SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1995 Commission file number: 0-2047
CAPITOL TRANSAMERICA CORPORATION (CTC)
(Exact name of registrant as specified in its charter)
A WISCONSIN CORPORATION 39-1052658
4610 University Avenue
Madison, Wisconsin 53705-0900
Registrant's telephone number, including area code: (608) 231-4450
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
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 of 1934 during the preceding twelve months
(or for such shorter 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
Based on the closing average of the high (17 1/4) and low price (16 1/2),
the aggregate market value of voting stock held by non-affiliates
of the registrant as of March 31, 1995 was approximately
$112,915,721.
Indicate the number of shares of each of the issuer's class of
common stock, as of the latest practicable date:
At March 31, 1995
Common Stock, $1.00 Par Value;
Issued: 6,882,575
Outstanding: 6,691,302
Total Pages: 20
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Part I
Financial Information Page
Consolidated Financial Statements 3 - 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 11
Condensed Statutory Financial
Statements of Subsidiaries 12
Part II
Other Information and Exhibits
Other Disclosures 14
Officers and Directors 15
Signatures 16
Exhibit 1 (Press Release) 17 - 20
2
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<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Investments:
Available-for-sale investment securities, at fair value
U.S. Government bonds (amortized cost $605,837, $607,165
and $614,795, respectively) $ 599,853 $ 583,711 $ 616,631
State, municipal and political subdivision bonds (amortized
cost $57,794,111, $55,980,952 and $53,548,043, respectively) 61,060,745 56,747,846 56,136,173
Corporate bonds and notes (amortized cost $1,264,902,
$2,256,865 and $2,099,302, respectively) 1,238,341 2,197,810 2,168,832
Common stock (cost $38,614,069, $32,295,835 and
$27,689,320, respectively) 38,974,854 30,804,059 25,753,138
Nonredeemable preferred stock (cost $2,443,496, $3,052,524
and $3,944,750, respectively) 2,305,624 2,864,850 4,112,188
Investment real estate, at cost, net of depreciation 1,432,110 1,442,910 1,305,197
Short-term investments, at cost which
approximates fair value 9,365,085 10,143,960 3,667,391
Total Investments 114,976,612 104,785,146 93,759,550
Cash 538,295 1,253,320 751,337
Accrued investment income 1,308,418 1,366,123 1,214,885
Receivables from agents, insureds and others, less allowance for
doubtful accounts of $277,260, $262,260 and $218,500, respectively 10,468,649 9,344,224 10,052,481
Balances due from reinsurers 287,336 201,045 342,072
Funds held by ceding reinsurers 137,422 137,422 137,422
Reinsurance recoverable on unpaid losses 17,432 12,363 120,305
Reinsurance recoverable on paid losses 4,451 54,259 274,526
Deferred insurance acquisition costs 8,231,403 7,715,389 7,199,579
Prepaid reinsurance premiums 662,030 627,038 1,078,491
Due from securities brokers - - 195,952
Income taxes receivable - 481,711 -
Deferred income taxes - 1,211,241 462,455
Other assets 673,358 443,914 640,970
Total Assets $137,305,406 $127,633,195 $116,230,025
</TABLE>
3
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<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
<S> <C> <C> <C>
LIABILITIES
Policy liabilities and accruals:
Reserve for losses $ 20,452,434 $ 19,144,647 $ 16,663,255
Reserve for loss adjustment expenses 9,168,306 8,330,676 4,726,693
Unearned premiums 27,360,355 26,794,249 23,829,273
Total Policy Liabilities and Accruals 56,981,095 54,269,572 45,219,221
Accounts payable 3,649,668 3,913,672 3,674,445
Due to securities brokers 802,673 300,000 1,608,170
Balances due to reinsurers 1,319,059 901,055 623,238
Accrued premium taxes 128,283 269,722 149,699
Income taxes payable 383,722 - -
Deferred income taxes 607,314 - 820,637
Total Other Liabilities 6,890,719 5,384,449 6,876,189
Total Liabilities 63,871,814 59,654,021 52,095,410
SHAREHOLDERS' INVESTMENT
Common stock, $1.00 par value, authorized 15,000,000 shares,
issued 6,882,575, 6,877,596 and 6,866,023, respectively 6,882,575 6,877,596 6,866,023
Paid-in surplus 7,949,591 7,931,671 7,890,659
Net unrealized appreciation (depreciation) on investment securities
carried at fair value, net of deferred taxes of $1,175,381, $338,322
and $302,856, respectively 2,281,622 (656,743) 587,897
Retained earnings 56,650,429 54,157,275 49,140,661
