======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the quarterly period ended March 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 0-22922
AMERICAN COUNTRY HOLDINGS INC.
(Exact Name of Registrant as specified in its charter)
Delaware 06-0995978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 North LaSalle Street, Chicago, Illinois 60601-1105
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (312) 456-2000
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.
[x] Yes [ ] No
The aggregate number of shares of the Registrant's Common Stock,
$.01 par value, outstanding May 11, 1998 was 32,009,438.
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<PAGE> 2
AMERICAN COUNTRY HOLDINGS INC.
PAGE
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at
March 31, 1998, (Unaudited)
and December 31, 1997 . . . . . . . . . . . . . . . 3
Consolidated Statements of Income
(Unaudited) for the Three Months
Ended March 31, 1998 and 1997 . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
(Unaudited) for the Three Months
Ended March 31, 1998 and 1997 . . . . . . . . . . . 5
Consolidated Statements of Stockholders'
Equity at March 31, 1998 (unaudited) and
December 31, 1997 and 1996 . . . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . 15
Item 3. Defaults upon Senior Securities . . . . . . . . . . 15
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE> 3
AMERICAN COUNTRY HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
---- -----
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Investments:
Available-for-sale
Fixed maturities - At fair value
(amortized cost: 1998 - $116,736,000;
1997 - $117,542,000) $118,566 $119,476
Equity securities - At fair value
(cost: 1998- $959,000; 1997-$1,487,000) 1,039 1,622
------- -------
Total investments 119,605 121,098
Cash and cash equivalents 10328 8499
Premiums receivable (net of allowance: 1998 - $251,000; 1997 - $265,000) 26549 7021
Reinsurance recoverable 17770 16254
Deferred income taxes 3844 3899
Deferred policy acquisition cost 2859 2544
Accrued investment income 1798 1765
Property and equipment 952 882
Other assets 836 699
------- -------
$184,541 $162,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expense $95,383 $99,087
Unearned premiums 34878 13413
Note payable 7800 4800
Accrued expenses 7653 4388
Income taxes payable 281 2694
Other liabilities 2,361 3,139
------- -------
Total liabilities 148356 127521
Commitments and contingent liabilities
Stockholders' equity:
Common stock - $.01 par value:
Authorized - 60,000,000 shares
Issued and outstanding - shares: 1998 32,043,000;
1997 - 32,036,000 320 320
Preferred stock: Authorized - 2,000,000 shares;
Issued and outstanding - 0 shares 0 0
Additional paid-in capital 36860 36848
Accumulated other comprehensive income 929 1076
Retained earnings (deficit) (1,924) (3,104)
------- -------
36,185 35,140
------- -------
$184,541 $162,661
======== ========
</TABLE>
See Notes to the Consolidated Financial Statements.
<PAGE> 4
AMERICAN COUNTRY HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
---- ----
(in thousands,
except per share data)
<S> <C> <C>
REVENUES:
Net premiums earned $13,129 $14,823
Net investment income 1,747 1,700
Net realized gains on investments 373 (28)
Other income 148 100
------- -------
Total revenues 15,397 16,595
LOSSES AND EXPENSES:
Losses and loss adjustment expenses 10,177 13,570
Amortization of deferred policy acquisition costs 3,026 3,081
Administrative and general expenses 540 422
------- -------
Total losses and expenses 13,743 17,073
------- -------
Income before income taxes 1,654 (478)
Provision for income tax
Current 209 (85)
Deferred 265 (275)
------- -------
474 (360)
------- -------
Net income $1,180 ($118)
======= =======
Basic and dilutive earnings per share $0.04 $0.00
===== =====
</TABLE>
See Notes to the Consolidated Financial Statements
<PAGE> 5
AMERICAN COUNTRY HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1998 1997
---- ----
(in thousands)
Net Cash used by operating activities ($2,755) ($1,681)
INVESTING ACTIVITIES
Fixed maturities - available-for-sale
Purchases (52,107) (3,945)
Sales 50,887 -
Maturities, calls, and prepayments 2,391 1,055
Equity securities - available-for-sale
Purchases - (661)
Sales - -
Maturities, calls, and prepayments 602 1,213
Fixed maturities - Held-to-maturity
Purchases - -
Sales - -
Maturities, calls, and prepayments - 1,790
Net sale of short term investments - 2
Sale or maturity of other investments - 51
