<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR QUARTER ENDED JUNE 30, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
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)
<TABLE>
<S> <C>
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)
</TABLE>
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: 7,831,690 shares of Common
Stock, $1 par value, at August 10, 2000.
--------------------------------------------------------------------------------
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS SHOWN IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
ASSETS ----------- ------------
<S> <C> <C>
Investments:
Debt securities, available-for-sale, at market (cost of
$28,978 in 2000 and $32,180 in 1999).................... $ 28,547 $ 31,575
Equity securities, at market (cost of $6,167 in 2000 and
$1,317 in 1999)......................................... 6,039 1,317
Cash and short-term investments........................... 5,249 26,722
-------- --------
Total cash and investments.............................. 39,835 59,614
Accrued investment income................................... 677 835
Premiums and agents' balances receivable, net of allowance
for doubtful accounts of $6,088 in 2000 and $4,247 in
1999...................................................... 5,898 8,156
Premium notes receivable.................................... 4,232 3,435
Reinsurance recoverable on paid losses and loss adjustment
expenses.................................................. 25,976 18,528
Reinsurance recoverable on unpaid losses and loss adjustment
expenses.................................................. 58,514 74,017
Property and equipment, net................................. 4,133 5,421
Prepaid reinsurance premiums--ceded business................ 51,111 56,724
Deferred policy acquisition costs........................... 400 1,373
Goodwill.................................................... 4,701 19,876
Other assets................................................ 5,087 6,824
-------- --------
Total assets............................................ $200,564 $254,803
======== ========
LIABILITIES
Losses and loss adjustment expenses:
Reported and estimated losses and claims--retained
business................................................ $ 28,131 $ 34,733
--ceded business...... 54,395 67,904
Adjustment expenses--retained business.................... 5,562 5,100
--ceded business........................ 4,119 6,113
Unearned premiums:
Property and casualty--retained business.................. 5,741 5,796
--ceded business........................ 51,111 56,724
Balances due other insurance companies...................... 23,873 20,460
Debt........................................................ 14,173 14,986
Accrued restructuring charges............................... 684 0
Other liabilities and deferred items........................ 8,053 13,730
-------- --------
Total liabilities....................................... 195,842 225,546
-------- --------
COMMITMENTS AND CONTINGENCIES
SPECIAL STOCK, no par value, authorized 5,000,000 shares
Issued and outstanding 220,000 shares of cumulative $0.62,
convertible, redeemable, nonvoting, special preferred
stock, redemption value $2,200............................ 2,200 2,200
Issued and outstanding 50,000 shares of cumulative $0.625
convertible, redeemable nonvoting, special preferred
stock, redemption value $500.............................. 500 500
-------- --------
Total special stock..................................... 2,700 2,700
-------- --------
SHAREHOLDERS' EQUITY
Common stock, $1 par value, authorized 17,500,000 shares,
issued and outstanding 7,831,690 shares in 2000 and
7,831,398 shares in 1999.................................. 7,832 7,831
Additional paid-in-capital.................................. 61,989 61,988
Accumulated other comprehensive income...................... (559) (605)
Accumulated deficit......................................... (67,240) (42,657)
-------- --------
Total shareholders' equity.............................. 2,022 26,557
-------- --------
Total liabilities and shareholders' equity.............. $200,564 $254,803
======== ========
</TABLE>
2
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS SHOWN IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Commission & service income............................ $ 7,914 $ 9,334 $ 19,267 $21,759
Premiums earned........................................ 4,299 12,229 8,763 22,759
Net investment and other interest income............... 885 972 1,918 2,059
Realized (losses) gains, net........................... (123) 11 (227) 11
Policy fees and other income........................... 1,168 989 2,612 2,173
-------- ------- -------- -------
Total revenue...................................... 14,143 23,535 32,333 48,761
-------- ------- -------- -------
Expenses:
Losses & loss adjustment expenses.................... 5,035 9,205 10,812 16,754
Policy acquisition costs............................. 6,594 8,710 14,419 18,828
Interest expense..................................... 318 334 640 610
Other operating costs & expenses..................... 7,360 8,105 14,540 13,474
Restructuring charge................................. 16,421 0 16,421 0
-------- ------- -------- -------
Total expenses..................................... 35,728 26,354 56,832 49,666
-------- ------- -------- -------
Loss from operations, before provision for income
taxes................................................ (21,585) (2,819) (24,499) (905)
Provision for income taxes............................. 0 0 0 0
-------- ------- -------- -------
Net loss............................................... (21,585) (2,819) (24,499) (905)
Other comprehensive income:
Change in value of marketable securities, less
reclassification adjustments of $(124) and $8 for
(losses) gains included in net loss for the three
months ended June 30, 2000 and 1999, respectively,
and $(236) and $8 for (losses) gains included in
net loss for the six months ended June 30, 2000 and
1999, respectively................................. (272) (573) 46 (1,052)
-------- ------- -------- -------
Comprehensive net loss................................. $(21,857) $(3,392) $(24,453) $(1,957)
======== ======= ======== =======
Basic loss per share:
Net loss............................................. $ (2.76) $ (0.36) $ (3.13) $ (0.12)
Weighted average shares outstanding.................. 7,832 7,775 7,831 7,774
Diluted loss per share:
Net loss............................................. $ (2.76) $ (0.36) $ (3.13) $ (0.12)
Weighted average shares outstanding.................. 7,832 7,775 7,831 7,774
</TABLE>
3
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS SHOWN IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(24,499) $ (905)
Adjustments to reconcile net loss to net cash used in
operating activities:
Restructuring charges and associated impairment of
long-lived assets..................................... 16,421 0
Amortization of deferred policy acquisition costs....... 14,419 18,828
Equity in loss (earnings) of unconsolidated
subsidiaries.......................................... 48 (56)
Provision for losses on premiums and agents' balances
receivable, net of recoveries........................... 1,842 994
