<TABLE>
ITEM 1. FINANCIAL STATEMENTS
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at market (cost of $35,877,411
at 1995 and $41,321,214 at 1994)) $ 33,952,881 $ 38,940,939
Equity securities available-for-sale, at market
(cost of $540,655 at 1995 and 1994) 561,593 458,492
Short-term investments, including temporary cash
investments of $10,690,347 ($20,243,331 at
1994) 10,979,529 20,457,513
Mortgage loan on real estate, at estimated
realizable value (cost of $2,949,080 at 1994) - 1,965,000
Other long-term investments 45,342 46,092
----------- -----------
Total investments 45,539,345 61,868,036
Cash, other than invested cash 19,940,432 -
Accrued investment income 272,735 808,774
Premiums and agents' balances receivable, net 6,839,070 13,027,605
Premium notes receivable 55,490 93,162
Reinsurance recoverable on paid losses and loss
adjustment expenses 40,104,756 30,277,569
Reinsurance recoverable on unpaid losses and
loss adjustment expenses 93,583,495 88,730,898
Property and equipment, net 6,037,762 6,270,334
Prepaid reinsurance premiums-ceded business 47,089,128 48,482,673
Deferred policy acquisition costs 926,180 899,053
Other assets 3,331,678 5,476,468
------------ ------------
Total Assets $263,720,071 $255,934,572
============ ============
LIABILITIES
Losses and claims:
Reported and estimated losses and claims -
retained business 60,048,004 64,220,902
ceded business 78,885,463 74,140,671
Adjustment expenses- retained business 15,370,315 14,893,169
ceded business 14,698,032 14,590,227
Unearned premiums:
Property and casualty-retained business 7,074,616 6,945,280
ceded business 47,089,128 48,482,673
Credit life 1,364,506 1,570,468
Balances due other insurance companies 17,988,583 17,264,627
Notes payable 439,167 439,167
Current income taxes payable 13,260 148,966
Other liabilities and deferred items 16,227,672 12,588,570
------------ ------------
Total liabilities $259,198,746 $255,284,720
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Special stock, no par value, authorized 5,000,000
shares, none issued and outstanding - -
Common stock, $1 par value, authorized 25,000,000
shares, issued & outstanding 16,717,686 shares
(14,500,534 at 1994) 16,717,686 14,500,534
Additional paid-in capital 34,087,608 30,983,592
Unrealized gain (loss) on securities (2,056,116) (2,615,004)
Retained deficit (44,227,853) (42,219,270)
Total shareholders' equity ------------ ------------
Total liabilities and shareholders' equity $263,720,071 $255,934,572
============ ============
</TABLE>
<TABLE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended
March 31
----------------------
1995 1994
<S> <C> <C>
Premiums:
Property and casualty:
Net premiums written $ 4,143,011 $ 4,044,984
Change in unearned premiums (836,162) 1,182,899
------------ -----------
Premiums earned 3,306,849 5,227,883
Credit life premiums earned 192,318 555,776
Commission and service income 5,796,017 6,037,875
Net investment income 766,592 1,551,142
Other interest income 407,656 205,429
Realized gains in investments 64,503 1,841,901
Other income 97,051 1,360,074
------------ -----------
Total revenue 10,630,986 16,780,080
------------ -----------
Expenses:
Property and casualty:
Losses and loss adjustment expenses 5,067,990 9,752,312
Policy acquisition costs 1,207,491 1,327,618
Credit life benefits 138,023 219,724
Interest expense 30,097 63,930
Other operating costs and expenses 6,184,848 5,063,178
------------ -----------
Total expenses 12,628,449 16,426,762
------------ -----------
Income (loss) from operations, before taxes (1,997,463) 353,318
Provision for taxes 11,120 134,210
------------ -----------
Net income (loss) $(2,008,583) $ 219,108
============ ===========
Per share:
Net income (loss) $ (0.13) $ 0.03
============ ===========
Cash dividends $ 0.00 $ 0.00
============ ===========
Average number of shares outstanding 15,999,773 7,500,534
============ ===========
Change in value of marketable equity
securities (charged) directly to income $ 558,888 $(7,201,964)
============ ===========
</TABLE>
<TABLE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash And Temporary Cash Investments
(UNAUDITED)
Three Months Ended
March 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,008,583) $ 219,108
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 243,251 20,176
(Gains) on investments (64,503) (1,841,901)
Net change in assets and liabilities affecting
cash flows from operating activities 1,467,359 902,241
--------- ---------
Net cash used in operating activities (362,476) (700,376)
--------- ---------
Cash flows from investing activities:
Proceeds from investments sold 5,751,796 81,941,524
Proceeds from investments matured 1,710,000 -
Costs of investments acquired (1,949,261) (74,783,197)
Net change in short-term investments (75,000) 560,365
Proceeds from property and equipment sold 16,425 110,360
Purchases of property and equipment (25,204) (21,854)
---------- ----------
Net cash provided by investing activities 5,428,756 7,807,198
---------- ----------
Cash flows from financing activities:
Proceeds from stock rights offering 5,321,168 -
Repayment of notes payable - (57,904)
---------- ----------
Net cash provided by (used in) financing activities 5,321,168 (57,904)
Net increase (decrease) in cash and temporary
cash investments 10,387,448 7,048,918
Cash and temporary cash investments, January 1 20,243,331 12,218,893
---------- ----------
Cash and temporary cash investments, March 31 30,630,779 19,267,811
========== ==========
Supplemental cash flow information:
Cash paid for - Interest $ - $ 63,930
Income taxes paid 146,826 606,705
</TABLE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The interim financial statements in Item 1 are unaudited, but in the opinion
of management, reflect all adjustments necessary for fair presentation of
results for such periods. All such adjustments are of a normal recurring
nature. The results of operations for any interim period are not necessarily
indicative of results for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto
contained in the Company's annual report Form 10-K for the year ended
December 31, 1994.