Shareholders' investment before treasury stock 73,764,217 68,309,799 64,485,240
Treasury stock, 191,273, 191,273 and 193,148 shares,
respectively, at cost (330,625) (330,625) (350,625)
Total Shareholders' Investment 73,433,592 67,979,174 64,134,615
Total Liabilities and Shareholders' Investment $137,305,406 $127,633,195 $116,230,025
Book Value Per Share $ 10.97 $ 10.17 $ 9.61
Shares Outstanding 6,691,302 6,686,323 6,672,875
</TABLE>
4
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<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months Ended March 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
REVENUES
Premiums earned $ 13814920 $ 12335659
Net investment income 1543149 1237187
Realized investment gains 20225 11981
Other revenues 98084 15910
Total Revenues 15476378 13600737
LOSSES AND EXPENSES INCURRED
Losses incurred 4805947 4603294
Loss adjustment expenses incurred 2123575 1257589
Underwriting, acquisition and
insurance expenses 4691449 4169960
Increase in deferred insurance
acquisition costs -516014 -268563
Other expenses 282408 265724
Total Losses and Expenses Incurred 11387365 10028004
Income from operations before
income taxes 4089013 3572733
Income tax expense (benefit)
Current 974664 1098214
Deferred 81260 -154428
1055924 943786
Net Income $ 3033089 $ 2628947
INCOME PER SHARE $ 0.45 $ 0.40
Weighted Average Number of Shares Outstanding 6681237 6643869
</TABLE>
5
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<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, December 31, March 31,
1995 1994 1994
Cash flows provided by operating activities:
<S> <C> <C> <C>
Net Income $ 3,033,089 $ 9,247,240 $ 2,628,947
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 79,162 344,328 75,371
Realized investment (gains) losses (20,225) 106,188 (11,981)
Change in:
Deferred insurance acquisition costs (516,014) (784,373) (268,563)
Unearned premiums 566,106 3,466,567 501,591
Allowance for doubtful accounts receivable from agents 15,000 60,000 15,000
Accrued investment income 57,705 (26,674) 124,564
Receivables from agents, insureds and others (1,139,425) (415,046) (1,078,303)
Balances due to/from reinsurers 331,713 55,481 (363,363)
Reinsurance recoverable on paid and unpaid losses 44,739 117,133 (211,076)
Funds held by ceding reinsurers - (2,829) (2,829)
Income taxes payable 1,089,025 (2,000,010) (697,662)
Deferred income taxes 81,260 (262,036) (154,428)
Due to/from securities brokers 502,673 2,651,078 3,763,296
Prepaid reinsurance premiums (34,992) 601,845 150,392
Other assets (36,558) 504,974 241,357
Reserve for losses and loss adjustment expenses 2,145,417 8,155,874 2,070,499
Accounts payable (264,004) (239,443) (480,658)
Accrued premium taxes (141,439) 6,432 (113,591)
Net cash provided by operating activities 5,793,232 21,586,729 6,188,563
Cash flows provided by (used for) investing activities:
Proceeds from sales of available-for-sale investments 211,577 1,895,147 2,197,978
Purchases of available-for-sale investments (9,158,023) (26,596,166) (9,021,270)
Maturities of available-for-sale investments 3,218,671 6,074,710 1,290,298
Purchase of depreciable assets (268,077) (320,920) (49,135)
Net cash used for investing activities (5,995,852) (18,947,229) (5,582,129)
Cash flows provided by (used for) financing activities:
Cash dividends paid (535,304) (2,938,618) (1,334,950)
Stock options exercised 22,899 139,710 87,125
Net proceeds from sale (purchase) of treasury stock - 8,444 (11,556)
Net cash used for financing activities (512,405) (2,790,464) (1,259,381)
Net decrease in cash (715,025) (150,964) (652,947)
Cash, beginning of period 1,253,320 1,404,284 1,404,284
Cash, end of period $ 538,295 $ 1,253,320 $ 751,337
Cash paid during the year for:
Income taxes $ 4,775,000 $ 5,427,361 $ 1,795,876
Interest - - -
</TABLE>
6
<PAGE>
CAPITOL TRANSAMERICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(1) Basis of Presentation
The condensed financial statements included herein of Capitol
Transamerica Corporation (the "Company"), other than the Consolidated
Balance Sheet as of December 31, 1994, and the Consolidated Statement
of Cash Flows as of December 31, 1994, have been prepared by the Compa-
ny without audit, pursuant to the rules and regulations of the
Securities Exchange Commission. Certain information and footnote dis-
closures normally included in financial statements prepared in accor-
dance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations.
