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 27, 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 April 25, 2000, Farm Family Holdings, Inc. issued a press release announcing
the results of its operations for the first quarter ended March 31, 2000.
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 27, 2000 /s/ Philip P. Weber
- -------------------------------- ---------------------------------------------
(Date) Philip P. Weber
President and CEO
<PAGE>
News Release
Contact:
Timothy A. Walsh
Executive Vice President,
IMMEDIATE RELEASE Chief Financial Officer & Treasurer
(518) 431-5410
Farm Family Holdings Reports Results for the First Quarter
Ended March 31, 2000
Glenmont, New York - April 25, 2000 - Farm Family Holdings, Inc. (NYSE: FFH)
(the "Company") today announced that consolidated operating income for the first
quarter of 2000 increased 3.6% to $3,689,000 compared to $3,562,000 for the same
period in 1999. On a diluted per share basis, consolidated operating income was
$0.60 for the first quarter of 2000 compared to $0.67 for the same period in
1999.
Net income for the first quarter of 2000 was $16,409,000 compared to $3,743,000
for the first quarter of 1999. On a diluted per share basis, net income was
$2.66 for the first quarter of 2000 compared to $0.71 for the same period in
1999. In addition, book value per share on a diluted basis increased to $31.91
per share as of March 31, 2000.
The increase in net income and book value was primarily attributable to
revisions to the Company's calculation of its estimate of profits on
participating life insurance business allocable to stockholders. A significant
portion of the Company's life insurance segment's products is written on a
"participating" basis, as defined in the New York State Insurance Law. Profits
earned on participating business are reserved for the payment of dividends to
participating policyholders, except for the stockholders' share of profits on
participating policies, which under New York State Insurance Law, is limited
annually to the greater of 10% of the profit on participating business, or 50
cents per thousand dollars of the face amount of participating life insurance in
force.
In November 1999, the Company requested an opinion of the Insurance Department
of the State of New York (the "Department") as to whether interest credited in
excess of the interest guaranteed under certain participating insurance
policies, annuities and dividend accumulations ("Excess Interest") and the
difference between the guaranteed cost of insurance or premium and the cost of
insurance or premium actually charged ("Spreads"), as well as dividends to
participating policyholders, could be included in its calculation of the
estimate of profits on participating life insurance business allocable to
stockholders. In April 2000, the Department approved the Company's request to
include Excess Interest and Spreads, as well as dividends to participating
policyholders, in its calculation of the estimate of profits on participating
life insurance business allocable to stockholders on both a prospective and
retrospective basis. Accordingly, the Company's calculation of the estimate of
profits on participating life insurance business allocable to stockholders has
been revised to include these amounts.
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The impact of including Excess Interest and Spreads in the Company's estimate of
the profits on participating life insurance business allocable to stockholders
increased the profits allocable to stockholders and is included in participating
policyholders' interest on the accompanying condensed consolidated statements of
income. The effect of retroactively including Excess Interest and Spreads in the
Company's calculation of its estimate of profits on participating life insurance
business allocable to stockholders for periods through December 31, 1999
increased net income for the three months ended March 31, 2000 by $12,746,000
(after tax expense of $6,349,000) or $2.07 per common share on a fully diluted
basis.
Philip P. Weber, President and CEO of Farm Family Holdings, said, " I am pleased
with the continued growth of our property and casualty and life insurance
businesses. We continue to grow in our core ten-state territory as well as our
two newest states, Pennsylvania and Maryland. Although our first quarter
operating results were adversely impacted by an increase in claim severity in
certain of our casualty lines of business and by losses sustained on certain
assumed reinsurance contracts, we remain encouraged by the opportunities we see
in our markets."
Property and Casualty Insurance Business
For the first quarter of 2000, property and casualty premium revenue was
$47,522,000 compared to $48,334,000 for the same period in 1999. The decrease in
premium revenue for the first quarter of 2000 was primarily attributable to an
increase of $1,998,000 in premium revenue ceded to Farm Family Casualty's
reinsurers and a decrease of $369,000 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 first quarter of 2000. These decreases in premium revenue were partially
offset by an increase in premium revenue derived from Farm Family Casualty's
direct writings of $1,169,000 and premium revenue of $640,000 from United Farm
Family.