The following table indicates the more significant financial comparisons with
the applicable prior periods (dollars shown in thousands, except per share
amounts):
<TABLE>
<S> <C> <C>
March 31, December 31,
FINANCIAL CONDITION 1995 1994
Total investments $ 45,539 $ 61,868
Total assets 263,720 255,935
Total liabilities 259,199 255,284
Shareholders' equity 4,521 650
Per share 0.27 0.05
</TABLE>
<TABLE>
Three Months Ended,
March 31st
RESULTS OF OPERATIONS 1995 1994
<S> <C> <C>
Operating revenues
Insurance
Premiums earned $ 3,499 $ 5,784
Commission and service income 5,796 6,038
Net investment and other interest income 1,174 1,756
Realized gains on investments 65 1,842
Other income 97 1,360
Total operating revenues 10,631 16,780
Net income (loss) $ (2,009) $ 219
Per share $ (0.13) $ 0.03
</TABLE>
Overview
The Company filed an SEC Form 10-K for December 31, 1994 which indicated
Shareholders' Equity of $650,000. In addition, the Company's wholly-owned
property and casualty subsidiary, South Carolina Insurance Company ("SCIC")
filed an amended annual statement with the South Carolina Department of
Insurance ("DOI") which indicated a deficiency in statutory capital and
surplus of $1.6 million. Since December 31, 1994, the following events have
occurred with the intent of strengthening both Shareholders' Equity and
statutory capital and surplus:
In January of 1995, the Company raised approximately $5.1 million (net of
expenses) through a rights offering. Of that amount, $5 million was directly
contributed to the capital of SCIC.
Effective April 13, 1995, the Company executed a $2 million note in the favor
of the investors currently holding approximately 49% of the Company's stock.
The proceeds of this note were directly contributed to the capital of SCIC.
The Company had excess cash of $400,000, which was contributed to the capital
of SCIC in May, 1995.
The Company has voluntarily curtailed premium writings to the point that the
only business the Company is retaining is mandatory pools and associations.
The Company is no longer writing "risk" insurance and is concentrating on the
servicing of "non-risk" fee-generating insurance, primarily the South and
North Carolina Reinsurance Facilities, the Federal "Write-Your-Own" Flood
program and the Kentucky Fair Plan. The Company is also continuing to write
commercial lines business as a managing general agent for an unaffiliated
company. Collectively, these programs have historically provided the Company
with profits.
The Company is working closely with the regulators as it formulates its
future operating plans. While statutory capital and surplus at March 31,
1995 is below the DOI's minimums, the two capital contributions totaling $2.4
million during the second quarter raised the surplus above the minimums.
Results of Operations
The net loss for the first quarter of 1995 was $2.0 million ($.13 per share),
compared to net income of $219,000 ($.03 per share) for the first quarter of
1994. The first quarter of 1995 includes $5.8 million of commission and
service income on the Company's fee-generating business. This is a decrease
of $242,000 compared to the same period in 1994 primarily due to the
previously disclosed reduction in the Company's block of business with the
South Carolina Reinsurance Facility ("SCRF") that is being serviced.
However, the Company did show an increase in income from the fees received on
losses serviced for the SCRF and all fees generated by the North Carolina
Reinsurance Facility, Kentucky Fair Plan and the commercial business the
Company is writing as a managing general agent.
