UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 333-24739
STONEVILLE INSURANCE COMPANY
-----------------------------------------------------------------
(exact name of Registrant as specified in its charter)
MISSISSIPPI 72-1341156
- ----------------------------------------------- --------------------
(State or other jurisdiction (I.R.S. Identification Number)
of incorporation of organization)
633 North State Street, Suite 200, Jackson, Mississippi 39202-7817
- -------------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (601-352-7817)
----------------------
Securities registered pursuant to section 12(g) of the Act: None
------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act if 1934 during the preceding 12 months (or for such shorted period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES ( X ) NO ()
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 12, 1998
Common stock, $1.00 par value 503,384 Shares
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1 - Stoneville Insurance Company Financial Statements
Balance Sheets
March 31, 1998 and December 31, 1997
Statements of Income
Three Months Ended March 31, 1998 and 1997
Statements of Changes in Stockholders' Equity
Period Ended December 31, 1997
Three Months Ended March 31, 1998
Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
Notes to Financial Statements
<PAGE>
STONEVILLE INSURANCE COMPANY
Balance Sheets
March 31, 1998 and December 31, 1997
March 31, December 31,
1998 1997
--------- ------------
Assets
Investments:
Trading securities (at fair value)
Equity securities $247 $247
Securities available-for-sale (at fair value)
Fixed maturities (amortized cost - $1,253,367 and 1,274,769 1,320,855
$1,295,572) --------- ---------
Total Investments 1,275,016 1,321,102
Cash and Cash Equivalents 343,279 425,493
Funds held by ceding companies 70,592 0
Accrued interest receivable 27,954 29,819
Capital equipment leases at cost less
accumulated depreciation of $12,087 and $9,775 6,323 7,292
Prepaid expenses 35,124 25,300
Deferred tax assets 332,804 322,438
Other assets 575 575
---------- ----------
Total Assets $2,091,667 $2,132,019
========== ==========
Liabilities
Reserve for losses and loss adjustment expenses $53,366 $0
Accounts payable and accrued liabilities 48,007 117,226
Capital lease obligations 762 1,256
---------- ----------
Total Liabilities 102,135 118,482
---------- ----------
Shareholders' Equity
Common stock ($1 par value; 650,000 shares
authorized;
503,384 shares issued) 503,384 503,384
Retained earnings 1,464,747 1,484,870
Net unrealized loss on securities
available for sale, net of deferred taxes 21,401 25,283
---------- ----------
Total Shareholders' Equity 1,989,532 2,013,537
---------- ----------
Total Liabilities and Shareholders' Equity $2,091,667 $2,132,019
========== ==========
See accompanying notes to financial statements.
<PAGE>
STONEVILLE INSURANCE COMPANY
Statements of Income
Three Months Ended March 31, 1998 and 1997
1998 1997**
--------- ---------
Revenues
Premiums earned $112,296 $0
Premiums ceded 0 0
--------- ---------
Net premiums earned 112,296 0
Investment income 17,563 51,678
Other 43,393 (9,959)
--------- ---------
Total Revenues 173,252 41,719
--------- ---------
Expenses
Loss and loss adjustment expenses 64,750 0
Policy acquisition fees 7,861
Program administration fees 16,844 0
Regulatory fees 5,615 9,000
General expenses 108,671 84,870
--------- ---------
Total Expenses 203,741 93,870
--------- ---------
Income before Income Taxes (30,489) (52,151)
Provision (benefit) for income taxes (10,366) (8,551)
--------- ---------
Net Income ($20,123) ($43,600)
========= =========
Per Share Data
Net Income ($0.04)
=========
** 1997 represents the combined information of two previously separate entities.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
Statements of Changes in Shareholders'
Equity
For Periods Indicated
Net
Unrealized
Appreciation
on Securities Total
Common Stock Available Retained Shareholders'
Shares Amount for Sale Earnings Equity
---------------------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 0 $0 ($9,236) $2,462,693 $2,453,457
1997**
Net income (loss) (474,439) (474,439)
Issuance of stock upon conversion from a 503,384 503,384 (503,384) 0
Trust
to a stock company
Net increase in unrealized appreciation of
securities available for sale 34,519 34,519
-------------------------------------------------------------------------
Balance at December 31, 1997 503,384 $503,384 $25,283 $1,484,870 $2,013,537
1998
Net income (loss) (20,123) (20,123)
Net increase in unrealized appreciation of
securities available for sale (3,882) (3,882)
-------------------------------------------------------------------------
Balance at March 31, 1998 503,384 $503,384 $21,401 $1,464,747 $1,989,532
=========================================================================
<FN>
** 1997 represents the combined information of two previously separate entities.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
STONEVILLE INSURANCE COMPANY
Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
1998 1997**
Cash Flows From Operating Activities
Premiums collected $0 $0
Losses and loss adjustment expenses paid 0 (489,168)
Refunds and premium adjustments paid 0 (60,595)
Administrative expenses paid (171,396) (119,107)
Income taxes (paid) refund received 0 (37,417)
Investment income received 24,463 62,088
Other income received 28,393 0
Net (increase) decrease in trading securities 0 1,678,829
Interest paid (27) 0
--------- ---------
Net Cash Provided by Operating Activities (118,567) 1,034,630
--------- ---------
Cash Flows From Investing Activities
Proceeds from sales of available-for-sale securities 36,847 0
Transfer of held-to-maturity security to cash equivalent 0 99,874
--------- ---------
Net Cash Provided by Investing Activities 36,847 99,874
--------- ---------
Cash Flows From Financing Activities
Principal payments under capital lease obligations (494) (170)
--------- ---------
Net Cash Used in Financing Activities (494) (170)
--------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents (82,214) 1,134,334
