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 June 30, 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 (19 1/4) and low price (18 1/2),
the aggregate market value of voting stock held by non-affiliates
of the registrant as of June 30, 1995 was approximately
$126,465,747.
Indicate the number of shares of each of the issuer's class of
common stock, as of the latest practicable date:
At June 30, 1995
Common Stock, $1.00 Par Value;
Issued: 6,890,928
Outstanding: 6,700,172
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
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Investments:
Available-for-sale investment securities, at fair value
U.S. Government bonds (amortized cost $604,290, $607,165
and $613,537, respectively) $ 610,204 $ 583,711 $ 602,849
State, municipal and political subdivision bonds (amortized
cost $62,049,512, $55,980,952 and $54,601,579, respectively) 67,203,473 56,747,846 57,314,837
Corporate bonds and notes (amortized cost $1,377,904,
$2,256,865 and $2,100,968, respectively) 1,440,436 2,197,810 2,101,416
Common stock (cost $40,256,061, $32,295,835 and
$28,920,142, respectively) 45,963,977 30,804,059 27,264,278
Nonredeemable preferred stock (cost $3,771,686, $3,052,524
and $3,847,750, respectively) 3,733,750 2,864,850 3,843,250
Investment real estate, at cost, net of depreciation 1,428,653 1,442,910 1,309,143
Short-term investments, at cost which
approximates fair value 3,508,544 10,143,960 1,981,015
Total Investments 123,889,037 104,785,146 94,416,788
Cash 29,731 1,253,320 391,045
Accrued investment income 1,449,723 1,366,123 1,332,119
Receivables from agents, insureds and others, less allowance for
doubtful accounts of $295,000, $262,260 and $233,500, respectively 13,306,733 9,344,224 11,502,259
Balances due from reinsurers 448,933 201,045 426,942
Funds held by ceding reinsurers 77,117 137,422 137,422
Reinsurance recoverable on unpaid losses 70,602 12,363 287,466
Reinsurance recoverable on paid losses 334,952 54,259 224,804
Deferred insurance acquisition costs 9,080,575 7,715,389 7,617,236
Prepaid reinsurance premiums 795,324 627,038 850,413
Due from securities brokers 1,003,122 - -
Income taxes receivable - 481,711 -
Deferred income taxes - 1,211,241 289,163
Other assets 1,077,824 443,914 721,780
Total Assets $151,563,673 $127,633,195 $118,197,437
</TABLE>
3
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
LIABILITIES
Policy liabilities and accruals:
Reserve for losses $ 21,963,286 $ 19,144,647 $ 17,317,950
Reserve for loss adjustment expenses 10,334,611 8,330,676 4,779,091
Unearned premiums 29,528,968 26,794,249 26,054,447
Total Policy Liabilities and Accruals 61,826,865 54,269,572 48,151,488
Accounts payable 3,053,475 3,913,672 2,836,045
Due to securities brokers 114,512 300,000 14,069
Balances due to reinsurers 1,335,207 901,055 636,535
Accrued premium taxes 98,523 269,722 186,807
Income taxes payable 398,699 - 122,387
Deferred income taxes 3,140,988 - -
Total Other Liabilities 8,141,404 5,384,449 3,795,843
Total Liabilities 69,968,269 59,654,021 51,947,331
SHAREHOLDERS' INVESTMENT
Common stock, $1.00 par value, authorized 15,000,000 shares,
issued 6,890,928, 6,877,596 and 6,868,472, respectively 6,890,928 6,877,596 6,868,472
Paid-in surplus 7,979,299 7,931,671 7,893,695
Net unrealized appreciation (depreciation) on investment securities
carried at fair value, net of deferred taxes of $3,703,411, $338,322
and $354,503, respectively 7,188,976 (656,743) 688,152
Retained earnings 59,857,908 54,157,275 51,150,412
Shareholders' investment before treasury stock 81,917,111 68,309,799 66,600,731
Treasury stock, 190,756, 191,273 and 193,148 shares,
respectively, at cost (321,707) (330,625) (350,625)
Total Shareholders' Investment 81,595,404 67,979,174 66,250,106
Total Liabilities and Shareholders' Investment $151,563,673 $127,633,195 $118,197,437
Book Value Per Share $ 12.19 $ 10.17 $ 9.92