Property, equipment and other (201) (54)
------ ------
Net cash provided (used) by investing 1,572 (549)
activities
FINANCING ACTIVITIES
Net proceeds from note payable 3,000 -
Exercise of options and warrants 12 -
------ ------
Net cash provided by financing activities 3,012 0
------ ------
Net increase (decrease) in cash 1,829 (2,229)
Cash at beginning of period 8,499 9,868
------ ------
Cash at end of period 10,328 $7,639
====== ======
See Notes to the Consolidated Financial Statements
<PAGE> 6
AMERICAN COUNTRY HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Retained Total
Number of Common Paid-in Comprehensive Earnings Stockholders'
Shares Stock Capital Income (Deficit) Equity
--------- ------ ---------- ------------ --------- -------------
<S> <C>
Balance at January 1, 1996 35,557 $356 $ 621 $2,187 $36,903 $40,067
------- ----- ------- ----- ------ -------
Comprehensive income, net of tax:
Net income 0 0 0 0 5,025 5,025
Change in unrealized investments gains,
(net of applicable income taxes of $ (682)) 0 0 0 (1,268) 0 (1,268)
Pension liability, net of deferred taxes 0 0 0 (887) 0 (887)
----- ------ -------
Total comprehensive income
0 0 0 0 0 2,870
Dividends to stockholders 0 0 0 0 (2,500) (2,500)
----- ------ -------
Balance at December 31, 1996
35,557 356 621 32 39,428 40,437
-------
Comprehensive income, net of tax:
Net income 0 0 0 0 2,069 2,069
Change in unrealized investments gains,
(net of applicable income taxes of $ 1,963) 0 0 0 1,011 0 1,011
Pension liability, net of deferred taxes 0 0 0 33 0 33
----- ----- -------
Total comprehensive income 0 0 0 0 0 3,113
-------
Redemption of shares recognized
as part of reverse acquisition (35,557) (356) (621) 0 (39,273) (40,250)
Acquisition of Western Systems 7,903 79 10,205 0 (5,328) 4,956
Issuance of additional shares 24,001 240 26,427 0 0 26,667
Issuance of additional shares upon
exercise of options and warrants 132 1 216 0 0 217
------- ----- ------- ----- ------ -------
Balance at December 31, 1997 32,036 320 36,848 1,076 (3,104) 35,140
----- ------ -------
Comprehensive income, net of tax:
Net income 0 0 0 0 1,180 1,180
Change in unrealized investments gains,
(net of applicable income taxes of $ (36)) 0 0 0 (69) 0 (69)
Pension liability, net of deferred taxes 0 0 0 (78) 0 (78)
-------
Total comprehensive income 0 0 0 0 0 1,033
-------
Exercise of options and warrants 0 0 12 0 0 12
----- ------ -------
Balance at March 31, 1998 32,036 $320 $36,860 $929 ($1,924) $36,185
====== ==== ======= ==== ======= =======
</TABLE>
<PAGE> 7
AMERICAN COUNTRY HOLDINGS INC.
PART I
FINANCIAL INFORMATION
(See Financial Statements and Exhibits Attached)
Notes to the Consolidated Financial Statements
(Unaudited)
A. NATURE OF OPERATIONS
American Country Holdings Inc. (the "Company") is an insurance
holding company which operates through its direct subsidiaries
American Country Insurance Company ("American Country"), American
Country Financial Services Corp. ("Financial Services")and American
Country Professional Services Corp. ("Professional Services").
American Country is an Illinois domestic property and casualty
insurance company that specializes in the underwriting and marketing
of commercial property and casualty insurance for a focused book of
business. American Country concentrates on types of insurance in which
it has expertise: transportation, restaurant and artisan contractor
lines. American Country also writes personal lines auto and
homeowners insurance. Financial Services operates principally as a
premium finance company and also provides secured loans for certain of
American Country's larger customers. Professional Services is a new
company that was created to be a third-party administrator to handle
claims processing for insureds. Although Professional Services has
had no activities to date, it expects to begin operations at the end
of the second quarter of 1998.
B. ACCOUNTING PRINCIPLES
The accompanying financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X and, accordingly, do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. The accompanying financial statements
should be read in conjunction with the consolidated financial
statements of the Company included in the Company's Annual Report on
Form 10-K filed on March 31, 1998.
Operating results for the three-month period ended March 31,
1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
Earnings per share information is presented on the basis of
weighted average shares outstanding for the period.
