SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-8804
THE SEIBELS BRUCE GROUP, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0672136
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 Lady Street (PO Box 1), Columbia, SC 29201(2)
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 748-2000
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 12 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
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 18,407,686 shares of Common
Stock, $1 par value, at April 30, 1996
ITEM 1. FINANCIAL STATEMENTS
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars shown in thousands)
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March 31, December 31
ASSETS 1996 1995
Investments: (Unaudited)
Fixed maturities, at market (cost of $35,094
at 1996 and $33,171 at 1995) $ 34,625 $ 33,581
Equity securities available-for-sale, at market
(cost of $34 at 1996 and $221 at 1995) 34 377
Short-term investments, including temporary cash
investments of $17,953 ($10,235 at 1995) 18,028 10,310
Other long-term investments 34 34
Total investments 52,721 44,302
Cash, other than invested cash 4,744 6,339
Accrued investment income 364 697
Premiums and agents' balances receivable, net 7,469 7,005
Reinsurance recoverable on paid losses and loss
adjustment expenses 26,193 27,423
Reinsurance recoverable on unpaid losses and loss
adjustment expenses 65,263 84,492
Property and equipment, net 5,467 5,396
Prepaid reinsurance premiums - ceded business 42,614 43,469
Deferred policy acquisition costs 194 293
Other assets 4,994 4,589
Total assets $ 210,023 $ 224,005
LIABILITIES
Losses and claims:
Reported and estimated losses and claims - retained $ 44,556 $ 47,445
56,224 74,918
Adjustment expenses - retained business 12,673 13,586
- ceded business 9,039 9,574
Unearned premiums:
Property and casualty - retained business 1,253 1,900
- ceded business 42,615 43,469
Credit life 500 758
Balances due other insurance companies 16,751 12,438
Notes payable 2,476 2,476
Current income taxes payable 155 191
Escrow liability 6,283 0
Other liabilities and deferred items 4,380 7,063
Total liabilities 196,906 213,818
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 18,407,686 shares (16,772,686 at 18,408 16,773
Additional paid-in capital 35,653 34,080
Unrealized gain/(loss) on securities (634) 401
Accumulated deficit (40,310) (41,067)
Total shareholders' equity 13,117 10,187
Total liabilities and shareholders' equity $ 210,022 $ 224,005
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THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIE
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts shown in thousands, except per sh
Three Months Ended
March 31,
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1996 1995
Premiums:
Property and casualty:
Net premiums written $ 2,354 $ 4,143
Change in unearned premiums 645 (836)
Premiums earned 2,999 3,307
Credit life premiums earned 125 192
Commission and service income 10,221 13,024
Net investment income 660 767
Other interest income 118 408
Realized gains on investments 194 64
Other income 23 97
Total revenue 14,340 17,859
Expenses:
Property and casualty:
Losses and loss adjustment expenses 3,004 5,068
Policy acquisition costs 683 1,208
Credit life benefits 70 138
Interest expense 85 30
Other operating costs and expenses 9,733 13,412
Total expenses 13,575 19,856
Income (loss) from operations, before income taxes 765 (1,997)
Provision for income taxes 8 11
Net income (loss) $ 757 $ (2,008)
Per share and common equivalent share:
Net income (loss) - primary and fully diluted $ 0.04 $ (0.13)
Shares used in computing per common
and common equivalent share:
Primary 17,421 16,000
Full dilution 17,541 16,000
Change in value of marketable securities
credited /(charged) directly to equity $ (1,035) $ 559
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THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase in Cash and Temporary Cash Investments
(Unaudited)
(Amounts shown in thousands)
Three Months Ended
March 31,
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1996 1995
Cash flows from operating activities:
Net income (loss) $ 757 $ (2,008)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 239 243
Realized losses (gains) on investments (194) (64)
Net change in assets and liabilities affecting
cash flows from operating activities (2,294) 1,467
Net cash used in operating activities (1,492) (362)
Cash flows from investing activities:
Proceeds from investments sold 1,170 5,752
Proceeds from investments matured 2,795 1,710
Cost of investments acquired (5,510) (1,949)
Net change in short-term investments - (75)
Proceeds from property and equipment sold 108 16
Purchases of property and equipment (406) (25)
Net cash provided by (used in) investing activities (1,843) 5,429
Cash flows from financing activities:
Issuance of capital stock held in escrow 6,250 -
Issuance of capital stock 3,208 -
Proceeds from stock rights offering - 5,321
Net cash provided by financing activities 9,458 5,321
Net increase in cash and temporary cash investments 6,123 10,388
Cash and temporary cash investments, January 1 16,574 20,243
Cash and temporary cash investments, March 31 $ 22,697 $ 30,631
Supplemental cash flow information:
Cash paid for - income taxes $ 43 $ 147
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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, 1995.