Shares Outstanding 6,700,172 6,686,323 6,675,324
</TABLE>
4
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months For the Three Months
Ended June 30 Ended June 30
<CAPTION>
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Premiums earned $ 30,131,881 $ 25,217,693 $ 16,316,961 $ 12,882,034
Net investment income 3,112,091 2,536,356 1,568,942 1,299,169
Realized investment gains 869,052 20,788 848,827 8,807
Other revenues 127,208 82,757 29,124 66,847
Total Revenues 34,240,232 27,857,594 18,763,854 14,256,857
LOSSES INCURRED AND EXPENSES
Losses incurred 10,826,062 9,731,496 6,020,115 5,128,202
Loss adjustment expenses incurred 4,502,266 2,472,248 2,378,691 1,214,659
Underwriting, acquisition and insurance expenses 10,303,169 8,777,405 5,611,720 4,607,445
Increase in deferred insurance acquisition costs (1,365,186) (686,220) (849,172) (417,657)
Other expenses 489,434 541,327 207,026 275,603
Total Losses Incurred and Expenses 24,755,745 20,836,256 13,368,380 10,808,252
Income from operations before income taxes 9,484,487 7,021,338 5,395,474 3,448,605
Income tax expense (benefit)
Current 2,268,049 1,883,026 1,293,385 784,812
Deferred 310,495 (53,396) 229,235 101,032
2,578,544 1,829,630 1,522,620 885,844
Net Income $ 6,905,943 $ 5,191,708 $ 3,872,854 $ 2,562,761
INCOME PER SHARE $ 1.03 $ 0.78 $ 0.58 $ 0.39
Weighted Average Number of Shares Outstanding 6,686,134 6,654,742 6,686,134 6,654,742
</TABLE>
5
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
Cash flows provided by operating activities:
<S> <C> <C> <C>
Net Income $ 6,905,943 $ 9,247,240 $ 5,191,708
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 172,905 344,328 156,692
Realized investment (gains) losses (869,052) 106,188 (20,788)
Change in:
Deferred insurance acquisition costs (1,365,186) (784,373) (686,220)
Unearned premiums 2,734,719 3,466,567 2,726,765
Allowance for doubtful accounts receivable from agents 30,000 60,000 30,000
Accrued investment income (83,600) (26,674) 7,330
Receivables from agents, insureds and others (3,992,509) (415,046) (2,543,081)
Balances due to/from reinsurers 186,264 55,481 (434,936)
Reinsurance recoverable on paid and unpaid losses (338,932) 117,133 (328,515)
Funds held by ceding reinsurers 60,305 (2,829) (2,829)
Income taxes payable 880,410 (2,000,010) (1,395,912)
Deferred income taxes 310,495 (262,036) (32,783)
Due to/from securities brokers (1,188,610) 2,651,078 2,365,147
Prepaid reinsurance premiums (168,286) 601,845 378,470
Other assets (416,726) 504,974 89,278
Reserve for losses and loss adjustment expenses 4,822,574 8,155,874 2,777,592
Accounts payable (860,197) (239,443) (1,317,070)
Accrued premium taxes (171,199) 6,432 (76,483)
Net cash provided by operating activities 6,649,318 21,586,729 6,884,365
Cash flows provided by (used for) investing activities:
Proceeds from sales of available-for-sale investments 11,458,982 1,895,147 4,133,337
Purchases of available-for-sale investments (22,652,896) (26,596,166) (12,805,777)
Maturities of available-for-sale investments 4,827,164 6,074,710 2,635,386
Purchase of depreciable assets (370,725) (320,920) (72,478)
Net cash used for investing activities (6,737,475) (18,947,229) (6,109,532)
Cash flows provided by (used for) financing activities:
Cash dividends paid (1,205,310) (2,938,618) (1,869,126)
Stock options exercised 60,960 139,710 92,610
Net proceeds from sale (purchase) of treasury stock 8,918 8,444 (11,556)
Net cash used for financing activities (1,135,432) (2,790,464) (1,788,072)
Net decrease in cash (1,223,589) (150,964) (1,013,239)
Cash, beginning of period 1,253,320 1,404,284 1,404,284
Cash, end of period $ 29,731 $ 1,253,320 $ 391,045
Cash paid during the year for:
Income taxes $ 1,395,000 $ 5,427,361 $ 1,795,876
Interest - - -
</TABLE>
6
<PAGE>
CAPITOL TRANSAMERICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 stock
split effected as a stock dividend. 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.