Although the Company believes the disclosures are adequate to make the
information presented not misleading, it is suggested that these con-
densed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1994 annual
report on Form 10-K. Wherever applicable, prior period's information
has been restated to reflect the June 15, 1992 three-for-two and the
June 14, 1991 five-for-four stock splits effected as stock dividends.
Certain amounts in the prior periods consolidated financial statements
have been reclassified to conform with the 1995 presentation.
(2) Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of shares of stock outstanding during the period.
Pior periods' information has been restated to reflect the applicable
stock splits.
(3) Income Taxes
Deferred income taxes reflect the net tax effects of temporary differ-
ences between the carrying amounts of assets and liabilities for finan-
cial statement purposes and the amounts used for income taxes.
(4) Common Stock Options
There were 4,979 options exercised during the three months ended March
31, 1995 and there were 19,613 options exercised during the three
Months ended March 31, 1994. For further information regarding stock
options refer to Note 6 of Notes to Consolidated Financial Statements
included in the Company's 1994 annual report.
(5) Dividends
1995
On January 27, 1995 a cash dividend of $.08 per share was declared to
shareholders of record March 17 and paid March 31 in the amount of
$534,304.
1994
On October 28, 1994 a cash dividend of $.08 per share was declared to
shareholders of record December 15 and paid December 30 in the amount
of $534,907.
On July 29, 1994 a cash dividend of $.08 per share was declared to
shareholders of record September 15 and paid September 30 in the amount
of $534,585.
On May 3, 1994 a cash dividend of $.08 per share was declared to share-
holders of record June 15 and paid June 30 in the amount of $534,176.
On January 28, 1994 a regular cash dividend of $.08 per share and an
extra cash dividend of $.12 per share were declared to shareholders of
record March 4 and paid March 18 in the amount of $1,334,950.
7
<PAGE>
(6) Investments
Fixed maturities and equity securities are classified as available-for-
sale and, accordingly, are carried at fair value, with unrealized gains
and losses reported as a separate component of shareholders' investment
net of taxes. The cost of fixed maturities is adjusted for amortization
of premiums and discounts to maturity. Fixed maturities and equity
securities deemed to have declines in value that are other than tempo-
rary are written down through the statement of income to carrying
values equal to their estimated fair values.
Investment real estate is carried at cost net of accumulated deprecia-
tion of $92,930, $82,130 and $52,000 as of March 31, 1995, December 31,
1994 and March 31, 1994, respectively.
Cost of investments sold is determined under the specific identifica-
tion method.