The following table indicates the more significant financial comparisons with
the applicable prior periods (dollars shown in thousands, except per share
amounts):
March 31, December 31,
FINANCIAL CONDITION 1996 1995
Total investments $ 52,721 $ 44,302
Total assets 209,952 224,005
Total liabilities 196,835 213,818
Shareholders' equity 13,117 10,187
Per Share 0.71 0.61
Three Months Ended March 31,
RESULTS OF OPERATIONS 1996 1995
Operating revenues
Commission and service income $ 10,221 $ 13,024
Premiums earned 3,124 3,499
Net investment and other interest income 778 1,175
Realized gains on investments 194 64
Other income 23 97
Total operating revenues $ 14,340 $ 17,859
Net income (loss) $ 757 $ (2,008)
Per share $ 0.04 $ (0.13)
Results of Operations
The net income for the first quarter of 1996 was $0.8 million ($0.04 per share),
compared to a net loss of $2.0 million ($0.13 per share) for the first quarter
of 1995. Total revenues in the first quarter of 1995 decreased $3.5 million
(19.7%), when compared to the first quarter of 1995. The majority of this
is related to the decrease in commission and service income due to the reduction
in volume and rates. However, total expenses (includes losses and loss
adjustment expenses) also decreased in the first quarter of 1996 by $6.3
million (31.6%), when compared to the first quarter of 1995. While the
Company has seen premiums earned decrease as the related policies runoff, the
losses and loss adjustment expenses on the business earned prior to 1996 have
stabilized. Results in the first quarter of 1996, and the last three
quarters of 1995, confirm management's opinion that reserves appear to be
adequate to cover any future development on this business. In addition, the
Company continues its constant monitoring of expenses related to the contracts
it services to keep the profit margin from decreasing at the same rate as
revenues.
The majority of the loss in the first quarter of 1995 is due to losses incurred
on business the Company wrote in prior years. In addition, during the first
quarter of 1995, the Company began to feel the effects of the lower rates and
volume on the contracts from which it earns commission and
service income. The related expense reductions did not begin until the second
quarter.
Net investment income for the first quarter of 1996 was $0.8 million, compared
to $1.2 million for the same quarter in 1995. This decease is due to lower
average invested assets during the first quarter of 1996, as compared to the
same quarter in 1995. In addition, only minimal earnings were recognized on
the capital contributions discussed below. While the capital investment of
$6.3 million is included in short-term investments at March 31, 1996, the
Company will not recognize the interest earnings until the transaction is
approved by all parties in the second quarter. The capital
investment of $3.3 million is included in short-term investments at March 31,
1996; however, it was only available for earnings the last three days of the
quarter.
Other income in 1995 includes an $85,000 gain on the sale of certain assets of
Forest Lake Travel Service, Inc. This subsidiary was dissolved in the second
quarter of 1995.
Capital Resources and Liquidity
Cash used in operations during the first quarter of 1996 was $1.5 million,
compared to $0.4 million in 1995. The negative cash flow in both periods was
due to reduced premium collections and the payment of claims for the three
months. While additional cash drain is anticipated during 1996, the
expected amount is less than the $22.8 million of cash and short-term
investments held at March 31, 1996. Hence, no unplanned sales of securities
are anticipated during 1996.