(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 13,332 options exercised during the six months ended June
30, 1995 and there were 22,062 options exercised during the six months
ended June 30, 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 May 09, 1995 a cash dividend of $.10 per share was declared to
shareholders of record June 15 and paid June 30 in the amount of
$670,006.
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
$535,304.
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 $105,672, $82,130 and $61,750 as of June 30, 1995, December 31,
1994 and June 30, 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
<PAGE>
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 as well as
the entire property-casulaty insurance industry.
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 15 to 20 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 six months ended June 30, 1995 gross premiums written were $33,929,782
compared with $58,564,342 for the year ended December 31, 1994 and $29,446,101
at June 30, 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 $30,131,881, $52,461,456 and
$25,217,693 for the respective periods; and net unearned premiums were
$29,528,968, $26,794,249 and $26,054,447 at each respective period.
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
Gross Premiums Written $33,929,782 $58,564,342 $29,446,101
Reinsurance Ceded 1,231,468 1,912,401 1,001,100
Net Premiums Written $32,698,314 $56,651,941 $28,445,001
Net Premiums Earned $30,131,881 $52,461,456 $25,217,693
Net Unearned Premium Reserve $29,528,968 $26,794,249 $26,054,447
9
<PAGE>
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>
June 30, December 31, June 30,
Insurance Operating Ratios (Statutory Basis): 1995 1994 1994
<S> <C> <C> <C>
Loss and Loss Adjustment Expenses 51.1% 52.3% 47.7%
Underwriting Expenses 32.5% 32.4% 32.3%
Combined Ratios 83.6% 84.7% 80.0%
The Company's combined loss and expense ratios compare very favorably with the industry average of 104.0% for the
first quarter of 1995 and 108.5% for the full year of 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>
June 30, December 31, June 30,
Investments: 1995 1994 1994
<S> <C> <C> <C>
Invested Assets $ 123,889,037 $ 104,785,146 $ 94,416,788
Net Investment Income 3,112,091 5,359,606 2,536,356
Percent of Return to
Average Carrying Value 5.7% 5.6% 5.4%
Realized Gains (Losses) 869,052 (106,188) 20,788
Change in Unrealized Gains(Losses) $ 11,887,452 $ (6,251,923) $ (4,214,203)
</TABLE>
The $11,887,000 increase in unrealized gains for 1995 was composed of a
$4,538,000 increase in fixed maturities and a $7,349,000 increase in equity se-
curities. The Company not only has gained back all the unrealized losses ex-
perienced in 1994, but has another $5,636,000 in additional appreciation. Net
investment income for the six months of 1995 was up 23% over the first six
months of 1994. Net unrealized gains (losses) were $10,892,387, ($995,065) and
$1,042,654 as of June 30, 1995,December 31, 1994 and June 30,1994, respectively.
10
<PAGE>
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 $32,297,897 as of June 30, 1995 compared with $27,475,323 as of December
31, 1994 and $22,097,041 as of June 30,1994. 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 (81.7%, 82.1% and 79.9% 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.