Cash and Cash Equivalents at Beginning of Period 425,493 1,379,935
--------- ---------
Cash and Cash Equivalents at End of Period $343,279 $2,514,269
========= ==========
** 1997 represents the combined information of two previously separate entities.
See accompanying notes to financial statements.
<PAGE>
Cash and Cash Equivalents at End of Period
STONEVILLE INSURANCE COMPANY
Statements of Cash Flows (Continued)
Three Months Ended March 31, 1998 and 1997
Reconciliation of net income to net cash provided 1998 1997**
by Operating Activities --------- ---------
Net Income ($20,123) ($43,600)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 969 1,205
Decrease in trading securities 0 1,696,697
Decrease in premiums receivable 0 0
Increase in Funds held by ceding companies (70,592) 0
Decrease (increase) in prepaid expenses (9,824) 2,053
Decrease (increase) in accrued interest receivable 1,865 10,629
(Increase) decrease in notes and other receivables 0 (9,958)
Amortization of bond premium (discount) 5,357 625
Decrease in unpaid losses and loss adjustment expenses 53,366 (489,168)
(Decrease) increase in accounts payable and accrued (69,219) (27,290)
liabilities
Increase (decrease) in premium adjustment reserve 0 (60,595)
(Decrease) increase in income tax liability (10,366) (45,968)
---------- ----------
Net cash provided by operating activities ($118,567) $1,034,630
========== ==========
** 1997 represents the combined information of two
previously separate entities.
See accompanying notes to financial statements.
<PAGE>
Stoneville Insurance Company
Notes to Financial Statements
Quarters Ended March 31, 1998 and 1997
1. Basis of Presentation
These interim financial statements have been prepared on the basis of
accounting principles used in the annual financial statements ended December
31, 1997, and must be read in conjunction with the 1997 statements. In the
opinion of management, the accompanying interim unaudited financial
statements contain all adjustments necessary for a fair statement of
financial position and results of operations of the Company for the interim
periods.
2. Plan of Reorganization and Conversion
A Plan and Agreement of Reorganization and Conversion was entered into on
September 11, 1997 by and between Delta Agricultural and Industrial Trust
and Stoneville Insurance Company whereby the Trust transferred all of its
existing assets and liabilities to Stoneville on December 31, 1997 in
exchange for stock in Stoneville. The Trust was then liquidated and
dissolved with the stock of Stoneville distributed to its former members in
accordance with the terms outlined in the Plan.
3. Operations of the Company
The Company was formed to become the successor to the Delta Agricultural and
Industrial Trust, a Mississippi self-funded workers compensation trust. The
Company entered the workers compensation market in the first quarter of 1998
as a reinsurer. The Company currently does not write workers compensation
insurance on a direct basis.
4. Assets Pledged
Of the $1,274,769 in securities available-for-sale, $234,921 is pledged as
collateral for a letter of credit issued to an insurer that the Company
reinsures on a quota share basis. A claim can be made against the letter of
credit if the ceding insurer is unable to pay claims from premiums collected
by it. It is unlikely that there will be such a claim against the letter of
credit.
5. Reserve for Losses and Loss Adjustment Expenses
The reserve for losses and loss adjustment expenses ("LAE") is based upon
case reserve reports received from ceding insurance companies and the
company's own estimates. Loss and LAE reserves also include estimates of
incurred but not reported losses based on past experience modified for
current trends and estimates of expenses for investigating and settling
claims. It is the company's policy to discount workers' compensation claims
on reported and unreported losses to present value using an interest rate of
4.5%. Such discount resulted in a reduction in gross loss reserves of $5,997
as of March 31, 1998. The reserve for losses and LAE is attributable to a
quota share reinsurance arrangement in which the Company participates only as
a reinsurer. Management believes that the reserve for loss and LAE as of
March 31, 1998 is adequate to cover ultimate gross cost of losses and
LAE incurred through March 31, 1998. The reserve is based on estimates of
losses and LAE incurred and, therefore, the amount ultimately paid may be
more or less than such estimates.
<PAGE>
6. Operations of Previously Separate Companies
As indicated in the financial statements, the information presented for the
first quarter of 1997 represents the combined information from two previously
separate companies. Presented below are the operating results of each entity
and the intercompany adjustments made as a result of the combination for the
three months ended March 31, 1997.