Shareholders' equity at March 31, 1996 was $13.1 million ($0.71 per share),
compared to $10.2 million ($0.61 per share) at December 31, 1995. During the
first quarter of 1996, the Company issued 6,250,000 shares of authorized but
unissued shares at a price of $1.00 to several related
investors. The proceeds of the sale were deposited into escrow pending approval
of the transaction by shareholders and by the South Carolina Department of
Insurance. In conjunction with the sale of common stock, the Company also has
issued stock options to acquire an additional 3,125,000 shares at the higher of
$1.50 per share or book value at December 31, 1998 and 3,125,000 shares
at the higher of $2.00 or book value at December 31, 2000.
Also during the first quarter of 1996, the Company issued 1,635,000 shares of
authorized but unissued shares at a price of $2.00 to a different group of
investors. The proceeds of this stock sale were used to liquidate the notes
payable that were due May 1, 1996. In addition, subject to
shareholder approval of increasing the number of authorized shares, the Company
has issued to this group stock options expiring December 31, 2000 to acquire an
additional 1,635,000 shares at the higher of $2.50 per share or book value at
the date of exercise.
PART I. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
On January 10, 1996, Form 8-K was filed reporting that a letter of intent had
been signed with a group of related investors to invest in 5.5 million shares of
authorized but unissued common stock of the Company. The Company also
announced the election of Kenneth W. Pavia as a member of the Board of
Directors to replace Roy L. Faulks, who had resigned.
On February 2, 1996, Form 8-K was filed reporting that the investment of
6,250,000 shares of the Company's authorized but unissued common stock by a
related group of investors had closed. The investment was increased from
the previously reported 5.5 million shares. The proceeds were placed in
escrow pending approval by shareholders and the South Carolina Department of
Insurance.
On March 14, 1996, Form 8-K was filed reporting an agreement in principle for
South Carolina Insurance Company, a subsidiary of the Company, to sell its
inactive subsidiary, Consolidated American Insurance Company, to Hogan Holding
Corporation. This sale is continent upon the negotiation of a definitive
agreement and regulatory approval. The Company subsequently
announced that neither contingency was resolved during the first quarter.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE SEIBELS BRUCE GROUP, INC.
(Registrant)
Date: May 15, 1996 /s/John A. Weitzel
John A. Weitzel
Chief Financial Officer and Director
Date: May 15, 1996 /s/Ernst N. Csiszar
Ernst N. Csiszar
President and Director
Date: May 15, 1996 /s/Mary M. Gardner
Mary M. Gardner
Controller (Principal Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 34,625,000
<DEBT-CARRYING-VALUE> 34,625,000
<DEBT-MARKET-VALUE> 34,625,000
<EQUITIES> 34,000
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 52,721,000
<CASH> 4,744,000
<RECOVER-REINSURE> 26,193,000
<DEFERRED-ACQUISITION> 194,000
<TOTAL-ASSETS> 210,023,000
<POLICY-LOSSES> 57,229,000
<UNEARNED-PREMIUMS> 1,753,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 2,476,000
0
0
<COMMON> 18,408,000
<OTHER-SE> (5,291,000)
<TOTAL-LIABILITY-AND-EQUITY> 210,023,000
3,124,000
<INVESTMENT-INCOME> 778,000
<INVESTMENT-GAINS> 194,000
<OTHER-INCOME> 10,244,000
<BENEFITS> 3,074,000
<UNDERWRITING-AMORTIZATION> 683,000
<UNDERWRITING-OTHER> 9,818,000
<INCOME-PRETAX> 765,000
<INCOME-TAX> 8,000
<INCOME-CONTINUING> 757,000
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<NET-INCOME> 757,000
<EPS-PRIMARY> 0.04
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<RESERVE-OPEN> 61,031,000
<PROVISION-CURRENT> 794,000
<PROVISION-PRIOR> 2,210,000
<PAYMENTS-CURRENT> 370,000
<PAYMENTS-PRIOR> 6,436,000
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<CUMULATIVE-DEFICIENCY> 2,210,000
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