C. DEBT
On March 30, 1998, the Company borrowed $7.8 million under a
short-term note, of which $4.8 million was used to repay a loan
facility the Company previously had and $3.0 million was used to pay a
<PAGE> 8
tax liability of the Company which resulted from the reverse
acquisition of The Western Systems Corp. in July of 1997. On April
30, 1998, the Company entered into a $15 million revolving loan credit
facility pursuant to which the Company initially borrowed $7.8 million
at an initial interest rate of 6.47% to repay the short-term note. The
line of credit agreement contains various debt covenants including
certain financial covenants and commitment fees, which are .3875% per
annum of the unused line of credit.
D. CAPITAL STOCK
No dividends have been declared or paid by the Company during the
periods presented in the accompanying financial statements. At March
31, 1998, the Company has 2,055,129 warrants outstanding. The
warrants allow the warrant holder to purchase 2.19 shares of Common
Stock at a price of $1.83 per share through August 31, 1998 (the "Old
Warrants"). On May 11, 1998, the Company filed a Registration
Statement on Form S-3 with the Securities and Exchange Commission (the
"SEC") registering Company Common Stock and Class A Redeemable Common
Stock Purchase Warrants (the "New Warrants"). Shortly after the
Registration Statement is declared effective by the SEC, the Company
intends to offer the holders of the Old Warrants an opportunity to
exchange, for a limited period of time, each Old Warrant and $4.00 in
cash for 2.19 shares of the Company's Common Stock and 2.19 New
Warrants. Each New Warrant issued will entitle the holder thereof to
purchase one share of the Company's Common Stock at an exercise price
of $3.25 through and including August 31,2001.
E. STOCK OPTION PLAN
The Company has established a Stock Option Plan (the "Plan"), as
amended, under which options to purchase up to a total of 750,000
shares of common stock may be granted to officers and other key
employees. Stock options granted under this Plan, which may be either
incentive stock options or nonqualified stock options for federal
income tax purposes, expire up to ten years after date of grant and
become exercisable over a three year period. Employees who have left
the Company have 90 days to exercise their options. In December 1996,
the stockholders agreed to an amendment to the Plan, whereby in the
event of a sale of the assets of the Company, all options outstanding
would become immediately exercisable without regard to any vesting
provisions. At March 31, 1998, the Company had 405,199 options
outstanding with exercise prices ranging from $0.60 per share to $3.75
per share.
F. REINSURANCE
The components of the net reinsurance recoverable balances in the
accompanying balance sheets were as follows:
<PAGE> 9
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-----------------------------------------
(In thousands)
<S> <C> <C>
Ceded paid losses recoverable $ 1,304 $ 436
Ceded unpaid losses and loss 13,284 15,114
adjustment expenses ("LAE")
Ceded unearned premiums 3,182 703
-------- --------
Total $17,770 $16,253
======== ========
</TABLE>
The reinsurance ceded components of the amounts relating to the
accompanying statement of income was as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
-------------------------------
(In thousands)
<S> <C> <C>
Ceded premiums earned $3,431 $2,320
Ceded incurred losses 1,446 2,221
Ceded incurred LAE 14 163
</TABLE>
The effect of reinsurance on premiums written and earned for the
three months ended March 31, 1998, and 1997 was as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
(In Thousands)
Premiums Premiums
-------- --------
Written Earned Written Earned
------- ------------------------------------
<S> <C> <C> <C> <C>
Direct $37,901 $ 16,397 $37,870 $16,920
Assumed 124 163 185 224
Ceded (5,910) (3,431) (2,222) (2,320)
-------- -------------------------------------
Net $ 32,115 $ 13,129 $35,833 $14,824
========= =====================================
</TABLE>
G. ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income includes all
changes in shareholder's equity (except those arising from
transactions with shareholders) and includes net income and net
unrealized gains (losses) on securities. The new standard requires
<PAGE> 10
only additional disclosures in the consolidated financial statements,
it does not affect the Company's financial position or results of
operations.
In 1997 the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
establishes standards for providing disclosures related to products
and services, geographic area and major customers. In February 1998
the FASB issued Statement No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits." This statement
standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable. The Company
anticipates adopting these statements in its 1998 year-end financial
statements as required. Implementation of these statements is not
expected to have a material effect on the Company's financial
statements.
