SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 1.3 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1994 Commission File No: 0-9649
INDEPENDENT INSURANCE GROUP, INC.
FLORIDA 59-2027555
(State or other jurisdiction of (I.R.S. employer
incorporation of Organization) identification number)
One Independent Drive, Jacksonville, Florida 32276
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (904) 358-5151
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 with the Commission, during the
preceding 12 months (or such shorter period that the Registrant was required
to file such reports), and has been subject to the filing requirements for at
least the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at May 6, 1993
Voting Common Stock, $1.00 Par Value 5,793,503
Nonvoting Common Stock, $1.00 Par Value 7,370,997
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(000 OMITTED)
March 31 December 31
1994 1993
ASSETS
Investments
Debt securities - available for sale $ 647,483 $ 676,754
Debt securities - held to maturity 53,692 53,289
Equity securities 145,288 139,491
Mortgage loans 155,414 165,652
Real estate 17,762 17,589
Policy loans 33,216 33,065
Short-term investments 13,442 5,927
Total investments 1,066,297 1,091,767
Cash 6,753 13,451
Reinsurance recoverables 57,458 58,405
Property, furniture and equipment 48,376 49,320
Deferred policy acquisition costs 197,235 196,720
Accounts and notes receivable 7,115 11,833
Other assets 46,893 47,378
TOTAL $ 1,430,127 $ 1,468,874
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy reserves $ 805,031 $ 789,432
Policyholders' funds 101,541 99,849
Income taxes (13,264) (9,131)
Other liabilities 231,489 266,002
Notes payable 13,600 6,800
Total liabilities 1,138,397 1,152,952
Shareholders' equity:
Voting common stock 5,914 6,100
Nonvoting common stock 8,792 8,606
Additional paid-in capital 6,378 6,378
Net unrealized gain on
equity securities 1,978 25,393
Retained earnings 293,219 293,996
Treasury stock-at cost:
Nonvoting common stock, 1,542 shares (24,551) (24,551)
Total shareholders' equity 291,730 315,922
TOTAL $ 1,430,127 $ 1,468,874
See notes to consolidated condensed financial statements.
- - -3-
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED EXCEPT PER SHARE AMOUNTS)
Three Months Ended March 31
1994 1993
Premium and other income $ 73,386 $ 102,726
Net investment income 16,262 19,240
Realized investment gains 219 7,705
Total 89,867 129,671
Benefits 41,270 66,148
Policy reserve increase (3,855) 5,804
Amortization of deferred
policy acquisition costs 14,564 19,628
Other operating expenses 38,454 42,136
Total 90,433 133,716
Income (loss) from continuing operations
before income taxes (566) (4,045)
Provison (credit) for income taxes:
Current 758 (2,318)
Deferred (1,337) 639
Total (579) (1,679)
Income (loss) from continuing operations 13 (2,366)
Income from discontinued operations
(net of taxes) - 492
Gain on disposition of discontinued
operations (net of taxes) - 7,002
Net income before cumulative effect
of change in accounting principles 13 5,128
Cumulative effect of change in
accounting principles - (42,815)
Net income (loss) $ 13 $ (37,687)
Per share
Income (loss) from continuing operations $0.00 $(0.18)
Income from discontinued operations
net of taxes 0.00 0.57
Net income before cumulative effect
of change in accounting principles 0.00 0.39
Cumulative effect of change in
accounting principles - (3.25)
Net income (loss) $0.00 $(2.86)
Dividends $0.06 $ 0.06
Weighted average number of shares
outstanding (in thousands) 13,165 13,165
See notes to consolidated condensed financial statements.