(7) Contingent Liabilities
The Company is a defendant in certain lawsuits involving complaints
which demand damages and recoveries for claims and losses alledgedly
related to risks insured by the Company. In the opinion of management,
such lawsuits are routine in that they result from the ordinary course
of business in the insurance industry. The reserve for losses includes
management's estimates of the probable ultimate cost of settling all
losses involving lawsuits.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Capitol Transamerica Corporation (the "Company") is an insurance holding company
operating in 33 states which writes, through its insurance subsidiaries, both
property-casualty and fidelity-surety insurance. The property-casualty segement
accounts for approximately 80% of the business written while the fidelity-surety
segment accounts for approximately 20% of the Company's business.
The underwriting cylcles of the property-casualty insurance industry have been
characterized by peak periods of adequate rates, underwriting profits and lower
combined ratios, while the downward side of the cycle is characterized by inade-
quate rates, underwriting losses and, as a result, higher combined ratios. The
adequacy of premium rates is affected primarily by the severity and frequency of
claims which in turn are affected by natural disasters, regulatory measures and
court decisions which continue to uphold the "deep pocket" theory in awarding
against insurance companies. Unfortunately for the insurance industry, the trend
of increasing price competition has continued as has the number of significant
natural disasters. This combination has resulted in considerable reduction in
underwriting profitability for the industry as a whole.
Inflation also has a significant impact on the insurance industry in general, as
well as on the Company. Inflation creates higher claim costs, which are then
matched currently against premiums whose rating statistics were developed from
data of previous years. In recent inflationary periods, this has led to inade-
quate rate structures, since rate regualtors are slow to grant rate adjustments
at times when the overall economy is in an inflationary cycle. Studies have
shown that premium rates trail the claim experience by a period of two years or
more. Adequate premium rates continue to be of concern to the Company and the
property casulaty industry as a whole.
OPERATING RESULTS
As mentioned in the Overview section, the property-casualty insurance industry
is in a downward cycle. However, based on its operating results the Company is
in a peak period as it continues to generate considerable underwriting profits.
The Company's increase in premiums earned has been strictly due to volume
increases resulting from new product lines, expansion of coverages and entry in-
to new geographic territories. The ability to maintain a steady combined ratio,
typically 20 to 25 points below the industry average, is due to its basic phi-
losophy of generating underwriting profits. When the industry's cycle reverses,
the Company will be in an excellent position to take advantage of premium rate
increases which will benefit the Company's overall profitability.
For the quarter ended March 31, 1995 gross premiums written were $14,903,166
compared with $58,564,342 for the year ended December 31, 1994 and $13,664,970
at March 31, 1994.
Premiums earned are recognized as net revenues after reduction for reinsurance
ceded and after establishment of the provision for the pro-rata unearned portion
of premiums written. Net premiums earned totaled $13,814,920, $52,461,456 and
$12,335,659 for the respective periods; and net unearned premiums were
$27,360,355, $26,794,249 and $23,829,273 at each respective period.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
<S> <C> <C> <C>
Gross Premiums Written $14,903,166 $58,564,342 $13,664,970
Reinsurance Ceded 557,132 1,912,401 586,475
Net Premiums Written $14,346,034 $56,651,941 $13,078,495
Net Premiums Earned $13,814,920 $52,461,456 $12,335,659
Net Unearned Premium Reserve $27,360,355 $26,794,249 $23,829,273
9
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The Company's underwriting results can be measured by reference to the combined loss and expense ratios. This
tabulation includes the operating results of the two subsidiary insurance companies on a statutory basis. Loss and loss
adjustment expenses are stated as a ratio of net premiums earned, while underwriting expenses are stated as a ratio of net
premiums written. The combined ratios were as follows:
<CAPTION>
March 31, December 31, March 31,
Insurance Operating Ratios (Statutory Basis): 1995 1994 1994
<S> <C> <C> <C>
Loss and Loss Adjustment Expenses 50.4% 52.3% 46.7%
Underwriting Expenses 33.8% 32.4% 33.5%
Combined Ratios 84.2% 84.7% 80.2%
The Company's combined loss and expense ratios compare very favorably with the industry average of 108.5% for 1994.
