================
(1) Operating income for the fourth quarter of 1999 excludes realized
investment losses of $282,000, net of tax, and nonrecurring charges of
$247,000, net of tax, consisting of $76,000 relating to employee severance
costs and $171,000 related to the Company's evaluation of potential
business transactions. The Company is no longer evaluating these
transactions. Operating income for the fourth quarter of 1998 excludes
realized investment losses of $54,000, net of tax. Operating income for
the year ended December 31, 1999 excludes realized investment losses of
$266,000, net of tax, and nonrecurring charges of $247,000, as mentioned
above. Operating income for the year ended December 31, 1998 excludes
realized investment gains of $293,000, net of tax, and a gain of
$4,107,000, net of tax, on the partial reduction of the Company's extended
earnings liability.
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
December 31, 1999 December 31, 1998
Assets:
<S> <C> <C>
Investments $1,071,681 $307,524
Cash and cash equivalents 19,190 10,677
Insurance receivables 56,842 47,466
Deferred acquisition costs 17,630 13,668
Present value of future profits 28,571 ----
Accrued investment income 18,875 5,527
Property and equipment, net 14,520 ----
Deferred income tax asset, net 29,605 1,694
Receivable from affiliates, net ---- 16,660
Other assets 4,884 3,287
===========================================
Total assets $1,261,798 $406,503
===========================================
Liabilities:
Reserves for losses and loss adjustment expenses
for property/casualty insurance $186,130 $174,435
Reserves for life policies and contract benefits 239,891 ----
Funds on deposit from policyholders 416,971 ----
Unearned premium reserve 74,364 71,209
Accrued dividends to policyholders 5,263 ----
Accrued expenses and other liabilities 23,639 16,621
Participating policyholders' interest 128,516 ----
-------------------------------------------
Total liabilities 1,074,774 262,265
Mandatory redeemable preferred stock 5,830 ----
Total stockholders' equity 181,194 144,238
===========================================
Total liabilities and stockholders' equity $1,261,798 $406,503
===========================================
Book Value Per Share $29.65 $27.45
===========================================
Book Value Per Share (excluding SFAS 115 adjustment) $30.07 $25.60
===========================================
Common Shares Outstanding 6,110,684 5,253,813
===========================================
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<CAPTION>
FARM FAMILY HOLDINGS, INC.
Selected Segment Information
($ in thousands)
Three months ended Year Ended
December 31, December 31,
1999 1998 1999 1998
Premium Revenues
<S> <C> <C> <C> <C>
Property and casualty insurance $46,466 $48,352 $188,921 $181,756
Life insurance 9,448 ---- 27,799 ----
----------------------------------------------------
Total $55,914 $48,352 $216,720 $181,756
====================================================
Net Investment Income
Property and casualty insurance $5,380 $4,666 $20,449 $18,601
Life insurance 12,464 ---- 37,673 ----
Corporate and other 84 120 388 518
Intersegment eliminations 11 ---- 48 ----
====================================================
Total $17,939 $4,786 $58,558 $19,119
====================================================
Other Operating Costs & Expenses and Amortization
Property and casualty insurance
Underwriting and amortization expenses $11,891 $11,648 $46,471 $45,778
Dividends to policyholders ---- 73 159 192
Life insurance 3,741 ---- 11,097 ----
Corporate and other 656 456 1,564 1,480
Intersegment eliminations (225) ---- (675) ----
====================================================
Total $16,063 $12,177 $58,616 $47,450
====================================================
Net Income
Operating Income
Property and casualty insurance $4,285 $4,741 $17,140 $14,884
Life insurance 1,281 ---- 2,879 ----
Corporate and other (384) (207) (888) (613)
----------------------------------------------------
Total operating income 5,182 4,534 19,131 14,271
Realized investment gains (losses), net of tax (282) (54) (266) 293
Gain on partial reduction of extended earnings liability,
net of tax ---- ---- ---- 4,107
Other non-recurring items, net of tax (247) ---- (247) ----
----------------------------------------------------
Net income $4,653 $4,480 $18,618 $18,671
====================================================
December 31,
----------------------------
1999 1998
Identifiable Assets
Property and casualty $446,721 $397,038
Life insurance 812,106 ----
Corporate and other 71,014 35,417
Intersegment eliminations (68,043) (25,952)
==============================
Total $1,261,798 $406,503
==============================
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<CAPTION>
FARM FAMILY HOLDINGS, INC.
Selected Unaudited Pro Forma Consolidated Financial Data
($ 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 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.
For the Year Ended:
December 31, 1999 December 31, 1998
Statement of Income Data:
<S> <C> <C>
Total revenues $297.7 $293.6
Total losses, benefits and expenses (269.9) (268.4)
Gain on partial reduction of extended earnings liability ---- 6.3
------------------------ -----------------------
Income before federal income tax expense 27.8 31.5
Federal income tax expense (8.0) (9.5)
------------------------ -----------------------
Income before preferred stock dividends 19.8 22.0
Preferred stock dividends (0.4) (0.4)
------------------------ -----------------------
Income attributable to common shareholders $19.4 $21.6
======================== =======================
Operating income(1) $20.0 $17.1
======================== =======================
Per Share Data:
Net income per common share - Diluted $3.14 $3.51
======================== =======================
Operating income per common share - Diluted (1) $3.24 $2.78
======================== =======================
Weighted average shares - Diluted 6,175,929 6,160,836
======================== =======================
(1) Operating income excludes the impact of realized investment gains (losses),
nonrecurring items, and the related taxes thereon.
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