FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended March 31, 1995
Commission File Number 2-39729
COTTON STATES LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
GEORGIA 58-0830929
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
244 Perimeter Center Parkway, N. E., Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(404) 391-8600
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 the filing requirements for at least the past 90 days.
YES___X___ NO______
The Registrant, as of March 31, 1995, has 2,711,149 shares of common stock
outstanding.
PART I - CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated statements have been prepared by management. In
management's opinion, all adjustments and certain reclassifications
necessary to a fair statement of the results for the three months ended
March 31, 1995 and 1994 have been made.
COTTON STATES LIFE INSURANCE COMPANY
Unaudited Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994
ASSETS 1995 1994
Investments
Fixed maturities, held for investment, at amortized
cost (market value $31,781,106 in 1995 and
$31,336,004 in 1994) $33,118,608 $33,637,095
Fixed maturities, available for sale, at market
(amortized cost $40,366,559 in 1995 and
$46,039,255 in 1994) 39,797,454 44,450,362
First mortgage loans on real estate 5,740,695 5,916,625
Policy loans 6,486,960 6,543,751
Short-term investments 11,151,972 1,962,140
Total investments 96,295,689 92,509,973
Cash 1,803,811 2,173,651
Accrued investment income 1,286,389 1,439,721
Accounts receivable, principally premiums 3,000,673 3,007,599
Amount due from reinsurers 809,272 1,876,843
Deferred policy acquisition costs 22,562,019 21,953,463
Other assets 2,156,121 1,451,218
$127,913,974 $124,412,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $85,468,025 $84,687,257
Policy and contract claims 1,652,017 1,453,553
Federal income taxes 2,037,102 1,459,221
Other liabilities 3,619,715 3,255,617
Total liabilities 92,776,859 90,855,648
Stockholders' Equity:
Common Stock 2,882,220 2,882,220
Additional paid-in capital 1,295,865 1,295,922
Net unrealized (losses) on fixed maturities
available for sale (488,505) (1,128,107)
Retained earnings 32,731,714 31,791,715
Less treasury stock, at cost, (170,971 shares in
1995 and 171,071 in 1994) (1,284,179) (1,284,930)
Total stockholders' equity 35,137,115 33,556,820
$127,913,974 $124,412,468
COTTON STATES LIFE INSURANCE COMPANY
Unaudited Consolidated Summary of Earnings
Three months ended
March 31,
1995 1994
Income:
Premium income $1,906,915 $2,058,010
Mortality and expense charges earned 1,746,509 1,698,331
Investment income 1,754,849 1,548,355
Realized investment gains (losses) 3,585 (39,755)
Brokerage and other income 310,801 192,048
Total income 5,722,659 5,456,989
Benefits and expenses:
Life benefits and claims 1,952,435 1,807,868
A & H benefits and claims 647,440 958,428
Amortization of policy acquisition costs 343,253 341,184
Operating expenses 1,324,164 1,148,977
Total benefits and expenses 4,267,292 4,256,457
Earnings before income tax expense 1,455,367 1,200,532
Federal income taxes:
Current tax expense 154,271 213,669
Deferred tax expense 252,650 59,093
Total Federal income taxes 406,921 272,762
Net Earnings
$1,048,446 $927,770
Earnings per share of common stock $ 0.39 $ 0.36
Weighted average number of shares
used in computing earnings per share 2,711,167 2,590,925
COTTON STATES LIFE INSURANCE COMPANY
Unaudited Consolidated Statements of Cash Flows
Three months ended March 31, 1995 and 1994
1995 1994
Cash flows from operating activities:
Net Earnings $1,048,446 $927,770
Adjustments to reconcile net earnings to net
cash provided from operating activities:
Increase in policy liabilities and accrual 979,232 1,317,035
Increase in deferred policy acquisition co (608,556) (520,426)
Change in Federal income taxes 123,440 (50,302)
Decrease (increase) in accounts receivable
amounts due from reinsurers 1,074,497 (323,674)
Other, net 187,473 194,050
Net cash provided from operating activities 2,804,532 1,544,453
Cash flows from investing activities:
Purchase of fixed maturities held for investment 0 (3,907,178)
Purchase of fixed maturities available for sale (7,535,855) 0
Sale of fixed maturities available for sale 12,091,683 0
Proceeds from maturity and redemption of fixed
maturities held for investment 510,728 525,094
Proceeds from maturity and redemption of fixed
maturities available for sale 800,797 1,238,701
First mortgage loans originated 0 (439,500)
Principal collected on first mortgage loans 175,930 533,221
Policy Loans 56,791 (643)
Other, net 23,832 40,701
Net cash provided (used) in investing activities 6,123,906 (2,009,604)
Cash flows from financing activities:
Notes payable principal reduction 0 (320,000)
Cash dividends paid (108,446) (77,728)
Net cash (used) by financing activities (108,446) (397,728)
Net increase (decrease) in cash and cash equivalen $8,819,992 ($862,879)
Cash and cash equivalents:
Beginning of period 4,135,791 3,451,941
End of period $12,955,783 $2,589,062
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
There have been no material changes in the Company's financial condition
since December 31, 1994. As reported in the Company's Annual Report to its
stockholders for the year ended December 31, 1994, the Company does not
anticipate the necessity of entering the debt or equity market in order to
meet short-term or long-term obligations.