</TABLE>
REINSURANCE
The Company follows the customary practice of reinsuring with other companies,
i.e., ceding a portion of its exposure on the policies it has written. This pro-
gram of reinsurance permits the Company greater diversification of business and
the ability to write larger policies while limiting the extent of its maximum
net loss. It provides protection for the Company against unusually serious oc-
currences in which a number of claims could produce a large aggregate loss.
Management continually monitors the Company's reinsurance program to obtain pro-
tection that should be adequate to ensure the availability of funds for losses
while maintaining future growth.
NET INVESTMENT INCOME AND REALIZED GAINS
In accordance with SFAS No. 115, the Company's fixed maturities and equity se-
curites are classified as available-for-sale and are carried at fair value. The
unrealized gains and losses, net of tax, are reported as a separate component of
shareholders investment.
Interest and Dividend Income: Interest on fixed maturities is recorded as income
when earned and is adjusted for any amortization of purchase premium or dis-
count. Dividends on equity securities are recorded as income on ex-dividend
dates.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
Investments: 1995 1994 1994
<S> <C> <C> <C>
Invested Assets $ 114,976,612 $ 104,785,146 $ 93,759,550
Net Investment Income 1,543,149 5,359,606 1,237,187
Percent of Return to
Average Carrying Value 5.7% 5.6% 5.3%
Realized Gains (Losses) 20,225 (106,188) (4,366,105)
</TABLE>
The $4,452,000 increase in unrealized gains for 1995 was composed of a
$2,550,000 increase in fixed maturities and a $1,902,000 increase in equity se-
curities. The Company has already gained back 71% of the unrealized losses ex-
perienced in 1994 and the outlook appears bright for the remainder of 1995 as
economy continues to prosper. Net investment income for the first quarter of
1995 was up 25% over the first quarter of 1994. Net unrealized gains (losses)
were $3,457,004. ($995,065) and $890,753 as of March 31, 1995, December 31, 1994
and March 31, 1994, respectively.
10
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INCOME TAXES
Income tax expense is based on income reported for financial statement purposes
and tax laws and rates in effect for the years presented. Deferred federal in-
come taxes arise from timing differences between the recognition of income de-
termined for financial reporting purposes and income tax purposes. Such timing
differences are related principally to the deferral of policy acquisition costs,
the recognition of unearned premiums, and discounting the claims reserves for
tax purposes. Deferred taxes are also provided on unrealized gains and losses.
LOSS RESERVES
Reserves for loss and loss adjustment expenses reflect the Company's best esti-
mate of the liability for the ultimate cost of reported claims and incurred but
not reported (IBNR) claims as of the end of each period. The estimates are based
on past claim experience and consider current claim trends as well as social and
economic conditions. The Company's reserve for loss and loss adjustment expenses
was $29,620,740 as of March 31, 1995 compared with $27,475,323 as of December
31, 1994 and $21,389,948 as of March 31, 1994. This increase is a combination of
giving consideration for the increase in premium volume, increased retention on
all lines of coverages written and an increase in the IBNR reserves. Management
continues to closely monitor the reserve development trends and projections as
it attempts to stabilize the loss reserve development which has occurred in
recent years.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the Company's ability to meet obligations as they become
due. The obligations and cash outflow of the Company include claims settlements,
acquisition and administrative expenses, investment purchases and dividends to
shareholders. In addition to satisfying obligations and cash outflow through
premium collections, there is cash inflow obtained from interest and dividend
income, maturities and sales of investments. Because cash inflow from premiums
is received in advance of cash outflow required to settle claims, the Company
accumulates funds which it invests pending liquidity requirements. Therefore,
investments represent the majority (83.7%, 82.1% and 80.7% at each respective
period) of the Company's assets. Cash outflow can be unpredictable for two rea-
sons: first, a large portion of liabilities representing loss reserves have un-
certainty regarding settlement dates; and second, there is potential for losses
occurring either individually or in aggregate. As a result, the Company main-
tains adequate short-term investment programs necessary to ensure the availa-
bility of funds. The investment program is structured so that a forced sale li-
quidation of fixed maturities should not be necessary during the course of ordi-
nary business involvement and activities. The Company has no material capital
expenditure commitments.