- - -4-
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED)
1994 1993
OPERATING ACTIVITIES:
Net Income $ 13 $ (37,687)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Change in -
Accrued policy reserves and
benefits (21,653) (7,517)
Accounts receivable, unearned
premiums 7,948 (7,641)
Other assets and other liabilities 1,427 (4,401)
Accrued and unearned investment
income (343) 464
Liability for income taxes (579) (1,679)
Amortization of policy acquisition
costs 14,564 19,628
Deferral of policy acquisition costs (11,094) (19,067)
Depreciation of property and equipment 1,048 1,187
Purchase of property and equipment (122) (233)
(Income) from discontinued operations
(net of tax) (492)
Net realized (gains) on investments (219) (7,705)
(Gain) on disposition of discontinued
operations (net of taxes) (7,002)
Cumulative change if accounting
principles (net of taxes) 42,815
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITES (9,010) (29,330)
INVESTING ACTIVITIES:
Sales, maturities or payments from
investments and loans 82,217 238,767
Purchases of investments and loans
granted (87,607) (205,307)
Disposition of discontinued operations - 11,487
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (5,390) 44,947
FINANCING ACTIVITIES:
Additions to notes payable 7,000 10,900
Reductions in notes payable (200) (8,000)
Receipts credited to policyholders' funds 6,329 6,483
Return of policyholders' funds (4,637) (4,211)
Dividends to shareholders (790) (790)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 7,702 4,382
INCREASE (DECREASE) IN CASH (6,698) 19,999
CASH, BEGINNING OF YEAR 13,451 7,996
CASH, END OF YEAR $ 6,753 $ 27,995
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in
satisfaction of debt $ 1,492 $ 1,527
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED)
Capital Stock $1 Par
(Shares and Amounts)
Voting Nonvoting
Balance, December 31, 1992 $ 6,267 $ 8,439
Net income (loss):
Income (loss) from continuing operations
Income from discontinued operations (net of taxes)
Gain on discontinued operations (net of taxes)
Cumulative effect of change in accounting principles
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock (17) 17
Adjustment of equity
securities to market (net of taxes)
Balance, March 31, 1993 $ 6,250 $ 8,456
Balance, December 31, 1993 $ 6,100 $ 8,606
Net income (loss):
Income (loss) from continuing operations
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock (186) 186
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, March 31, 1994 $ 5,914 $ 8,792
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED)
Net
Unrealized
Gain(Loss)
on Debt
Securities
Available
Additional for Sale
Paid in and Equity
Capital Securities
Net of Tax
Balance, December 31, 1992 $ 6,378 $ 11,756
Net income (loss):
Income (loss) from continuing operations
Income from discontinued operations (net of taxes)
Gain on discontinued operations (net of taxes)
Cumulative effect of change in accounting principles
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock
Adjustment of equity
securities to market (net of taxes) (590)
Balance, March 31, 1993 $ 6,378 $ 11,166
Balance, December 31, 1993 $ 6,378 $ 25,393
Net income (loss):
Income (loss) from continuing operations
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock
Adjustment of debt securities available for sale
and equity securities to market (net of taxes) (23,415)
Balance, March 31, 1994 $ 6,378 $ 1,978
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED)
Retained Treasury Stock
Earnings Shares Amount
Balance, December 31, 1992 $ 333,417 (1,542) $(24,551)
Net income (loss):
Income (loss) from continuing operations (2,366)
Income from discontinued operations
(net of taxes) 492
Gain on discontinued operations
(net of taxes) 7,002
Cumulative effect of change
in accounting principles (42,815)
Dividends to shareholders ($.06 per share) (790)
Issue and (retirement) of stock
Adjustment of equity
securities to market (net of taxes)
Balance, March 31, 1993 $ 294,940 (1,542) $(24,551)
Balance, December 31, 1993 $ 293,996 (1,542) $(24,551)
Net income (loss):
Income (loss) from continuing operations 13
Dividends to shareholders ($.06 per share) (790)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, March 31, 1994 $ 293,219 (1,542) $(24,551)
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(000 OMITTED)
Total
Balance, December 31, 1992 $ 341,706
Net income (loss):
Income (loss) from continuing operations (2,366)
Income from discontinued operations
(net of taxes) 492
Gain on discontinued operations
(net of taxes) 7,002
Cumulative effect of change
in accounting principles (42,815)
Dividends to shareholders ($.06 per share) (790)
Issue and (retirement) of stock
Adjustment of equity
securities to market (net of taxes) (590)
Balance, March 31, 1993 $ 302,639
Balance, December 31, 1993 $ 315,922
Net income (loss):
Income (loss) from continuing operations 13
Dividends to shareholders ($.06 per share) (790)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes) (23,415)
Balance, March 31, 1994 $ 291,730
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited, consolidated,
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of March 31, 1994 and December 31, 1993, the results of
operations for the three months ended March 31, 1994 and 1993 and cash
flows for the three months ended March 31, 1994 and 1993.