11
<PAGE>
<TABLE>
INSURANCE SUBSIDIARY FINANCIAL STATEMENTS
Statutory Basis as Reported to State Regulatory Authorities
June 30, 1995, December 31, 1994 and June 30, 1994
CAPITOL INDEMNITY CORPORATION June 30, December 31, June 30,
Balance Sheets 1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and Invested Assets $ 108,376,128 $ 96,224,984 $ 84,148,101
Other Receivables 15,049,064 10,069,285 11,315,294
Total Assets $ 123,425,192 $106,294,269 $ 92,463,395
LIABILITIES
Reserve for Losses and Loss Expenses $ 31,480,633 $ 26,829,156 $ 21,050,945
Unearned Premiums 28,733,644 26,167,211 25,204,034
Other Payables 13,489,235 12,645,939 10,153,991
Total Liabilities 73,703,512 65,642,306 56,408,970
SURPLUS AS REGARDS POLICYHOLDERS
Shareholder's Equity 49,721,680 40,651,963 39,054,425
Total Liabilities and Capital $ 123,425,192 $106,294,269 $ 95,463,395
Statements of Income
Premiums Earned $ 30,136,014 $ 51,476,687 $ 24,393,854
Underwriting Deductions 26,239,790 45,441,802 20,841,050
Net Underwriting Gain 3,896,224 6,034,885 3,552,804
Investment Income Including Sales 3,398,599 4,287,368 2,082,964
Other Income (Expense) 103,803 (40,763) (68,108)
Income Tax Expense 1,937,556 2,865,727 1,570,625
Net Income $ 5,461,070 $ 7,415,763 $ 3,997,035
CAPITOL SPECIALTY INSURANCE CORPORATION
Balance Sheets
ASSETS
Cash and Invested Assets $ 5,655,883 $ 5,283,210 $ 4,855,852
Other Receivables 81,136 75,084 515,174
Total Assets $ 5,737,019 $ 5,358,294 $ 5,371,026
LIABILITIES
Due to Brokers $ 114,512 $ - $ -
Other Payables 7,478 4,786 21,102
Total Liabilities 121,990 4,786 21,102
SURPLUS AS REGARDS POLICYHOLDERS
Shareholder's Equity 5,615,029 5,353,508 5,349,924
Total Liabilities and Capital $ 5,737,019 $ 5,358,294 $ 5,371,026
Statements of Income
Premiums Earned $ 525 $ 260,879 $ 256,083
Underwriting Deductions 11,414 126,974 138,030
Net Underwriting (Loss) Gain (10,889) 133,905 118,053
Investment Income Including Sales 138,831 230,004 133,893
Other Income - 138,171 142,865
Income Tax Expense 6,382 69,248 76,583
Net Income $ 121,560 $ 432,832 $ 318,228
</TABLE>
12
<PAGE>
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
<PAGE>
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: August 10, 1995
16
<PAGE>
CAPITOL TRANSAMERICA CORPORATION
FOR IMMEDIATE RELEASE Contact: Paul J. Breitnauer
JULY 18, 1995 Phone (608) 231-4450
NEWS RELEASE
SECOND QUARTER EARNINGS INCREASE 51%
Madison, Wisconsin, July 18, 1995- George A. Fait, Chairman, today announced
that second quarter earnings were up 51.1% over the comparable quarter of 1994.
Consolidated net income for the quarter ended June 30, 1995 was $3.9 million or
$.58 per share compared with $2.6 million or $.39 per share for the same period
in 1994. The second quarter for 1995 included $.13 per share of pre-tax capital
gains. Excluding capital gains, second quarter 1995 and 1994 net income was $.50
and $.39 per share, respectively, a 29.6% increase.
Year to date earnings were $6.9 million or $1.03 per share compared with
$5.2 million or $.78 per share in 1994, a 33% increase. Six months income in
1995 included $869,000 or $.13 per share of pre-tax capital gains while the
first six months of 1994 included $21,000 or $.01 per share of pre tax capital
gains. Excluding capital gains, net income for the six months of 1995 was $.95
per share compared with $.77 per share for the same period last year, a 22.3%
increase.
Second quarter 1995 gross premiums written were $19.0 million compared with
$15.8 million for the same period in 1994, a $3.2 million increase or $20.6%.
Net premiums earned for the second quarter increased from $12.9 million in 1994
to $16.3 million in 1995, a 26.7% increase.