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<TABLE>
INSURANCE SUBSIDIARY FINANCIAL STATEMENTS
Statutory Basis as Reported to State Regulatory Authorities
March 31, 1995, December 31, 1994 and March 31, 1994
CAPITOL INDEMNITY CORPORATION March 31, December 31, March 31,
Balance Sheets 1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and Invested Assets $ 103,025,995 $ 96,224,984 $ 81,833,251
Other Receivables 10,370,461 10,069,285 11,101,031
Total Assets $ 113,396,456 $106,294,269 $ 92,934,282
LIABILITIES
Reserve for Losses and Loss Expenses $ 29,062,333 $ 26,829,156 $ 20,767,331
Unearned Premiums 26,698,325 26,167,211 22,424,270
Other Payables 15,853,862 12,645,939 12,997,103
Total Liabilities 71,614,520 65,642,306 56,188,704
SURPLUS AS REGARDS POLICYHOLDERS
Shareholder's Equity 41,781,936 40,651,963 36,745,578
Total Liabilities and Capital $ 113,396,456 $106,294,269 $ 92,934,282
Statements of Income
Premiums Earned $ 13,816,021 $ 51,476,687 $ 11,885,485
Underwriting Deductions 11,907,898 45,441,802 9,927,348
Net Underwriting Gain 1,908,123 6,034,885 1,958,137
Investment Income Including Sales 1,257,257 4,287,368 1,027,435
Other Income (Expense) 74,756 (40,763) 15,910
Income Tax Expense 829,531 2,865,727 962,732
Net Income $ 2,410,605 $ 7,415,763 $ 2,038,750
CAPITOL SPECIALTY INSURANCE CORPORATION
Balance Sheets
ASSETS
Cash and Invested Assets $ 5,369,326 $ 5,283,210 $ 5,204,893
Other Receivables 54,901 75,084 152,169
Total Assets $ 5,424,227 $ 5,358,294 $ 5,357,062
LIABILITIES
Reserve for Losses and Loss Expenses $ - $ - $ 13,701
Unearned Premiums - - 295,292
Other Payables 7,892 4,786 32,389
Total Liabilities 7,892 4,786 341,382
SURPLUS AS REGARDS POLICYHOLDERS
Shareholder's Equity 5,416,335 5,353,508 5,015,680
Total Liabilities and Capital $ 5,424,227 $ 5,358,294 $ 5,357,062
Statements of Income
Premiums Earned $ 248 $ 260,879 $ 154,028
Underwriting Deductions 6,844 126,974 77,784
Net Underwriting (Loss) Gain (6,596) 133,905 76,244
Investment Income Including Sales 62,847 230,004 66,500
Other Income - 138,171 -
Income Tax Expense 3,154 69,248 28,531
Net Income $ 53,097 $ 432,832 $ 114,213
</TABLE>
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PART II
<PAGE>
Other Disclosures
Item 1. Legal Proceedings
Reference is made to footnote number 7 "Contingent
Liabilities" on Page 8 of this report.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
Reference is made to the Notice of Annual Meeting of
Shareholders and Proxy Statement for the Annual
Meeting of Shareholders which was held May 8, 1995,
both of which are dated April 3, 1995 and previously
filed with the Securities and Exchange Commission
and are incorporated herein as an exhibit by
reference.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
14
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CAPITOL TRANSAMERICA CORPORATION
Subsidiaries
Capitol Indemnity Corporation
Capitol Specialty Insurance Corporation
Capitol Facilities Corporation
Board of Directors
Paul J. Breitnauer Michael J. Larson
Vice President and Treasurer President
Capitol Transamerica Corporation Bank One Madison
Sun Prairie, Wisconsin Madison, Wisconsin
George A. Fait Reinhart H. Postweiler
Chairman of the Board Retired-formerly with
and President Flad Affiliated Corp.