Delta
Stoneville Agricultural
Insurance & Industrial
Company Trust Combined
------------ ------------- ---------
Total Revenues $ 0 $ 42,002 $ 42,002
Net Income (283) (43,317) (43,600)
Intercompany Interest Expense
Eliminated 283
Intercompany Interest Income
Eliminated 283
7. Other Income
Other Income for the first quarter of 1998 includes $28,393 in fees paid to
the Company for management of certain insurance programs for a ceding
carrier. For the quarter ended March 31,1997, other income represented a
loss on the sale of trading securities.
8. Earnings (Loss) Per Share
Earnings (loss) per common share is based on net income or (loss) and the
weighted average number of shares outstanding during each interim period.
The number of shares used in computing earnings per share is 503,384 for the
quarter ended March 31, 1998. No shares were issued until December
31, 1997, therefore no earnings per share amounts are presented for the
quarter ended March 31,1997.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition - March 31, 1998 Compared to December 31, 1997
Total shareholders' equity decreased by $24,005 or 1% from $2,013,537
at December 31, 1997 to 1,989,532 at March 31, 1998. This decrease was caused
by a net loss from operations of $20,123 for the first three months of 1998 and
a decrease in unrealized gain on securities available-for-sale of $3,882.
Total assets decreased by $40,352 or 1.9% at March 31, 1998 compared to
December 31, 1997. Cash and investments decreased a total of $128,300 during
the three months ended March 31, 1998 due primarily to limited revenue
producing activities in the first quarter of 1998 coupled with the payment of
certain costs associated with the Plan of Reorganization and Conversion of the
Delta Agricultural and Industrial Trust that became effective December 31, 1997.
Total liabilities decreased by $16,347 or 1.4% at March 31, 1998
compared to December 31, 1997. This decrease was due primarily to the payment of
liabilities incurred in 1997 associated with the Plan of Reorganization and
Conversion of the Delta Agricultural and Industrial Trust that became effective
December 31, 1997.
Results of Operations - First Quarter 1998 Compared to First Quarter 1997
The Company experienced a net loss of $20,123 during the first quarter
of 1998 compared to a net loss of $43,600 during the first quarter of 1997.
During the first quarter of 1998 the Company entered into a quota share
reinsurance arrangement with another insurance carrier in which the Company
shares in 25% of the income and is obligated to pay 25% of the expenses
associated with the business written within this program. As a result of this
arrangement, the Company's portion of earned premium during the first quarter of
1998 was $112,296 compared to $0 in 1997. Losses and loss adjustment expenses
related to this program were $64,750 during the first three months of 1998
compared to $0 in the same period in 1997. Other expenses associated with this
program totaled $30,320 during the first quarter of 1998 compared to $0 in the
first quarter of 1997.The Company's share of net income associated with this
program during the first quarter of 1998 was $17,226 compared to $0 in the first
quarter of 1997.
Investment income of the Company decreased from $51,678 in the first
quarter of 1997 to $17,563 in the first quarter of 1998. This decrease was a
result of having less cash to invest due to the funding of an Assumption
Reinsurance Agreement in December, 1997 in which the Company was relieved of all
of its insurance liabilities. In conjunction with this agreement, the Company
paid a premium of $1,586,463 to the carrier that assumed the Company's insurance
liabilities. The payment of this premium resulted in less cash being available
for investment during the first quarter of 1998.
The Company realized capital losses in the first quarter of 1997
totaling $9,959. No capital gains or losses were realized during the first
quarter of 1998.
General expenses increased from $84,870 in the first quarter of 1997 to
$108,671 in 1998. This increase is due primarily to the costs involved in
re-entering the commercial insurance market in the first quarter of 1998
including the costs associated with the execution of certain reinsurance
agreements.
The Company recorded an income tax benefit for the quarter ended March
31, 1998 in the amount of $10,366 compared to a tax benefit for the same quarter
in 1997 of $8,551.
<PAGE>
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material changes to the legal proceedings described in the
Company's Registration Statement on Form 10-K (File Number 333-24739).
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial data schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1998.
<PAGE>
STONEVILLE INSURANCE COMPANY
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.
STONEVILLE INSURANCE COMPANY
(Registrant)
DATE: May 13,, 1998 /s/ Harry Vickery
--------------------------------------
President and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 1,274,769
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 247
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,275,016
<CASH> 343,279
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 2,091,667
<POLICY-LOSSES> 53,366
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 762
0
0
<COMMON> 503,384
<OTHER-SE> 1,486,148
<TOTAL-LIABILITY-AND-EQUITY> 2,091,667
112,296
<INVESTMENT-INCOME> 17,563
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 43,393
<BENEFITS> 64,750
<UNDERWRITING-AMORTIZATION> 7,861
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (30,489)
<INCOME-TAX> (10,366)
<INCOME-CONTINUING> (20,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,123)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