Depreciation and amortization........................... 1,096 1,346
Net realized loss (gain) on sale of investments......... 236 (8)
Net realized gain on sale of property and equipment..... (9) (3)
Change in assets and liabilities:
Accrued investment income............................. 158 (9)
Premiums and agents' balances receivable, net......... 416 2,868
Premium notes receivable, net......................... (797) 967
Reinsurance recoverable on losses and loss adjustment
expenses............................................ 8,055 3,562
Prepaid reinsurance premiums--ceded business.......... 5,613 5,305
Deferred policy acquisition costs..................... (13,446) (20,455)
Unpaid losses and loss adjustment expenses............ (21,643) (9,765)
Unearned premiums..................................... (5,668) 2,227
Balances due other insurance companies................ 3,413 (10,733)
Other, net............................................ (4,127) 1,548
-------- --------
Net cash used in operating activities............... (18,472) (4,289)
-------- --------
Cash flows from investing activities:
Proceeds from investments sold or matured................. 9,836 8,438
Cost of investments acquired.............................. (11,750) (5,468)
Proceeds from property and equipment sold................. 9 3
Purchases of property and equipment....................... (201) (1,181)
-------- --------
Net cash (used in) provided by investing
activities........................................ (2,106) 1,792
-------- --------
Cash flows from financing activities:
Issuance of capital stock................................. 2 7
Net (repayment) issuance of debt.......................... (813) 157
Dividends paid............................................ (84) (84)
-------- --------
Net cash (used in) provided by financing
activities........................................ (895) 80
-------- --------
Net decrease in cash and short term investments............. (21,473) (2,417)
Cash and short term investments, January 1.................. 26,722 23,141
-------- --------
Cash and short term investments, June 30.................... $ 5,249 $ 20,724
======== ========
Supplemental cash flow information:
Interest paid............................................. $ 643 $ 649
Income taxes paid......................................... 0 0
-------- --------
</TABLE>
4
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
The Seibels Bruce Group, Inc. (the "Company") and its wholly owned subsidiaries
and have been prepared, without audit, in conformity with accounting principles
generally accepted in the United States ("GAAP") pursuant to the rules and
regulations of the Securities and Exchange Commission. All significant
intercompany balances and transactions have been eliminated in consolidation
and, in the opinion of management, all adjustments necessary for the fair
presentation of the Company's unaudited interim financial position, results of
operations and cash flows have been recorded. These financial statements should
be read in conjunction with the financial statements and notes thereto contained
in the Company's annual report on Form 10-K for the year ended December 31, 1999
filed with the Securities and Exchange Commission. The results of operations for
the interim period are not necessarily indicative of the results for a full
year. Certain prior period amounts have been reclassified to conform to the
current period presentation.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates, although, in the opinion of management, such differences would not be
significant.
NOTE 2. REINSURANCE ARRANGEMENTS
Reinsurance contracts do not relieve the Company of its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurer to
minimize its exposure to significant losses from reinsurer insolvency.
The Company currently reinsures 75% of its nonstandard automobile business
and 70% of its commercial lines business through quota share reinsurance
agreements. The nonstandard automobile reinsurance agreement was effective in
the fourth quarter of 1999. From the end of the first quarter of 1999 through
the end of the first quarter of 2000, 90% of the Company's commercial lines
business was reinsured. Effective April 1, 2000, the reinsured percentage was
reduced to 70% in an effort to capitalize on the favorable operating results of
business written under that agreement. Under quota share reinsurance
arrangements the Company cedes a portion of its premiums to the reinsurers, net
of a ceding commission, and collects the same portion of claims payments from
the reinsurers. The reinsurers for the automobile business are Scandinavian Re
and NAC Re and the reinsurer for the commercial lines business is Erie Insurance
Exchange. The Company is also party to a catastrophe cover reinsurance
arrangement with a pool of reinsurers to reduce its exposure to large individual
risks and large catastrophic occurrences.
NOTE 3. PROPERTY AND CASUALTY UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE
The liability for property and casualty unpaid losses and loss adjustment
expenses includes:
- An accumulation of case estimates for losses reported prior to the close
of the accounting period.
5
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 3. PROPERTY AND CASUALTY UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE
(CONTINUED)
- Estimates of incurred-but-not-reported losses based upon past experience
and current circumstances.
- Estimates of allocated, as well as unallocated, loss adjustment expense
liabilities determined by applying percentage factors to the unpaid loss
reserves, with such factors determined on a by-line basis based on past
results of paid loss expenses to paid losses.
- The deduction of estimated amounts recoverable from salvage, subrogation,
and second injury funds.
- Estimated losses for reinsurance ceded and assumed.
Management, in conjunction with the Company's consulting actuaries, performs
periodic reviews of the above components of the Company's loss reserves to
evaluate the adequacy of such reserves. Management believes the reserves are
sufficient to prevent prior years' losses from adversely affecting future
periods; however, establishing reserves is an estimation process and adverse
developments in future years may occur and would be recorded in the year so
determined.
NOTE 4. DEBT
In connection with acquiring Graward General Companies, Inc. ("Graward"), in
Nashville, Tennessee, the Company issued subordinated convertible notes payable
(the "Notes") in the amount of $2,700. The Notes bear interest at a rate equal
to 5% per annum. The entire principal amount due under the Notes is payable in
full on December 31, 2004, provided, however, that if certain outstanding debt
is paid in full and upon 60 days prior written notice, the Notes will become
payable six months after such debt is paid in full. However, in no event will
the Notes become payable earlier than April 1, 2003. At the election of the
holder of the Notes, the Notes may be converted into 300,000 shares of common
stock on the maturity date, provided, however, that notice has been given of
such election at any time on or after the 45th day prior to the maturity date of
the Notes up to but not including the 15th day prior to the maturity date.