For the first quarter of 2000, property and casualty net written premiums were
$57,345,000 compared to $48,743,000 for the same period in 1999. The increase in
property and casualty net written premiums was primarily attributable to an
increase of $10,584,000 or 23.0% in direct writings by Farm Family Casualty
(excluding assigned risk automobile business premiums) and the inclusion of
United Farm Family's net written premiums of $1,415,000. Premiums from direct
writings increased primarily as a result of the conversion of our personal and
commercial automobile policies in certain states from six-month to twelve-month
policies and the inclusion of United Farm Family's direct written premiums of
$1,465,000. Excluding the impact of converting personal and commercial
automobile policies from six-month to twelve-month policies in certain states,
Farm Family Casualty's direct written premiums (excluding assigned risk
automobile business premiums) would have increased approximately $2,913,000 or
6.3% to $49,020,000 for the first quarter of 2000 compared to $46,107,000 for
the same period in 1999. These increases were partially offset by an increase of
$2,105,000 in premiums ceded to Farm Family Casualty's reinsurers and a decrease
of $399,000 in premiums assumed by Farm Family Casualty. Excluding premiums from
personal automobile business in the state of New Jersey, premiums from assigned
risk automobile business, and the effects of converting personal and commercial
automobile policies in certain states from six-month to twelve-month policies,
Farm Family Casualty's direct writings increased $3,551,000 or 9.0% for the
first quarter of 2000 compared to the same period in 1999.
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The GAAP combined ratio for property and casualty business was 104.6% for the
first quarter of 2000 compared to 99.3% for the same period in 1999. Excluding
United Farm Family, the GAAP combined ratio was 104.1% for the first quarter of
2000. Losses and loss adjustment expenses for property and casualty business
were 81.1% of premium revenue for the first quarter of 2000 compared to 75.5%
for the same period in 1999. The increase in the loss and loss adjustment
expense ratio was primarily attributable to an increase in the severity of
losses incurred on certain of the Company's businessowners, umbrella, and
personal automobile (bodily injury coverage) policies. In addition, the Company
incurred significant losses on two of its voluntary assumed reinsurance
contracts during the first quarter of 2000. The underwriting expense ratio for
the property and casualty business was 23.5% for the first quarter of 2000
compared to 23.8% for the same period in 1999.
Operating income for the property and casualty business for the first quarter of
2000 was $2,818,000 compared to $3,633,000 for the same period in 1999. The
decrease in operating income was largely due to the increase in losses and loss
adjustment expenses mentioned above.
Life Insurance Business
For the first quarter of 2000, life insurance premium revenue was $9,563,000,
operating income was $1,182,000, net investment income was $12,859,000 and total
assets were $813,282,000.
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.
Annual Meeting
At the Annual Meeting of Shareholders held today, the nominees for Directors
were elected, including a new Director, Edward J. Muhl. Mr. Muhl is a Senior
Managing Director of Insurance and Reinsurance Practice of Navigant Consulting,
Inc. Mr. Muhl previously served as Superintendent of Insurance of the State of
New York, Commissioner of Insurance for the State of Maryland and President of
the National Association of Insurance Commissioners. In addition, the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
for 2000 was ratified and the amendments to the Company's Omnibus Securities
Plan were approved.
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 repurchases 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 beginning on April 27, 2000
(the expiration date of the Company's existing stock repurchase plan) and ending
on April 26, 2001. The extent and timing of any repurchases will depend on
market conditions and other corporate considerations. No assurances can be given
that any stock repurchases will be consummated.
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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.
Additional information regarding the Company is available at www.farmfamily.com.
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, frequency and severity of losses, 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, 1999.