Capitol Transamerica Corporation Madison, Wisconsin
Madison, Wisconsin
Robert W. Goodwin Richard E. Tipple
Retired-formerly with Retired-formerly with
Dean Witter Reynolds, Inc. Univ. of Wisconsin
Clearwater, Florida Planning Department
Stoughton, Wisconsin
Officers
George A. Fait Virgiline M. Schulte
Chairman of the Board and President Secretary
Paul J. Breitnauer Jane F. Endres
Vice President and Treasurer Assistant Secretary
15
<PAGE>
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.
CAPITOL TRANSAMERICA CORPORATION
George A. Fait
Chairman of the Board and President
Paul J. Breitnauer
Vice President and Treasurer
Date: May 9, 1995
16
<PAGE>
CAPITOL TRANSAMERICA CORPORATION
FOR IMMEDIATE RELEASE Contact: Paul J. Breitnauer
Phone (608) 231-4450
NEWS RELEASE
FIRST QUARTER EARNINGS
Madison, Wisconsin, May 3, 1995- George A. Fait, Chairman of
Capitol Transamerica Corporation today announced that first
quarter 1995 earnings were $3,033,089 or $.45 per share
compared with 1994's first quarter earnings of $2,628,947 or
$.40 per share, a 15% increase.
Gross premiums written for the first quarter were $14,903,166
compared with $13,664,970 for the like period in 1994. The
$1,238,196 increase was 9.1% over last year.
Total invested assets at March 31, 1995 were $114,976,612
compared with $93,759,550 at March 31, 1994, an increase of
$21,217,062 or 22.6%. Net investment income was $1,543,149
compared with $1,237,187 for the first quarter of 1994, a 24.7%
increase.
Shareholders' investment at March 31, 1995 was $73,433,592, or
$10.97 per share compared with $64,134,615 or $9.61 per share for
the same period in 1994, a 14.5% increase.
Based upon the positive results, a cash dividend amounting to
$535,304, or $.08 per share was paid in the first quarter,
continuing the current dividend policy, with additional payments
scheduled to be made in the months of June, September and December.
Fait stated that the Company's combined net loss, loss expense
and general expense ratio for the first quarter of 1995 was 84.2%
compared with 80.2% for the first quarter of 1994, noting an
increase in outside claim expense from quarter to quarter. However,
the combined ratio is most favorable in contrast to the industry
average of 108.5% for the year 1994. He explained the Company's
ability to maintain a combined ratio far below the industry average
is due to its basic philosophy of generating underwriting profits
and not relying upon investment income alone to show positive
earnings.
17
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Fait further commented that despite persistent price
competition the Company has posted profitable results as written
premiums continue to increase. The Company is constantly reviewing
geographic regions to determine favorable areas for premium
expansion, appointing new agencies and in general, pursuing new
business opportunities by aggressively marketing our products and
services. The ability to increase premium volume with business
that is consistent with our underwriting standards is a daily
challenge to management.
He also noted that the market value over cost of the Company's
investment portfolio increased by $4.5 million in the first quarter
as a result of the strengthening in both the stock and bond markets
and said prospects are good that this positive movement will
continue throughout the year.
The Annual Shareholders' Meeting is scheduled for May 8 at the
Holiday Inn - Madison West in Middleton, Wisconsin.
Capitol Transamerica Corporation is an insurance holding
company operating a regional insurance business writing specialty
lines of commercial property and casualty policies as well as
fidelity and surety coverages through its subsidiary insurance
companies Capitol Indemnity Corporation and Capitol Specialty
Insurance Corporation. A third subsidiary, Capitol Facilities
Corporation, provides premium financing for the insurance
companies.
The Capitol Transamerica Group operates in 33 states and is
rated A+ (Superior) by A.M. Best Company, Inc., and independent
organization that analyzes the insurance industry.
Capitol Transamerica Corporation, with 6,691,302 shares
outstanding, is traded on the National Over-the-Counter Stock
Market under the symbol CATA.