Interest expense on the Notes has been neither accrued, nor paid, due to the
current purchase price arbitration (see Part II--Item 1).
On March 31, 1998, the Company entered into a $15,000 Credit Facility (the
"Facility") with a major lending institution for the purpose of financing its
acquisition activity and other general corporate purposes. Quarterly principal
payments began in March 1999. The final payment of all remaining principal and
accrued interest is due in June 2004. Accrued interest is payable monthly on the
outstanding balance under the Facility and is calculated, at the Company's
discretion, using a pre-determined spread over LIBOR or the prime interest rate
of the lending institution. The effective interest rate as of June 30, 2000,
December 31, 1999 and June 30, 1999 was 9.44%, 8.94% and 8.00%, respectively.
The Facility is secured by a lien on the assets of the Company. As of June 30,
2000 and December 31, 1999, the outstanding balance under the Facility was
$11,473 and $12,286, respectively. The Credit Agreement stipulates that the
Company demonstrate compliance with a number of affirmative and negative
covenants on a quarterly basis. Significant financial covenants include minimum
statutory surplus levels, ratios of debt to total capitalization and cash flow
coverage. As of June 30, 2000, and due primarily to the charges incurred as a
6
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 4. DEBT (CONTINUED)
result of the restructuring plan (see Note 6), the Company was not in compliance
with the debt to total capitalization ratio and the minimum statutory surplus
requirement for South Carolina Insurance Company. However, these instances of
noncompliance have been waived by the lending institution. The Company was in
compliance with all other covenants at June 30, 2000.
NOTE 5. EARNINGS PER SHARE
In accordance with SFAS 128, "Earnings Per Share", the Company measures
earnings per share at two levels: basic earnings per share and diluted earnings
per share. Basic per share data is calculated by dividing (loss) income
allocable to common stockholders by the weighted average number of shares
outstanding during the year. Diluted per share data is calculated by dividing
(loss) income allocable to common stockholders by the weighted average number of
shares outstanding during the year, as adjusted for the potentially dilutive
effects of stock options and/or convertible preferred stock, unless common
equivalent shares are antidilutive. For the six and three months ended June 30,
2000, common equivalent shares under special stock and options outstanding are
excluded from the dilutive earnings per share calculation as they yield an
antidilutive effect.
NOTE 6. RESTRUCTURING CHARGES
The Company experienced significant net losses in 1999 and the first six
months of 2000 primarily due to the Company's automobile business segment (see
Note 8). More specifically, a substantial component of that segment's operating
losses stem from the operations of Graward. Upon completion of the Graward
acquisition in April 1998, the Company immediately began ramping up operations
in preparation for significant premium growth. By December 31, 1998, the Company
had achieved direct and assumed premium levels in excess of $191,400, a 68.2%
increase over 1997, but at a consolidated net operating loss of $2,894. The
losses continued to mount throughout 1999. Beginning in the third quarter of
1999, Graward implemented significant cost control measures in an attempt to
make the operation profitable. Concurrent with these measures, Graward began a
critical profitability review of its book of business that resulted in a
reduction of authorized independent agents and more stringent underwriting
guidelines. Despite these measures, and additional measures implemented in the
first quarter of 2000, Graward remained unprofitable. Since its acquisition in
April 1998 and continuing through May 31, 2000, Graward's operating losses had
amounted to over $6,935. During the second quarter of 2000, it was concluded
that all available actions and cost control measures that could reasonably be
taken had been taken and that Graward's operations would not generate profits.
In June 2000, Graward's Board of Directors approved and the Company
announced a restructuring plan (the "Plan") centering around the discontinuation
of its Graward operations. The Plan will be substantially completed over the
next twelve to eighteen months and includes approximately $16,421 in special
charges related primarily to the impairment of long-lived assets associated with
the operation, employee severance, and the cancellation of contractual
commitments. Other nonrecurring charges of the Plan include a $1,800 additional
reserve against Graward's accounts receivable from insureds, bringing the total
estimated cost of the Plan to approximately $18,221. Although every effort will
be made to collect outstanding receivables, in the opinion of management, the
discontinuation of the Graward operation
7
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 6. RESTRUCTURING CHARGES (CONTINUED)
significantly and adversely impacts the effectiveness of Graward's collections
efforts. The cash requirements of the restructuring plan are estimated to be
approximately $684 and will be substantially expended by the end of 2000.
Restructuring costs include all costs directly related to the Plan. EITF No.
94-3 provides specific requirements as to the appropriate recognition of costs
associated with employee termination benefits and other exit costs. Employee
termination costs are recognized when benefit arrangements are communicated to
affected employees in sufficient detail to enable the employees to determine the
amount of benefits to be received upon termination. Other exit costs resulting
from an exit plan that are not associated with or that do not benefit activities
that will be continued are recognized at the date of commitment to an exit plan
subject to certain conditions. For a cost to be accrued, it must not be
associated with or incurred to generate revenues after the commitment date, and
it must be either: i) incremental to other costs incurred prior to the
commitment date, or ii) represent amounts under a contractual obligation that
existed prior to the commitment date that will either continue after the exit
plan is completed with no economic benefit or which will result in a penalty to
cancel the obligation. Other costs directly related to the discontinuation of
Graward's operations that are not eligible for recognition at the commitment
date, such as relocation costs and estimated operating costs to be incurred
during the runoff period, are expensed as incurred.