***More***
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Statements of Income
($ in thousands, except per share data)
Three Months Ended
March 31,
2000 1999
---- ----
Revenues:
<S> <C> <C>
Premiums from property/casualty operations $47,522 $48,334
Premiums from life and health operations and contract charges 9,563 ----
Net investment income 18,493 4,834
Realized investment gains (losses), net (208) 279
Other income 621 277
---------------------------------
Total revenues 75,991 53,724
---------------------------------
Losses, benefits, and expenses:
Losses and loss adjustment expenses on property/casualty operations 38,534 36,486
Policyholder contract benefits 14,660 ----
Amortization expense 8,751 8,996
Other operating costs and expenses 5,674 2,836
Participating policyholders' interest (15,895) ----
---------------------------------
Total losses, benefits and expenses 51,724 48,318
Income before federal income tax expense and preferred stock dividends 24,267 5,406
Federal income tax expense 7,769 1,663
---------------------------------
Income before preferred stock dividends 16,498 3,743
Preferred stock dividends 89 ----
---------------------------------
Net income attributable to common stockholders $16,409 $3,743
=================================
Operating income (1) $3,689 $3,562
=================================
Per Share Data
Net income per share-Diluted $2.66 $0.71
=================================
Operating income per share-Diluted (1) $0.60 $0.67
=================================
Weighted average shares outstanding-Diluted 6,167,294 5,296,143
=================================
</TABLE>
(1) Operating income for the first quarter of 2000 excludes realized
investment losses of $26,000, net of tax, and realized investment
gains of $181,000, net of tax, for the same period in 1999. In
addition, operating income for the first quarter of 2000 excludes
the effect of retroactively including Excess Interest and Spreads in
the calculation of the Company's estimate of profits on
participating life insurance business allocable to stockholders for
periods through December 31, 1999 of $12,746,000, net of tax.
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
March 31, 2000 December 31, 1999
Assets:
<S> <C> <C>
Investments $1,075,120 $1,071,681
Cash and cash equivalents 19,217 19,190
Insurance receivables 71,155 56,842
Deferred acquisition costs 19,858 17,630
Present value of future profits 28,534 28,571
Accrued investment income 17,570 18,875
Property and equipment, net 14,481 14,520
Deferred income tax asset, net 25,898 29,605
Other assets 5,140 4,884
------------------------------------------
Total assets $1,276,973 $1,261,798
==========================================
Liabilities:
Reserves for losses and loss adjustment expenses
for property/casualty insurance $189,987 $186,130
Reserves for life policies and contract benefits 244,987 239,891
Funds on deposit from policyholders 411,924 416,971
Unearned premium reserve 84,226 74,364
Accrued dividends to policyholders 5,515 5,263
Accrued expenses and other liabilities 24,011 23,639
Participating policyholders' interest 113,696 128,516
------------------------------------------
Total liabilities 1,074,346 1,074,774
Mandatory redeemable preferred stock 5,830 5,830
Total stockholders' equity 196,797 181,194
------------------------------------------
Total liabilities and stockholders' equity $1,276,973 $1,261,798
==========================================
Book Value Per Share Outstanding $32.19 $29.65
==========================================
Book Value Per Share Outstanding (excluding SFAS 115 adjustment) $32.75 $30.07
==========================================
Book Value Per Share-Diluted $31.91 $30.46
==========================================
Book Value Per Share-Diluted (excluding SFAS 115 adjustment) $32.47 $30.89
==========================================
Common Shares Outstanding 6,113,984 6,110,684
==========================================
</TABLE>
***More***
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<TABLE>
<CAPTION>
FARM FAMILY HOLDINGS, INC.
Selected Segment Information
($ in thousands)
Three months ended
March 31,
2000 1999
---- ----
Premium revenues
<S> <C> <C>
Property and casualty insurance $47,522 $48,334
Life insurance 9,563 ----
-------------------------------
Total $57,085 $48,334
===============================
Net investment income
Property and casualty insurance $5,556 $4,727
Life insurance 12,859 ----
Corporate and other 78 107
-------------------------------
Total $18,493 $4,834
===============================
Other operating costs & expenses and amortization expense
Property and casualty insurance
Underwriting and amortization expenses $11,158 $11,520
Dividends to policyholders ---- 70
Life insurance 3,050 ----
Corporate and other 447 242
Intersegment eliminations (230) ----
-------------------------------
Total $14,425 $11,832
===============================
Net income
Operating income
Property and casualty insurance $2,818 $3,633
Life insurance 1,182 ----
Corporate and other (311) (71)
-------------------------------
Total operating income 3,689 3,562
Effect of retroactively including Excess Interest
and Spreads, net of tax 12,746 ----
Realized investment gains (losses), net of tax (26) 181
-------------------------------
Net income $16,409 $3,743
===============================
</TABLE>
<TABLE>
March 31, December 31,
2000 1999
Identifiable assets
<S> <C> <C>
Property and casualty $461,648 $446,721
Life insurance 813,282 812,106
Corporate and other 72,241 71,014
Intersegment eliminations (70,198) (68,043)
-------------------------------
Total $1,276,973 $1,261,798
================================
***End***
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