H. INVESTMENTS
The Company follows FASB Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities", which requires
categorization of fixed maturities either as held to maturity,
available for sale or trading and equity securities as available for
sale or trading. FASB Statement No. 115 allows companies to transfer
securities between categories for events that are isolated,
nonrecurring and unusual for the reporting enterprise that could not
have been reasonably anticipated. The Company no longer holds any
fixed maturities as held to maturity.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto included elsewhere in this Report.
Overview
American Country Holdings Inc. (the "Company") is an insurance
holding company which operates through its direct subsidiaries
American Country Insurance Company ("American Country"), American
Country Financial Services Corp. ("Financial Services")and American
Country Professional Services Corp. ("Professional Services").
American Country is an Illinois domestic property and casualty
insurance company that specializes in the underwriting and marketing
of commercial property and casualty insurance for a focused book of
business. American Country concentrates on types of insurance in which
it has expertise: transportation, restaurant and artisan contractor
lines. American Country also writes personal lines auto and
homeowners insurance. Financial Services operates principally as a
premium finance company and also provides secured loans for certain of
American Country's larger customers. Professional Services is a new
company that was created to be a third-party administrator to handle
claims processing for insureds. Although Professional Services has
<PAGE> 11
had no activities to date, it expects to begin operations at the end
of the second quarter of 1998.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997
Overall premium revenues declined 11.4% in 1998 to $13.1 million
from $14.8 million for the same period in 1997.
The following table sets forth the net premiums earned by the
principal lines of insurance underwritten by American Country for the
periods indicated and the dollar amount and percentage of change
therein from period to period:
NET PREMIUMS EARNED
Increase (Decrease)
Three Months Ended 1998 to 1997
March 31, ----------------
1998 1997 Amount Percent
---- ---- ------ -------
(in thousands)
Transportation lines $ 7,189 $ 6,651 $ 538 8.1%
lines
Commercial lines 5,881 6,082 ( 201) ( 3.3)
Personal lines 59 2,090 ( 2,031) (97.2)
-------- -------- -------- ------
Totals $ 13,129 $ 14,823 ($ 1,694) (11.4%)
======== ======== ======== =======
Compared to the first quarter in 1997, net premiums earned from
transportation lines, which consists of taxi and limousine liability
and physical damage insurance, increased by 8.1% to $7.2 million.
Nearly all of the insurance business written by American Country for
transportation lines generated premium revenue increases, especially
the insurance business representing American Country's expansion
outside its historical region of the Chicago metropolitan area. This
geographical expansion was accomplished primarily by new underwriting
programs in the states of Pennsylvania and Wisconsin.
Net premiums earned from commercial lines decreased as a result
of the continuing vigorous pricing competition industry-wide for this
line. Most severely affected was workers' compensation insurance,
which experienced a 15.6% decrease in 1998 to $3.2 million in premium
revenues from $3.7 million for the same period in 1997. Somewhat
offsetting this decrease was a 35% increase in Commercial Multiple
Peril and a 6% increase for the auto liability insurance that is not
classified as transportation.
The decrease of 97% in Personal lines is due to the reinsurance
agreement entered into with Ohio Casualty Insurance Company ("Ohio
Casualty") effective January 1, 1998. Pursuant to the reinsurance
agreement Ohio Casualty reinsures nearly all of American Country's
personal lines business, thereby assuming responsibility for such
business. As part of the reinsurance agreement Ohio Casualty receives
<PAGE> 12
nearly all of the premiums generated for this line of business. As a
result, premium revenues from this source decreased from $2.1 million
for the period ended 1997 to $59,000 for 1998.
Investment income (net investment income and net realized gains
on investments) increased approximately 27%, to $2.1 million as
compared to $1.7 million for the same period 1997. Interest income
decreased by $69,000 during 1998, resulting in total interest income
earned of $1.9 million. Realized gains amounted to $373,000 for 1998
compared to a loss of $28,000 during the same period in 1997. In
addition, costs relative to the investment activities of the Company
decreased 38% resulting in savings of $116,000.
Other income, which consists of interest and fees earned on the
Company's premium financing activities and fees earned in connection
with the reinsurance agreement with Ohio Casualty, increased 48% in
the first quarter of 1998 to $148,000.
Losses and loss adjustment expenses (LAE) decreased 25% or $3.4
million for the 1998 period, from $13.6 million during 1997 to $10.2
million for 1998, resulting in a loss ratio of 77.5% for 1998 compared
to 91.5% for 1997. Much of the savings in LAE can be attributed to
management's efforts to improve operating efficiencies.