Of the $16,421 total restructuring charge, approximately $15,678 relates to
the impairment of long-lived assets, including $14,915 of goodwill, $580 of
fixed assets associated with the Graward operation and $183 of deferred
financing costs. The Company evaluates the recoverability of long-lived assets
in accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Accordingly, the Company evaluates the
recoverability of long-lived assets not held for sale by measuring the carrying
amount of the assets against the estimated undiscounted future cash flows
associated with them. The Company evaluates the recoverability of long-lived
assets held for sale by comparing the asset's carrying amount with its estimated
fair value less costs to sell.
A summary of the accrued restructuring charges is as follows:
<TABLE>
<CAPTION>
IMPAIRMENT SEVERANCE CANCELLATION
OF LONG- AND OF CONTRACTUAL ALL
LIVED ASSETS BENEFITS COMMITMENTS OTHER TOTAL
------------ --------- -------------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial charge recorded...................... $ 15,678 $304 $304 $ 135 $ 16,421
Amount utilized by June 30, 2000............. (15,678) -- -- (59) (15,737)
-------- ---- ---- -------- --------
Balance, June 30, 2000....................... $ -- $304 $304 $ 76 $ 684
======== ==== ==== ======== ========
</TABLE>
All charges associated with the Plan were determined based on the formal
plans of management, and approved by the Board of Directors, using the best
information available. The amounts ultimately incurred could change as the
operations are run off over the next twelve to eighteen months.
8
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 7. ACQUISITIONS
Effective January 21, 2000, three of the Company's insurance subsidiaries
collectively acquired a 30.625% equity ownership interest in QualSure Holding
Corporation for $4,900. QualSure Holding Corporation is the holding company
parent of QualSure Insurance Corporation, a homeowners take-out insurance
company domiciled in the state of Florida. In connection with this investment,
one of the Company's subsidiaries, Insurance Network Services, Inc. entered into
a Claims Administration Services Agreement with QualSure Insurance Corporation
to adjudicate all of its claims for a fee based upon subject earned premium. The
Company believes this is an investment that capitalizes upon its considerable
experience in claims adjudication and provides a source of additional fee-based
income to supplement its risk bearing operations.
NOTE 8. FINANCIAL REPORTING BY BUSINESS SEGMENTS
Reportable business segments are determined based on management's internal
reporting approach, which is based on product line and complementary coverages.
The reportable business segments are comprised of Automobile, Flood, Commercial,
Adjusting Services and All Other. The Automobile segment includes all personal
lines components of retained risk nonstandard automobile operations as well as
the North Carolina Reinsurance Facility (the "NCRF"), South Carolina Reinsurance
Facility (the "SCRF") and South Carolina Associated Automobile Insurers Plan
(the "SCAAIP") operations. The Flood segment contains all flood operations
including the National Flood Insurance Program, flood zone determinations,
excess flood and flood compliance tracking, as well as the runoff of the
complementary homeowners product line. The Commercial segment includes all
commercial operations, as well as the commercial automobile activity for the
North and South Carolina Reinsurance Facilities. The Adjusting Services segment
contains the catastrophe insurance claims handling for hurricanes, tornadoes,
hailstorms, earthquakes and floods; catastrophe claims supervision; and ordinary
claims adjusting for both the Company
9
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 8. FINANCIAL REPORTING BY BUSINESS SEGMENTS (CONTINUED)
and external insurance companies. The All Other segment includes the runoff
operations of the Company. The results of the reportable segments are included
in the following table:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------------- -------------------
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Automobile........................................... $ 5,510 $19,326 $ 16,325 $37,038
Flood................................................ 4,099 3,736 7,168 6,857
Commercial........................................... 800 819 1,476 3,353
Adjusting Services................................... 3,557 145 6,819 478
All Other............................................ 177 (491) 545 1,035
-------- ------- -------- -------
Total revenue...................................... $ 14,143 $23,535 $ 32,333 $48,761
======== ======= ======== =======
Depreciation and amortization:
Automobile........................................... $ 240 $ 232 $ 503 $ 670
Flood................................................ 55 23 107 81
Commercial........................................... 46 56 89 104
Adjusting Services................................... 41 7 81 9
All other............................................ 7 7 32 57
-------- ------- -------- -------
Total depreciation and amortization................ $ 389 $ 325 $ 812 $ 921
======== ======= ======== =======
Net (loss) income:
Automobile (a)....................................... $(21,535) $(3,373) $(23,938) $(3,231)
Flood................................................ (115) (6) (238) (184)
Commercial........................................... (281) 120 (345) 1,368
Adjusting Services................................... 716 (152) 834 (53)
All Other............................................ (370) 592 (812) 1,195
-------- ------- -------- -------
Total net income (loss)............................ $(21,585) $(2,819) $(24,499) $ (905)
======== ======= ======== =======
</TABLE>
------------------------
(a) Includes a restructuring charge of $16,421 and a related nonrecurring charge
of $1,800 recorded in the quarter ended June 30, 2000.
NOTE 9. RECENT ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal use." SOP 98-1 requires
capitalization of computer software costs that meet certain criteria. The
statement is effective for fiscal years beginning after December 15, 1998. The
company adopted SOP 98-1 effective January 1, 1999. SOP 98-1 did not have a
material impact on the Company's financial position or results of operations.
10
<PAGE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS SHOWN IN THOUSANDS)
(UNAUDITED)
NOTE 9. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement established
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
This statement could increase volatility in earnings and other comprehensive
income. The effective date of this statement was amended by SFAS Nos. 137 and
138 and, as amended, is effective for all fiscal quarters beginning after June
15, 2000. The Company will adopt SFAS No. 133 effective January 1, 2001. SFAS
No. 133 is not expected to have a material impact on the Company's financial
position or results of operations.