Gross premiums for the first six months of 1995 were $33.9 million compared
with $29.4 million for the same period in 1994, a 15.2% increase. Net premiums
earned increased 19.5% for the first six months from $25.2 million in 1994 to
$30.1 million in 1995.
Total cash and invested assets at June 30, 1995 were $123.9 million
compared with $94.8 million at June 30, 1994, and increase of 30.7%. Net invest-
ment income for the six months of 1995 was $3.1 million compared with $2.5
million for the same period in 1994, a 22.7% increase.
Shareholders' equity at June 30, 1995 was $81.6 million or $12.19 per share
compared with $66.3 million or $9.92 per share for the same period in 1994, a
23.2% increase.
Dividends paid in the first six months of 1995 totaled $.18 per share. The
Board of Directors increased the quarterly dividend policy to $.10 per share
commencing with the second quarter of 1995.
17
<PAGE>
Fait stated "the combined net loss, loss expense and general expense ratio
for the six months of 1995 was 83.6% compared with 80.0% for the like period of
1994. The ability to maintain a favorable combined ratio while increasing prem-
ium volume indicates that we have kept true to our basic philosophy of producing
underwriting profits and not relying solely on investment income to generate
positive earnings. Overall the Company continues to show a most favorable com-
bined ratio compared to the industry average of 104.0% for the first quarter of
1995 and 108.0% for the full year of 1994."
With two strong quarters of written premiums in 1995, the Company antici-
pates achieving its goal of increasing premiums written by 15% over 1994. With
resources generated by its strong financial position, the Company is continuing
to meet the challenge of maintaining a steady pattern of growth and expansion
with continuing profitability.
Market value in excess of cost of the Company's investment portfolio in-
creased by $11.9 million in the first six months as a result of increased
profits in the equity portfolio and the decrease in interest rates which result-
ed in an increase in the net worth of the Company's bond portfolio.
Capital 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 sub-
sidiary insurance companies Capitol Indemnity Corporation and Capitol Specialty
Insurance Corporation. A third subsidiary, Capitol Facilities Corporation, pro-
vides 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 6,692,524 shares
outstanding, is traded on the National Over-the-Counter Stock
Market under the symbol CATA.
FINANCIAL HIGHLIGHTS FOLLOW
18
<PAGE>
CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share)
<CAPTION>
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Gross premiums written $ 33,930 $ 29,446 $ 19,027 $ 15,781
Net premiums written 32,698 28,445 18,352 15,367
Net premiums earned 30,132 25,218 16,317 12,882
EXPENSES
Claims and claim expenses 15,328 12,204 8,398 6,343
Other underwriting expenses 9,428 8,632 4,971 4,465
Total Losses and Expenses Incurred 24,756 20,836 13,369 10,808
Underwriting income 5,376 4,382 2,948 2,074
Investment income 3,112 2,536 1,569 1,299
Realized investment gains 869 21 849 9
Other income 127 83 29 67
Income before income tax 9,484 7,022 5,395 3,449
Income tax expense 2,578 1,830 1,522 886
NET INCOME $ 6,906 $ 5,192 $ 3,873 $ 2,563
EARNINGS PER SHARE $ 1.03 $ 0.78 $ 0.58 $ 0.39
<CAPTION>
COMPARATIVE FINANCIAL HIGHLIGHTS- Six Months Ended June 30,
1995 1994 1993 1992 1991
Per Share Information