The loss ratio for the transportation line for 1998 declined to
76.3% compared to 83.3% for 1997. Although losses and loss adjustment
expenses for transportation lines increased $915,000 or 18.2% over
1997, the increase was primarily due to increased loss activity as a
result of the geographic expansion of this line and the corresponding
increase in the volume of transportation business written and to
additional losses incurred for the Chicago area programs.
Commercial lines experienced a significant decline in both its
losses and the resulting loss ratios during the 1998 quarter. The
decrease, especially for workers' compensation and commercial multiple
peril business, resulted in a loss ratio of 69.7% compared to 101.6%
during 1997. This decrease can be attributed to better weather
conditions in American Country's underwriting territories during the
period as well as to the effects of the re-underwriting program
inaugurated during the fourth quarter 1997.
The decrease in Personal lines losses is the direct result of the
reinsurance agreement with Ohio Casualty, referred to earlier, wherein
100% of American Country's losses incurred after December 31, 1997 are
being assumed by Ohio Casualty on almost the entire book of personal
lines business.
Amortization of acquisition costs reflects a net decrease during
the 1998 period of $55,000 due to reduced commission paid to
producers, particularly in relation to the incentive profit sharing
commission program which was redesigned effective January 1, 1998.
This decrease was somewhat offset by commission expense incurred on
particular transportation products which had not been subject to these
costs in prior periods.
<PAGE> 13
General and administrative costs increased $24,000 in the 1998
period, primarily the result of increased costs for allowances due to
managers and agents, exclusive of commissions.
Liquidity and Capital Resources
The Company is a holding company, receiving cash principally
through fees and dividends from its subsidiaries and borrowings,
certain of which are subject to dividend restrictions and regulatory
approval. The ability of insurance and reinsurance companies to
underwrite insurance and reinsurance is based on maintaining liquidity
and capital resources sufficient to pay claims and expenses as they
become due. The primary sources of liquidity for the Company's
subsidiaries are funds generated from insurance premiums, investment
income, commission and fee income, capital contributions from the
Company and proceeds from sales and maturities of portfolio
investments. The principal expenditures are for payment of losses and
LAE, operating expenses, commissions and dividends to shareholders.
At March 31, 1998, the Company's total assets of $184.5 million
was comprised of the following: Cash and investments, 71.4%; premiums
receivable, 14.4%; reinsurance recoverables, 9.6%; deferred expenses
(policy acquisition costs and deferred taxes) 3.6%; fixed assets, .5%;
and other assets, .5%.
The Company's subsidiaries seek to maintain liquid operating
positions and follow investment guidelines and state regulations for
investments that are intended to provide for an acceptable return on
investment while preserving capital, maintaining sufficient liquidity
to meet their obligations and, as to the Company's insurance
subsidiary, maintaining a sufficient margin of capital and surplus to
ensure its unimpaired ability to write insurance and assume
reinsurance.
The following table provides a profile of the Company's fixed
maturities investment portfolio by rating at March 31, 1998:
Market Percent of
Value Portfolio
------ ----------
AAA/Aaa (including US
Treasuries of $14,383) $59,093 49.8%
AA/Aa 16,410 13.8%
A/A 28,592 24.1%
BBB/Ba 9,186 7.8%
All other 5,285 4.5%
------- ----
Total $118,566 100.0%
Cash flow used by operations for the quarter ended March 31,
1998, and 1997 was $2.7 million and $1.6 million, respectively, which
were amounts adequate to meet all obligations during the periods. The
increase in cash flow for the quarter ended March 31, 1998 as compared
to the 1997 three month period is primarily related to proceeds from a
<PAGE> 14
$15 million revolving loan credit facility obtained by the Company.
On March 30, 1998, the Company borrowed $7.8 million under a short-
term note, of which $4.8 million was used to repay a loan facility the
Company previously had and $3.0 million was used to pay a tax
liability of the Company which resulted from the reverse acquisition
of The Western Systems Corp. in July of 1997. On April 30, 1998, the
Company entered into a $15 million revolving loan credit facility
pursuant to which the Company initially borrowed $7.8 million at an
initial interest rate of 6.47% to repay the short-term note. The line
of credit agreement contains various debt covenants including certain
financial covenants and commitment fees, which are .3875% per annum of
the unused line of credit.