FINANCIAL HIGHLIGHTS FOLLOW
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CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share)
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
REVENUES
Gross premiums written $ 14,903 $ 13,665
Net premiums written 14,346 13,079
Net premiums earned $ 13,815 $ 12,336
EXPENSES
Claims and claim expenses 6,930 5,861
Other underwriting expenses 4,457 4,167
Total Losses and Expenses Incurred 11,387 10,028
Underwriting income 2,428 2,308
Investment income 1,543 1,237
Realized investment gains 20 12
Other income 98 16
Income Before Income Tax 4,089 3,573
Income tax expense 1,056 944
NET INCOME $ 3,033 $ 2,629
EARNINGS PER SHARE $ 0.45 $ 0.40
<CAPTION>
COMPARATIVE FINANCIAL HIGHLIGHTS- Three Months Ended March 31,
1995 1994 1993 1992 1991
Per Share Information
<S> <C> <C> <C> <C> <C>
Income per share $ 0.45 $ 0.40 $ 0.20 $ 0.37 $ 0.36
Consolidated net income $ 3,033,089 $ 2,628,947 $ 1,338,620 $ 2,409,206 $ 2,266,886
Weighted average number
of shares outstanding 6,681,237 6,643,869 6,605,422 6,545,520 6,337,286
Book value per share $ 10.97 $ 9.61 $ 8.45 $ 7.32 $ 5.96
Shareholders' investment $ 73,433,592 $ 64,134,615 $ 55,971,915 $ 48,044,391 $ 36,452,028
Dividends paid $ 535,304 $ 1,334,950 $ 1,655,300 $ 547,095 $ 326,286
Shares outstanding 6,691,302 6,672,875 6,627,360 6,559,107 6,117,863
Company Statistics:
Gross premiums written $ 14,903,166 $ 13,664,970 $ 10,926,943 $ 8,135,529 $ 6,945,202
Net investment income $ 1,543,149 $ 1,237,187 $ 1,212,118 $ 1,200,402 $ 1,01,3177
Invested assets $114,976,612 $ 93,759,550 $ 82,495,210 $ 62,543,327 $ 56,231,726
Total assets $137,305,406 $116,230,025 $102,001,540 $ 81,399,963 $ 68,435,471
Insurance Operating Ratios,
Statutory Basis:
Loss and loss adjustment
expenses: 50.4% 46.7% 60.0% 40.4% 49.3%
Underwriting expenses 33.8% 33.5% 36.8% 34.5% 31.6%
Combined ratios 84.2% 80.2% 96.8% 74.9% 80.9%
</TABLE>
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
BALANCE SHEETS
(in thousands, except per share)
<CAPTION>
March 31, December 31, March 31
1995 1994 1994
ASSETS
<S> <C> <C> <C>
Cash and investments $115,515 $106,038 $ 94,511
Receivables 12,224 11,597 12,338
Other assets 9,567 9,998 9,381
TOTAL ASSETS $137,306 $127,633 $116,230
LIABILITIES
Claims and claim expenses $ 29,621 $ 27,475 $ 21,390
Unearned premiums 27,360 26,794 23,829
Other liabilities 6,891 5,385 6,876
TOTAL LIABILITIES $ 63,872 $ 59,654 $ 52,095
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
15,000,000 shares, issued 6,882,575,
6,877,596 and 6,866,023, respectively $ 6,883 $ 6,877 $ 6,866
Paid-in surplus 7,949 7,932 7,891
Unrealized appreciation (depreciation) on
securitiescarried at fair value, net of
deferred taxes 2,282 (657) 588
Retained earnings 56,651 54,157 49,141
Less treasury stock, 191,273, 191,273 and
193,148 shares, respectively, at cost (331) (330) (351)
TOTAL SHAREHOLDERS' EQUITY 73,434 67,979 64,135
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $137,306 $127,633 $116,230
SHAREHOLDERS' EQUITY PER SHARE $ 10.97 $ 10.17 $ 9.61
Increase in Shareholders' Equity -
March 31, 1994 to March 31, 1995 14.5%
March 31, 1993 to March 31, 1994 14.6%
</TABLE>