<S> <C> <C> <C> <C> <C>
Income per share $ 1.03 $ 0.78 $ 0.69 $ 0.81 $ 0.79
Consolidated net income $ 6,905,943 $ 5,191,708 $ 4,559,447 $ 5,332,621 $ 5,062,208
Weighted average number
of shares outstanding 6,687,673 6,654,742 6,614,824 6,651,881 6,364,262
Book value per share $ 12.19 $ 9.92 $ 8.79 $ 7.87 $ 6.43
Shareholders' investment $ 81,595,404 $ 66,250,106 $ 58,249,666 $ 51,597,691 $ 39,377,033
Dividends paid $ 1,205,310 $ 1,869,126 $ 1,655,299 $ 552,104 $ 334,170
Shares outstanding 6,692,524 6,675,324 6,627,360 6,558,920 6,123,020
Company Statistics:
Gross premiums written $ 33,929,782 $ 29,446,101 $ 23,148,398 $ 17,876,028 $ 15,724,598
Net investment income $ 3,112,091 $ 2,536,356 $ 2,438,978 $ 2,315,426 $ 2,053,143
Invested assets $123,889,037 $ 94,416,788 $ 83,421,951 $ 70,031,713 $ 56,105,152
Total assets $151,563,673 $118,197,437 $103,594,519 $ 86,715,579 $ 71,675,442
Insurance Operating Ratios,
Statutory Basis:
Loss and loss adjustment
expenses: 51.1% 47.7% 46.3% 38.3% 39.0%
Underwriting expenses 32.5% 32.3% 32.6% 33.2% 33.4%
Combined ratios 83.6% 80.0% 78.9% 71.5% 72.4%
19
</TABLE>
<PAGE>
<TABLE>
CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
BALANCE SHEETS
(in thousands, except per share)
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and investments $ 123,919 $ 106,038 $ 94,808
Receivables 16,691 11,597 13,911
Other assets 10,954 9,998 9,478
TOTAL ASSETS $ 151,564 $ 127,633 $ 118,197
LIABILITIES
Claims and claim expenses $ 32,298 $ 27,475 $ 22,097
Unearned premiums 29,529 26,794 26,054
Other liabilities 8,141 5,385 3,796
TOTAL LIABILITIES $ 69,968 $ 59,654 $ 51,947
SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value, authorized
15,000,000 shares, issued 6,910,928,
6,877,596 and 6,868,472, respectively $ 6,911 $ 6,877 $ 6,868
Paid-in surplus 7,960 7,932 7,894
Unrealized appreciation (depreciation) on
securities carried at fair value, net of
deferred taxes 7,189 (657) 688
Retained earnings 59,858 54,157 51,151
Less treasury stock, 190,756, 191,273 and
193,148 shares, respectively, at cost (332) (330) (351)
TOTAL SHAREHOLDERS' EQUITY 81,596 67,979 66,250
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $151,564 $127,633 $118,197
SHAREHOLDERS' EQUITY PER SHARE $ 12.19 $ 10.17 $ 9.92
Increase in Shareholders' Equity -
June 30, 1994 to June 30, 1995 23.2%
June 30, 1993 to June 30, 1994 13.7%
20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 69,254,113
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 3,508,544
<EQUITIES> 49,697,727
<MORTGAGE> 0
<REAL-ESTATE> 1,428,653
<TOTAL-INVEST> 120,380,493
<CASH> 3,538,275
<RECOVER-REINSURE> 448,933
<DEFERRED-ACQUISITION> 9,080,575
<TOTAL-ASSETS> 151,563,673
<POLICY-LOSSES> 32,297,897
<UNEARNED-PREMIUMS> 29,528,968
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 6,890,928
0
0
<OTHER-SE> 74,704,476
<TOTAL-LIABILITY-AND-EQUITY> 151,563,673
30,131,881
<INVESTMENT-INCOME> 3,112,091
<INVESTMENT-GAINS> 869,052
<OTHER-INCOME> 127,208
<BENEFITS> 15,328,328
<UNDERWRITING-AMORTIZATION> (1,365,186)
<UNDERWRITING-OTHER> 10,303,169
<INCOME-PRETAX> 9,484,487
<INCOME-TAX> 2,578,544
<INCOME-CONTINUING> 6,905,943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,905,943
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<RESERVE-OPEN> 27,475,323
<PROVISION-CURRENT> 11,330,000
<PROVISION-PRIOR> 3,998,328
<PAYMENTS-CURRENT> 3,797,191
<PAYMENTS-PRIOR> 6,708,563
<RESERVE-CLOSE> 32,297,897
<CUMULATIVE-DEFICIENCY> 4,055,000
</TABLE>