NOTE 10. SUBSEQUENT EVENT
On July 14, 2000, the Company announced it is withdrawing from the voluntary
nonstandard automobile insurance market in South Carolina due to that business
unit's higher than acceptable loss ratios and continued strains on the Company's
consolidated earnings and resources. The Company continues to operate the other
components of its automobile reporting segment, which includes its capacity as
servicing carrier for the fee-based operations of the NCRF, the SCRF and the
SCAAIP, as well as its retained risk nonstandard automobile operations in North
Carolina.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table indicates the more significant financial comparisons
with the applicable prior periods (dollars shown in thousands, except per share
amounts):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
FINANCIAL CONDITION 2000 1999
------------------- -------- ------------
<S> <C> <C>
Total cash and investments.................................. $ 39,835 $ 59,614
Total assets................................................ 200,564 254,803
Total liabilities........................................... 195,842 225,546
Special stock............................................... 2,700 2,700
Shareholders' equity........................................ 2,022 26,557
Per share............................................... 0.26 3.39
</TABLE>
OVERVIEW
(AMOUNTS SHOWN IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
RESULTS OF OPERATIONS 2000 1999 2000 1999
--------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Commission and service income.......................... $ 7,914 $ 9,334 $ 19,267 $21,759
Premiums earned........................................ 4,299 12,229 8,763 22,759
Net investment and other interest income............... 885 972 1,918 2,059
Realized (losses) gains, net........................... (123) 11 (227) 11
Policy fees and other income........................... 1,168 989 2,612 2,173
-------- ------- -------- -------
Total revenue...................................... $ 14,143 $23,535 $ 32,333 $48,761
======== ======= ======== =======
Loss from operations, before provision for income
taxes................................................ $(21,585) $(2,819) $(24,499) $ (905)
Provision for income taxes............................. 0 0 0 0
-------- ------- -------- -------
Net loss............................................... $(21,585) $(2,819) $(24,499) $ (905)
======== ======= ======== =======
Weighted average shares outstanding.................... 7,832 7,775 7,831 7,774
======== ======= ======== =======
</TABLE>
12
<PAGE>
RESULTS OF OPERATIONS
(DOLLARS SHOWN IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
COMMISSION & SERVICE INCOME
Commission and service income decreased $2,492, or 11.5%, to $19,267 for the
six months ended June 30, 2000 from $21,759 for the six months ended June 30,
1999. The automobile business unit accounted for $7,616 of the overall net
decrease, posting commission & service income of $6,110 for the six months ended
June 30, 2000 versus $13,726 for the same period of 1999. This decrease is
mainly the result of a decrease in the number of policies in the South Carolina
Reinsurance Facility ("SC Facility"), a residual market for the automobile
insurance in the state of South Carolina. Effective March 1, 1999, no new
policies could be ceded to the SC Facility, and no voluntary renewals could be
ceded to the SC Facility after September 1999. Designated agents are able to
renew in the SC Facility through 2001. The new SCAAIP provides insurance to
drivers unable to obtain coverage in the voluntary market. Although the Company
has an arrangement with the SCAAIP to handle 50% of the policies written, there
has been very little activity to date. Offsetting the automobile business unit's
decrease in commission and service income was the $5,216 increase posted by the
adjusting services business unit. This unit was effectively begun late in the
second quarter of 1999 for the purpose of adjusting the losses of the Company's
insurance subsidiaries. Over the last twelve months, the adjusting services
business unit has focussed on attracting and retaining external customers and,
as a result, now boasts more than 30 unaffiliated customers. In addition,
concurrent with the Company's January 21, 2000 investment in QualSure Holding
Corporation, its adjusting services business unit entered into a Claims
Administration Services Agreement with QualSure to adjudicate all of its claims
for a fee based upon subject earned premium. The remaining $92 decrease in
commission & service income came from all other operations.
PREMIUMS EARNED
Net premiums earned decreased $13,996, or 61.5%, to $8,763 for the six
months ended June 30, 2000 from $22,759 for the six months ended June 30, 1999.
The automobile business unit accounted for $12,320 of the overall decrease,
posting premiums earned of $7,663 for the six months ended June 30, 2000 versus
$19,983 for the same period of 1999. The primary reason for the decrease centers
around the Company's 75% quota share reinsurance agreement which was effective
December 31, 1999. Under the agreement, 75% of all automobile premiums written
during the six months ended June 30, 2000 were ceded to the reinsurers. No such
reinsurance arrangement was in effect for the six months ended June 30, 1999.
Secondarily, in the third quarter of 1999 continuing through the first quarter
of 2000, the Company performed a critical profitability review of its automobile
book of business that resulted in a reduction of authorized independent agents
and more stringent underwriting guidelines. These actions also had a negative
impact on premiums written for the six months ended June 30, 2000. The
commercial business unit accounted for $1,574 of the overall decrease, posting
premiums earned of $1,058 for the six months ended June 30, 2000 versus $2,632
for the same period of 1999. Effective March 31, 1999, the Company entered into
a 90% quota share reinsurance agreement that remained in place through
March 31, 2000. Effective April 1, 2000, the 90% quota share reinsurance
agreement was amended to become a 70% quota share reinsurance agreement. The
amendment was made to capitalize upon the favorable underwriting results of the
commercial book of business. The existence of the quota share reinsurance
agreement for all six months of 2000 versus only three months of 1999 accounts
for the majority of the decrease in premiums earned by the commercial business
unit. The remaining $102 decrease in premiums earned came from the Company's
runoff operations.