Forward Looking Statements
The Company cautions readers regarding certain forward-looking
statements contained in the foregoing and elsewhere and in any other
statements made by, or on behalf of, the Company, whether or not in
future filings with the Securities and Exchange Commission. Forward-
looking statements are statements not based on historical facts. In
particular, statements using verbs such as "expect," "intend," "plan,"
"anticipate," "believe" or similar words generally involve forward-
looking statements. Forward-looking statements also include but may
not be limited to, statements relating to future plans, targets and
objectives, financial results, cyclical industry conditions,
government and regulatory policies, the uncertainties of the reserving
process and the competitive environment in which the Company operates.
Forward-looking statements are based upon estimates and
assumptions that are subject to significant business, economic and
competitive uncertainties, many of which are beyond the Company's
control and subject to change. These uncertainties can affect actual
results and could cause actual results to differ materially from those
expressed in any forward-looking statements. Whether or not actual
results differ materially from forward-looking statements may depend
on numerous foreseeable and unforeseeable events or developments, some
of which may be national in scope, such as general economic conditions
and interest rates. Some of these events or developments may be
related to the insurance industry generally, such as pricing
competition, regulatory developments and industry consolidation.
Others may relate to the Company specifically, such as credit,
volatility and other risks associated with the Company's investment
portfolio, and other factors. Investors are also directed to consider
other risks and uncertainties discussed in documents filed by the
Company with the SEC, including Exhibit 99 to the Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended
December 31, 1997. The Company disclaims any obligation to update
forward-looking information.
<PAGE> 15
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending material legal proceedings to which the
Company or its subsidiaries is a party or of which any of the
properties of the Company or its subsidiaries is subject, except for
claims arising in the ordinary course of business. Most of these
lawsuits involve claims under insurance policies issued by American
Country. These lawsuits are considered by American Country in
estimating the reserves for losses and loss adjustment expenses. In
the opinion of management, the ultimate resolution of such litigation
will not have a material effect on the financial condition of the
Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
(27) Financial Data Schedule
b. Reports on Form 8-K:
On January 22, 1998, the Company filed a Current Report on
Form 8-K reporting the appointment of Coopers & Lybrand
L.L.P. as principal accountants to the Company following
Ernst & Young LLP's completion of the audit of the Company's
financial statements for the year ended December 31, 1997.
On April 9, 1998, the Company filed a Current Report on Form
8-K reporting that Ernst & Young LLP had completed its audit
of the Company's financial statements for the two most
recent fiscal years ended December 31, 1997 and 1996 and
that Coopers & Lybrand LLP would be serving as auditors to
the Company for the fiscal year ending December 31, 1998.
On April 17, 1998, the Company filed a Current Report on
Form 8-K/A to clarify and supplement the disclosure included
in the Form 8-K filed on April 9, 1998.
<PAGE> 16
SIGNATURE
Pursuant to the requirements 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.
Date: May 15, 1998
American Country Holdings Inc.
(Registrant)
By: /s/ Edwin W. Elder
==============================
Executive Vice President, Chief
Operating Officer, and Acting
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 118,566
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,039
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 119,605
<CASH> 10,328
<RECOVER-REINSURE> 17,770
<DEFERRED-ACQUISITION> 2,859
<TOTAL-ASSETS> 184,541
<POLICY-LOSSES> 95,383
<UNEARNED-PREMIUMS> 34,878
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 7,800
0
0
<COMMON> 320
<OTHER-SE> 35,865
<TOTAL-LIABILITY-AND-EQUITY> 184,541
13,129
<INVESTMENT-INCOME> 1,747
<INVESTMENT-GAINS> 373
<OTHER-INCOME> 148
<BENEFITS> 10,177
<UNDERWRITING-AMORTIZATION> 3,026
<UNDERWRITING-OTHER> 540
<INCOME-PRETAX> 1,654
<INCOME-TAX> 474
<INCOME-CONTINUING> 1,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,180
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<RESERVE-OPEN> 0 <F1>
<PROVISION-CURRENT> 0 <F1>
<PROVISION-PRIOR> 0 <F1>
<PAYMENTS-CURRENT> 0 <F1>
<PAYMENTS-PRIOR> 0 <F1>
<RESERVE-CLOSE> 0 <F1>
<CUMULATIVE-DEFICIENCY> 0 <F1>
<FN>
<F1> Available on an annual basis only.
</FN>
</TABLE>