Mortgage Loans
The Company's mortgage loan policy stipulates that the Company will loan no
more than 80% of the value of residential loans and no more than 75% of the
value on commercial loans. For the past five years, the Company has
granted loans only to employees (excluding officers and directors), agents,
agent's relatives, employees of Gold Kist, Inc. (a related party) and
current mortgagees.
The geographic distribution of the loan portfolio as of March 31, 1995 and
December 31, 1994 is:
No. of Loans Book Value
03/31/9 12/31/94 State 03/31/95 12/31/94
7 7 Alabama $407,763 $413,405
7 7 Florida 485,853 493,445
99 101 Georgia 4,847,079 5,009,775
113 115 $5,740,695 $5,916,625
The Company has a large concentration of loans in Georgia; however, only
two loans for $225,235 are past due more than three months. Because the
loan-to-value ratio on these delinquent loans is 64%, the Company does not
anticipate any loss should it choose to foreclose. The Company has
forclosed on only one loan since 1985 and incurred no loss on the sale of
the underlying collateral.
Results of Operations
Premium Income
Premium income on ordinary life contracts was down 7% when compared to the
first quarter of 1994. Traditional premium income is up 17% over the same
quarter of 94 due to continued sale of the Company's new participating
whole life policy, but is offset by a decrease in group A&H premiums of 28%
which will continue to fluctuate as premiums are based on actual claims
experience. The Company's only A&H plans cover employees and the Company's
agents. No other group insurance is solicited. Individual A&H premiums
will continue to fluctuate as this is a closed block of run-off business.
Mortality and expense charges earned
Universal Life contract deposits increased 13% over the year earlier
quarter. Mortality and expense charges earned on these deposits increased
3%. The disproportionate increase in mortality and expense charges earned
versus increase in deposits is due to leveling out of reinsurance credits
classified against mortality and expense charges earned.
Investment Income
Investment income was up 13% over the year earlier quarter, due primarily
to an 8% increase in total invested assets.
Realized Investment Gains and Losses
The small amount of realized investment gains and losses resulted from the
sale of selected bonds triggered by responses to general market conditions.
Brokerage Income
The 32% increase in brokerage income is in line with the Company's
expectations with regards to the Company's subsidiaries, CSI Brokerage
Services, Inc. and CS Marketing Resources, Inc. Both Companies receive
override commissions from other insurance carriers and their revenues may
fluctuate based on the timing of receipt of the overrides. Additionally,
CSI Brokerage Services, Inc. earned $31,000 of interest income from an
advance to an affiliated company. The Company expects other income to
fluctuate as this advance is paid down.
Benefits and Operating Expenses
Ordinary benefits as a percentage of premium income and mortality and
expense charges earned increased 5% over the year earlier quarter.
Traditional and universal life death benefits were approximately $240,000
higher than 1994 levels. Accident and health benefits decreased 33% and
will continue to fluctuate as experience and related premium income are
generally based on actual claims experience. Expenses (including
amortization of policy acquisition costs) as a percentage of premium
income, mortality and expense charges and brokerage income increased 4%
over the first quarter of 1994. The Company continues to emphasize expense
controls, but minor fluctuations are still expected.
Federal Income Taxes
Current taxes are provided based on estimates of the projected effective
annual tax rate. Deferred taxes are provided on the basis of SFAS 109
adopted January 1, 1993.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendent in various actions incidental to the conduct
of its business. The Company intends to vigorously defend the litigation
and while the ultimate outcome of these matters cannot be estimated with
certainty, management does not believe the actions will results in any
material loss to the Company.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on April 24, 1995, the
following directors were elected for three year terms expiring in 1998:
J. Ridley Howard
F. Abit Massey
Charles C. Williams
Item 5. Other Information
On April 24, 1995 the Board of Directors declared a dividend of $.04 per
share for shareholders of record June 15, 1995 and payable July 1, 1995.
Item 6. Exhibits and Reports on Form 8-K.
NONE
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.
COTTON STATES LIFE INSURANCE COMPANY
Registrant
Date: 05/10/95
Gary W. Meader
Chief Financial Officer-Treasurer
Date: 05/10/95
William J. Barlow
Vice President-Controller
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