13
<PAGE>
NET INVESTMENT AND INTEREST INCOME
Net investment and other interest income decreased $141, or 6.8%, to $1,918
for the six months ended June 30, 2000 from $2,059 for the six months ended
June 30, 1999. Total cash and investments experienced a decrease of $19,779,
primarily to fund the acquisition of QualSure, to settle liabilities created
through the 75% quota share reinsurance agreement for the Company's automobile
business unit, and to fund the Company's operations. However, the most
significant piece of the decrease came from lower yielding cash and short-term
investments. Therefore, the impact on net investment and other interest income
from the sharp decrease in total cash and investments was somewhat insulated.
Partially offsetting that decrease in net investment income were higher yields
on the Company's bond portfolio due to interest rate increases over the last
twelve months and the implementation of a monthly reimbursement policy with the
South Carolina Reinsurance Facility which substantially improved the Company's
cash flows.
REALIZED (LOSSES) GAINS, NET
Net realized losses amounted to $227 for the six months ended June 30, 2000
versus a net realized gain of $11 for the same period in 1999. Sales of fully
depreciated property and equipment during 2000 resulted in realized gains of $9,
while realized losses on the sale of investments amounted to $236 and resulted
from the liquidation of a portion of the Company's investment portfolio to fund
operations and investing activities.
POLICY FEES AND OTHER INCOME
Policy fees and other income increased $439, or 20.2%, to $2,612 for the six
months ended June 30, 2000 from $2,173 for the six months ended June 30, 1999. A
significant source of policy fees for the Company is derived from its Graward
Managing General Agent operation and is directly correlated with its premium
writings. In the third quarter of 1999, the Company implemented significant cost
control measures at Graward in an attempt to make the operation profitable.
Concurrent with these measures, the Company began a critical profitability
review of Graward's book of business that resulted in a reduction of authorized
independent agents and more stringent underwriting guidelines. Additional
underwriting measures were implemented in the first quarter of 2000. As written
premium fell during the six months ended June 30, 2000 as compared to the same
period in 1999, policy fees and other income followed suit. Graward's policy
fees and other income was $1,023 for the six months ended June 30, 2000 versus
$1,625 for the same period in 1999, a $602 decrease. More than offsetting this
decrease were the policy fees and other income generated by a division of the
adjusting services business unit. This division was formed in the third quarter
of 1999 and has experienced rapid growth with a customer base containing both
affiliated and unaffiliated companies. Policy fees and other income generated by
this unit amounted to $1,114 for the six months ended June 30, 2000. The
remaining decrease in policy fees and other income of $73 came from all other
operations.
LOSSES AND LOSS ADJUSTMENT EXPENSES
Losses and loss adjustment expenses decreased $5,942, or 35.5%, to $10,812
for the six months ended June 30, 2000 from $16,754 for the six months ended
June 30, 1999. The automobile business unit accounted for $6,645 of the overall
decrease, posting incurred losses and loss adjustment expenses of $8,473 for the
six months ended June 30, 2000 versus $15,118 for the same period of 1999. The
primary reason for the decrease centers around the Company's 75% quota share
reinsurance agreement which was effective December 31, 1999. Under the
agreement, 75% of all accident year 2000 incurred losses through the six months
ended June 30, 2000 were ceded to the reinsurers. No such reinsurance
arrangement was in effect for the six months ended June 30, 1999. Partially
offsetting this decrease, losses and loss adjustment expenses of the commercial
business unit increased $136 for the six months ended June 30, 2000 when
compared to the same period in 1999. This increase is due to the change in the
reinsurance percentage for this business effective April 1, 2000. The 90% quota
share reinsurance agreement was amended to become
14
<PAGE>
a 70% quota share reinsurance agreement in an effort to capitalize on the
favorable underwriting results of the commercial business. The remaining
increase of $567 came from all other operations.
POLICY ACQUISITION COSTS
Policy acquisition costs decreased $4,409, or 23.4%, to $14,419 for the six
months ended June 30, 2000 from $18,828 for the six months ended June 30, 1999.
Fluctuations in policy acquisition costs are directly correlated to fluctuations
in direct written premium. Direct written premium for the six months ended
June 30, 2000 amounted to $72,093, a $22,046, or 23.4%, decrease from the
$94,139 written during the same period in 1999. In the third quarter of 1999
continuing through the first quarter of 2000, the Company performed a critical
profitability review of its automobile book of business that resulted in a
reduction of authorized independent agents and more stringent underwriting
guidelines. These actions also had a negative impact on premiums written for the
six months ended June 30, 2000.
INTEREST EXPENSE
Interest expense was $640 and $610 for the six months ended June 30, 2000
and 1999, respectively. The increase is due to higher average interest rates on
the Company's debt due to the series of interest rate increases over the past
twelve months. Partially offsetting the increased interest cost, was interest
saved by paying down approximately $1,626 of the debt between July 1, 1999 and
June 30, 2000.
OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses increased $1,066, or 7.9%, to $14,540 for
the six months ended June 30, 2000 from $13,474 for the six months ended
June 30, 1999. The single largest cause of the increase is the $1,800 additional
bad debt reserves posted in June 2000 in connection with the decision to
discontinue the operations of Graward and reduce Graward's receivables from
insureds to the amount estimated to be collected. Further, although every effort
will be made to collect outstanding receivables, in the opinion of management,
the discontinuation of the Graward operation significantly and adversely impacts
the effectiveness of Graward's collections efforts. Offsetting this increase are
the beginnings of a wide range of expense savings directly resulting from the
cost savings initiatives begun in the third quarter of 1999 and continuing
through the first and second quarters of 2000.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
(AMOUNTS SHOWN IN THOUSANDS)
Liquidity relates to the Company's ability to produce sufficient cash to
fulfill contractual obligations, primarily to policyholders. Sources of
liquidity include service fee income, premium collections, investment income and
sales and maturities of investments. Principal uses of cash are payments of
claims, principal and interest payments on debt, operating expenses, and
purchases of investments. Cash outflows can be variable because of the
uncertainties regarding settlement dates for liabilities for unpaid losses and
because of the potential for large losses. Accordingly, the Company maintains
investment and reinsurance programs generally intended to avoid the forced sale
of investments to meet claims obligations.