The first quarter of 1995 also includes $4.2 million of losses and loss
adjustment expenses ("LAE") on business the Company plans to no longer retain
(excluding the West Coast business discussed below). Premiums earned on this
business in the first quarter was $2.5 million. Premiums earned has been
reduced by the premiums the Company pays for catastrophe reinsurance. The
Company is currently negotiating with reinsurers to bring this cost to a
level more consistent with the fact that the Company is no longer writing
high-risk property premiums. LAE, primarily legal expenses, on the Company's
West Coast business, which the Company stopped writing in 1986, has
historically shown very poor results. The related legal expenses in the
quarter were the lowest since the Company stopped writing this business.
Additionally, new claims reported on this business have slowed and appear to
be less severe than in the past. Management is cautiously optimistic that
this business is beginning to stabilize.
Included in the results for the first quarter of 1994 was $3 million in
settlement expense related to the second quarter settlement of a dispute that
was scheduled for arbitration. Additionally, net premiums written in 1994 had
already begun to drop as the Company began to downsize operations.
Net investment income for the first quarter of 1995 was $767,000, compared to
$1.6 million for the same quarter in 1994. This decrease is due to a large
amount of bond sales in the third and fourth quarter of 1994. Net realized
investment gains of $65,000 were recognized in the first quarter of 1995,
compared to $1.8 million for the same period in 1994.
Other income in 1995 includes an $85,000 gain on the sale of certain assets
of Forest Lake Travel Service, Inc. This subsidiary has been dissolved in
the second quarter of 1995 as it is no longer a part of Company's operating
plans. Other income in 1994 includes a $625,000 gain in connection with the
sale of the assets of the Company's premium financing subsidiary.
The 1995 provision for taxes on income from operations was $11,000 for the
quarter. These charges resulted from the tax limitations on offsetting the
Company's net operating loss carryforwards against state income taxes and
certain life insurance taxable income. The Company's tax net operating loss
carryforward at March 31, 1995 is approximately $91.3 million.
Capital Resources and Liquidity
The investment portfolio at March 31, 1995 was $45.5 million, compared to
$61.9 million at the end of 1994. Shareholders' equity at March 31, 1995 was
$4.5 million ($.27 per share), compared to $650,000 ($.05 per share) at
December 31, 1994. This increase is due to the previously mentioned proceeds
received from the rights offering and increases in the market value of the
Company's investment portfolio. The increase in the market value of the
Company's bond and stock portfolio resulted in an unrealized gain of $559,000.
The market value of the bond portfolio as of May 31, 1995 shows additional
increases.
Cash used in operations during the first quarter of 1995 was $362,000,
compared to $700,000 in 1994. The outflows in both periods were due to
reduced premium volume and the payment of claims for the three months. The
Company is currently working on reducing expenses in order to limit the cash
outflows. While additional cash drain is anticipated in 1995, the expected
amount is less than the $30.9 million of cash and short-term investments held
at March 31, 1995. Hence, no unplanned sales of securities are anticipated
during 1995.
PART I. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
March 31, 1995.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(b) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE SEIBELS BRUCE GROUP, INC.
-----------------------------
(Registrant)
Date: June 12, 1995 MARY M. GARDNER
------------- -----------------------------
Mary M. Gardner
Controller (Principal Accounting Officer)
Date: June 12, 1995 JOHN C. WEST
------------- -----------------------------
John C. West
Chairman of the Board and
Office of the Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000276380
<NAME> THE SEIBELS BRUCE GROUP, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 33,952,881
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 561,593
<MORTGAGE> 0
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<TOTAL-INVEST> 45,539,345
<CASH> 19,940,432
<RECOVER-REINSURE> 40,104,756
<DEFERRED-ACQUISITION> 926,180
<TOTAL-ASSETS> 263,720,071
<POLICY-LOSSES> 75,418,319
<UNEARNED-PREMIUMS> 8,439,122
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 439,167
<COMMON> 16,717,686
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<TOTAL-LIABILITY-AND-EQUITY> 263,720,071
3,499,167
<INVESTMENT-INCOME> 1,174,248
<INVESTMENT-GAINS> 64,503
<OTHER-INCOME> 5,893,068
<BENEFITS> 5,206,013
<UNDERWRITING-AMORTIZATION> 1,207,491
<UNDERWRITING-OTHER> 6,184,848
<INCOME-PRETAX> (1,997,468)
<INCOME-TAX> 11,120
<INCOME-CONTINUING> (2,008,583)
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<RESERVE-OPEN> 79,114,071
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</TABLE>