INDEPENDENT INSURANCE GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors affecting the accompanying financial statements. It has been the
Company's experience that undue weight cannot be given to the results of a
single period, as such results are not necessarily indicative of that for an
entire year.
Net loss from continuing operations and before realized investment gains was
$100 thousand in the current quarter, compared with a loss of $7.5 million in
1993, and was below management's expectations. These results for 1993 included
approximately $8.0 million of losses from catastrophes as opposed to
approximately $300 thousand associated with catastrophes in 1994. Including
realized investment gains, income from continuing operations broke even in
1994 compared with a loss of $2.4 million in 1993. The Company generated
nearly $8.0 million of realized gains in the year ago quarter, primarily as a
result of market timing and investment strategies. It has been the Company's
experience that gains vary during interim periods due to timing and
investment strategies. In 1994, the process of exiting non-Home Service
lines of business is continuing, which results in less reported expenses and
revenue in each segment in comparison to the previous year.
Exclusive of investment gains, the life insurance subsidiary reported a pretax
loss of $900 thousand in the current quarter, a decrease of $3.1 million from
a year ago. By comparison, net investment income declined $1.8 million from
lower yields, while salary expense dropped $700 thousand due to the downsizing
of home office staff. Also in the current quarter $2.0 million was recorded
for estimated settlements on several lawsuits in Alabama, a jurisdiction where
awards for punitive damages have been prevalent and have received national
attention. Home Service life insurance premiums increased $1.9 million over the
1993 quarter. The decrease in life and accident/health premiums in the
quarter-to-quarter comparison primarily results from exiting the group and
credit lines of business, as previously announced. This is also the primary
reason for the lower reported life and accident/health benefits.
The property/casualty subsidiaries operated at a pretax loss of $500 thousand
for the first quarter, exclusive of realized gains, compared with a $14.9
million loss in the first quarter of 1993. Exclusive of catastrophes,
operations were break-even in 1994, an improvement of $2.5 million over 1993.
The current period reflects lower investment income and reduced administrative
expenses. The wind-down of non-Home Service lines of business continues to be
on target.
In accordance with the required adoption of a new accounting standard at year-
end 1993, the Company now reports certain securities at market value. These
securities may be sold in the future as the Company recognizes the need to
respond to market conditions and its tax position. Rising interest rates in
the quarter reduced the unrealized gain on security investments reported at
market value, which lowered shareholders' equity by $23.4 million, or $1.78
book value per share. It is important to note that had the standard permitted
us to market value the liabilities matched with these securities, the resulting
increase in shareholders' equity would have more than offset this decrease
Book value per share currently totals $22.16 versus $22.99 a year ago.
In other areas, at the Annual Shareholders' Meeting held in April, the Board of
Directors as recommended were elected for a one-year term, and a regular
quarterly cash dividend has been declared. A dividend of 6 cents per share
on both voting and nonvoting common stock is payable on June 1, 1994, to
shareholders of record on May 11, 1994.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Shareholders of the Registrant held
on April 13, 1994, the following were elected Directors for the
ensuing year:
Wilford C. Lyon, Jr. William G. Howard
Jacob F. Bryan IV Michael C. Lyon
G. Howard Bryan Patricia H. Doane
Boyd E. Lyon, Sr. Lucy B. Gooding
Kendall G. Bryan George M. Baldwin
Carter B. Bryan
All Directors of the Registrant are elected for one-year terms,
therefore, there are no Directors (other than those named above)
whose term of office as Director continued after the meeting.
Item 6. Exhibits and Reports on Form 8-K
(b) There were no reports on Form 8-K filed for
the three months ended March 31,1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INDEPENDENT INSURANCE GROUPP, INC.
(Registrant)
Date: May 13, 1994 By: Boyd E. Lyon, Sr.
Boyd E. Lyon, Sr., Vice President,
Treasurer, Chief Financial Officer