Net cash used in operating activities totaled $18,472. Significant uses of
cash flows from operating activities to emphasize include reductions in the
liability for losses and loss adjustment expenses of $21,643 and the liability
for unearned premiums of $5,668. Effective December 31, 1999, the Company
entered into a 75% quota share reinsurance agreement for its nonstandard
automobile business. As a result of the transaction, 75% of the Company's
written premium and 75% of its losses incurred during the 2000 accident year are
ceded to its reinsurers. Furthermore, the Company implemented more stringent
underwriting and retention guidelines in the first quarter of 2000, resulting in
a $22,045 reduction of direct premium writings for the six months ended
June 30, 2000 over the corresponding period for 1999. Furthermore, as a result
of implementing the 75% quota share reinsurance agreement, a $9,613 liability to
the reinsurers was recorded at December 31, 1999 and settled in the first
quarter of 2000. Other significant uses of cash include reductions in other
liabilities and deferred items of $5,677, a substantial portion of which relates
to reductions in municipal and premium tax liabilities. In April 2000, the
Company settled its municipal license tax dispute for $1,525, resulting in a
gain of $902. Further, premium tax liabilities existing at December 31, 1999
were settled in the first quarter of 2000. Coupling this with the aforementioned
substantially reduced direct premium writings in 2000, has resulted in a sharp
decrease in premium tax liabilities over December 31, 1999.
Significant sources of cash flows from operating activities to emphasize
include $8,055 from collections of reinsurance recoverable on losses and loss
adjustment expenses under the Company's quota share reinsurance agreements for
its automobile and commercial insurance programs. Furthermore, the
aforementioned underwriting and retention guidelines implemented in the first
quarter of 2000, and the resulting reduction in direct premium writings,
provided a $5,613 reduction in reinsurance premiums prepaid to the Company's
reinsurers. Balances due other insurance companies increased $3,413.
Fluctuations in this caption are significantly impacted by, and a direct result
of, the timing of payments made or received under the Company's automobile and
commercial quota share reinsurance agreements, as well as the timing of
settlements made or received with the South and North Carolina Reinsurance
Facilities.
Investing activities used cash in the amount of $2,106. Effective
January 21, 2000, three of the Company's insurance subsidiaries collectively
acquired a 30.625% equity ownership interest in QualSure Holding Corporation,
the holding company parent of QualSure Insurance Corporation, a homeowners
take-out insurance company domiciled in the state of Florida. Significant uses
of cash include liquidation of a portion of the Company's investment portfolio
to fund the acquisition and to provide cash for operations.
Net cash used in financing activities totaled $895 and related primarily to
repayment of debt principal and payment of dividends on Special Stock.
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Some of the statements discussed or incorporated by reference in this
quarterly report on Form 10-Q are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements regarding management's current knowledge, expectations, estimates,
beliefs
16
<PAGE>
and assumptions. All forward-looking statements included in this document or
incorporated by reference are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. Results may differ materially because of both known
and unknown risks and uncertainties which the Company faces. Factors which could
cause results to differ materially from our forward-looking statements include,
but are not limited to:
- the effects of economic conditions and conditions which affect the market
for property and casualty insurance, including, but not limited to,
interest rate fluctuations and flood zone determination services;
- the effects and impact of laws, rules and regulations which apply to
insurance companies;
- geographic concentrations of loss exposure, causing revenues and
profitability to be subject to prevailing regulatory, demographic and
other conditions in the area in which the Company operates;
- the availability of reinsurance and the ability of the Company's
reinsurance arrangements to balance the geographical concentrations of the
Company's risks;
- the impact of competition from new and existing competitors, which
competitors may have superior financial and marketing resources than the
Company;
- the impact of the decisions to exit the Graward and South Carolina
nonstandard automobile operations,
- the ability to successfully implement the restructuring plan and the risk
that current initiatives may not be successful,
- restrictions on the Company's ability to declare and pay dividends;
- the fact that the Company has experienced, and can be expected in the
future to experience, storm and weather-related losses, which may result
in a material adverse effect on the Company's results of operations,
financial condition and cash flows;
- the uncertainty associated with estimating loss reserves, and the adequacy
of such reserves, capital resources and other financial items;
- the outcome of certain litigation and administrative proceedings involving
the Company;
- control of the Company by a principal shareholder, which shareholder has
the ability to exert significant influence over the policies and affairs
of the Company;
- the possibility that the Company will be unable to meet its cash flow
requirements; the Company has suffered losses in recent years and the
Company may continue to experience losses in the future;
- risks the Company faces in diversifying the services it offers and
entering new markets; and
- other risk factors listed from time to time in the Company's Securities
and Exchange Commission filings.
Accordingly, there can be no assurance that the actual results will conform
to the forward-looking statements discussed or incorporated by reference in this
quarterly report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest income on the Company's cash and investments is affected by
fluctuations in the general level of U.S. interest rates. The Company uses
sensitivity analysis to determine its exposure to changes in interest rate
market risk. Currently, and because the majority of the Company's cash and
investments earns a fixed rate of interest while a small portion earns interest
at a variable rate, changes in U.S. interest rates would not have a material
effect on the interest earned on the Company's cash and investments.
The Company's Credit Facility bears interest at a predetermined spread over
LIBOR or the prime interest rate of the lending institution, at the Company's
discretion. The amount of interest expense incurred by the Company fluctuates
proportionately with changes in LIBOR and the general level of U.S. interest
rates.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company was served with a complaint dated November 19, 1997 by Norwest
Financial Resources, Inc. ("Norwest") that claimed indemnification from Premium
Service Corporation of Columbia ("Premium") and Seibels, Bruce & Company
("SB&C") pursuant to the Asset Purchase Agreement dated as of July 2, 1993 by
and among Premium, SB&C and Norwest. The indemnification claim relates to
certain loans of Premium which later were discovered to be incorrectly recorded
as realizable assets. Management is vigorously defending this complaint and
believes the Company has no liability in the case. This complaint was filed in
the state of South Carolina in the Richland County Court of Common Pleas.
On May 1, 1998, the Company completed its acquisition of Graward. In
completing the Final Balance Sheet in accordance with the related purchase
agreement, the Company identified purchase price adjustments totaling
approximately $6 million that it believes were known to certain of the sellers,
but not all of which were disclosed to the Company during its due diligence
process. The purchase agreement provides methods for resolving the differences
as to the appropriate adjustments to the purchase price. On December 18, 1998,
the sellers filed a demand for arbitration regarding the parties' dispute over
the purchase price adjustments. Thereafter, the parties reached tentative
agreement regarding some, but not all, of the disputed purchase price
adjustments. The parties then agreed to limit the scope of the arbitration to a
determination whether an adjustment was required for the way in which the
sellers had previously accounted for loss adjustment expenses (LAE) at Graward.
On February 7, 2000, the arbitration panel ruled that the Company was not
entitled to the requested $1.08 million purchase price adjustment on the LAE
issue, although the panel left open the question of whether a new independent
audit of Graward's 1997 financial statements could result in such an adjustment.
On May 5, 2000, the Company filed a motion to vacate the arbitration award. This
motion was filed in the state of South Carolina in the Richland County Court of
Common Pleas, Fifth Judicial Circuit. Subsequently, the sellers of Graward filed
for a removal of the motion to the United States District Court for the District
of South Carolina, Columbia Division. Management continues to believe that the
purchase price will be adjusted in its favor based on subsequent negotiation
and/or litigation with the sellers of Graward.
On March 1, 2000, the Company received a demand from Generali-U.S. Branch
("Generali") for arbitration of claims arising under the April 1995 Agency
Agreement between Generali and Graward. Generali seeks to recover approximately
$7.64 million plus interest, costs, disbursements, and attorneys' fees. The
Company has not yet responded to this demand.
The Company and its subsidiaries are parties to various other lawsuits
generally arising in the normal course of their insurance and ancillary
businesses. The Company does not believe that the eventual outcome of such suits
will have a material effect on the financial condition or results of operations
of 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.
(a) The Annual Meeting of Shareholders (the "Meeting") of the Company, was
held on May 10, 2000. As of March 13, 2000, and for purposes of the
Meeting, there were 7,831,393 shares of common stock of the Company, par
value $1.00 per share (the "Common Stock"), issued and
18
<PAGE>
outstanding. At the Meeting, there were 6,272,675 shares (80% of the
outstanding shares entitled to vote) represented in person or by proxy.
(c) The Meeting was called for the following purposes and with the following
results:
1) To fix the number of directors at 8. Passed with 5,879,019 votes (94%
of the shares cast) in favor, 81,113 against, 311,540 abstained and 3
unvoted.
2) To elect three (3) directors, Frank H. Avent, Charles H. Powers and
George R.P Walker, Jr., to hold office until the 2003 Annual Meeting
of Shareholders or until his/her successor shall be elected and shall
qualify. Each Director elected with at least 6,148,022 votes (98% of
the votes cast).
<TABLE>
<CAPTION>
VOTES CAST VOTES
NOMINEE VOTES CAST FOR AGAINST ABSTAINED UNVOTED
------- -------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Frank H. Avent.......................... 6,148,022 124,650 None 3
Charles H. Powers....................... 6,166,773 105,899 None 3
George R.P. Walker, Jr.................. 6,171,773 100,899 None 3
</TABLE>
The following directors continued in office after the meeting: A.
Crawford Clarkson, Jr., Claude E. McCain, Kenneth W. Pavia, John P.
Seibels and Susie H. VanHuss, Ph.D.
3) To ratify the Board's appointment of Arthur Andersen LLP to audit the
Company's books and records for the fiscal year ending December 31,
2000. Passed with 6,240,534 votes (99% of the votes cast) in favor,
17,265 against, 14,874 abstained and 2 unvoted.
4) To grant full and unlimited voting rights under the South Carolina
Control Share Acquisitions Act to 1,066,000 shares of Common Stock
purchase by Charles H. Powers, Walker S. Powers, Rex Huggins and Jane
Huggins in accordance with and in compliance with Title 35, Chapter
2, Article 1, Section 35-2-109 of the South Carolina Code. Passed
with 2,233,779 votes (50.15% of the shares entitled to vote) in
favor, 2,181,957 against and 38,151 abstained.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.2 Bylaws of the Registrant, as amended and restated, dated May 10,
2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed with the Securities and Exchange Commission on July 5,
2000 to report the discontinuation of the Company's Nashville, Tennessee
nonstandard automobile Managing General Agency operations, Graward
General Companies, Inc.
19
<PAGE>
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)
<TABLE>
<CAPTION>
<S> <C>
Date: August 11, 2000 /s/ JOHN E. NATILI
------------------------------------
John E. Natili
Executive Vice President and Chief Operating
Officer
Date: August 11, 2000 /s/ MATTHEW P. MCCLURE
------------------------------------
Matthew P. McClure
Vice President, General Counsel and Corporate
Secretary
Date: August 11, 2000 /s/ BRYAN D. RIVERS
------------------------------------
Bryan D. Rivers, CPA
Controller (Principal Accounting Officer)
</TABLE>
