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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, 1995 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, 1995
Voting Common Stock, $1.00 Par Value 5,737,604
Nonvoting Common Stock, $1.00 Par Value 7,426,896
INDEPENDENT INSURANCE GROUP, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Consolidated Condensed Balance Sheets
Consolidated Condensed Statements of Income
Consolidated Condensed Statements of Cash Flows
Consolidated Condensed Statements of Changes in
Shareholders' Equity
Notes to Consolidated Condensed Financial
Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(000 OMITTED)
March 31 December 31
1995 1994
ASSETS ----------- -----------
Investments:
Debt securities - available for sale $ 625,341 $ 603,421
Debt securities - held to maturity 50,892 51,048
Equity securities 165,547 156,596
Mortgage loans 141,231 143,677
Real estate 16,561 17,110
Policy loans 34,222 33,967
Short-term investments 17,895 13,728
----------- -----------
Total investments 1,051,689 1,019,547
Cash 4,741 10,533
Reinsurance recoverables 16,432 26,290
Property, furniture and equipment 44,965 45,770
Deferred policy acquisition costs 193,900 195,053
Accounts and notes receivable 5,129 6,145
Income tax receivable 15,109 15,790
Other assets 42,539 44,636
----------- -----------
TOTAL $ 1,374,504 $ 1,363,764
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy reserves $ 851,997 $ 861,453
Policyholders' funds 104,316 103,771
Postretirement and postemployment benefits 70,973 70,501
Other liabilities 52,064 53,281
Notes payable 5,800 7,500
----------- -----------
Total liabilities 1,085,150 1,096,506
----------- -----------
Shareholders' equity:
Voting common stock 5,720 5,725
Nonvoting common stock 8,986 8,981
Additional paid-in capital 6,378 6,378
Net unrealized gain on equity (11,180) (31,222)
securities
Retained earnings 304,001 301,947
Treasury stock-at cost:
Nonvoting common stock, 1,542 shares (24,551) (24,551)
----------- -----------
Total shareholders' equity 289,354 267,258
----------- -----------
TOTAL $ 1,374,504 $ 1,363,764
=========== ===========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED EXCEPT PER SHARE AMOUNTS)
Three Months Ended March 31
---------------------------
1995 1994
---------- ---------
Premium and other income $ 67,272 $ 73,386
Net investment income 16,941 16,262
Realized investment gains 602 219
--------- ---------
Total 84,815 89,867
--------- ---------
Benefits 33,572 41,270
Policy reserve increase 1,125 (3,855)
Amortization of deferred
policy acquisition costs 10,010 14,564
Other operating expenses 36,019 38,454
--------- ---------
Total 80,726 90,433
--------- ---------
Income (loss) before income taxes 4,089 (566)
-------- ---------
Provison (credit) for income taxes:
Current 1,208 758
Deferred 37 (1,337)
--------- ---------
Total 1,245 (579)
--------- ---------
Net income $ 2,844 $ 13
========== =========
Per share
Net income $ 0.06 $ 0.00
Dividends $ 0.06 $ 0.06
Weighted average number of shares
outstanding (in thousands) 13,165 13,165
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED)
1995 1994
-------- --------
OPERATING ACTIVITIES:
Net Income (loss) $ 2,844 $ 13
Adjustments to reconcile net income to net
cash provided by operating activities:
Change in -
Accrued policy reserves and benefits (2,594) (21,653)
Accounts receivable, unearned premiums (5,116) 7,948
Other assets and other liabilities 10,595 1,427
Accrued and unearned investment income 26 (343)
Liability for income taxes (5) (579)
Amortization of policy acquisition costs 10,010 14,564
Deferral of policy acquisition costs (8,857) (11,094)
Depreciation of property and equipment 1,075 1,048
Purchase of property and equipment (270) (122)
Net realized (gains) on investments (602) (219)
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 7,106 (9,010)
--------- ---------
INVESTING ACTIVITIES:
Sales, maturities or payments from
investments and loans 38,823 82,217
Purchases of investments and loans granted (49,776) (87,607)
--------- ---------
NET CASH (USED) BY
INVESTING ACTIVITIES (10,953) (5,390)
--------- ---------
FINANCING ACTIVITIES:
Additions to notes payable 7,000
Reductions in notes payable (1,700) (200)
Receipts credited to policyholders' funds 5,901 6,329
Return of policyholders' funds (5,356) (4,637)
Dividends to shareholders (790) (790)
---------- ---------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (1,945) 7,702
---------- ---------
INCREASE (DECREASE) IN CASH (5,792) (6,698)
CASH, BEGINNING OF YEAR 10,533 13,451
---------- ---------
CASH, AS OF MARCH 31 $ 4,741 $ 6,753
========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in satisfaction of debt $ 232 $ 1,492
========== =========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED)
Capital Stock $1 Par
(Shares and Amounts)
-----------------------
Voting Nonvoting
------- ---------
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
========= =========
Balance, December 31, 1994 $ 5,725 $ 8,981
Net income (loss):
Income (loss) from continuing operations
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock (5) 5
Adjustment of debt securities available for sale
and equity securities to market (net of taxes)
--------- ---------
Balance, March 31, 1995 $ 5,720 $ 8,986
========= =========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED)
Net Unrealized
Gain (Loss) on
Debt Securities
Available for
Sale and
Additional Equity
Paid-in Securities
Capital net of tax
------------- ---------------
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
========= =========
Balance, December 31, 1994 $ 6,378 $(31,222)
Net income (loss):
Income (loss) from continuing operations
Dividends to shareholders ($.06 per share)
Issue and (retirement) of stock
Adjustment of debt securities available for
sale and
equity securities to market (net of taxes) 20,042
--------- ---------
Balance, March 31, 1995 $ 6,378 $(11,180)
========= =========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED)
Treasury Stock
Retained -----------------
Earnings Shares Amounts
-------- ------ -------
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)
========= ======= ========
Balance, December 31, 1994 $ 301,947 (1,542) (24,551)
Net income (loss):
Income (loss) from continuing operations 2,844
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, 1995 $ 304,001 (1,542) (24,551)
========= ======= ========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000 OMITTED)
Total
-----
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
==========
Balance, December 31, 1994 $ 267,258
Net income (loss):
Income (loss) from continuing operations 2,844
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) 20,042
---------
Balance, March 31, 1995 $ 289,354
=========
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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, 1995 and December 31, 1994, the results of operations for the
three months ended March 31, 1995 and 1994 and cash flows for the
three months ended March 31, 1995 and 1994.
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.
During the first quarter of 1995, every group of companies within
the corporation produced better results over the year-ago period.
Net income totaled $2.8 million or $.22 per share compared with
$13 thousand or $.00 per share in 1994. Results for 1995 reflect
Home Service operations, while 1994 reflected premiums, costs and
expenses of both Home Service operations and lines of non-Home
Service business which were in a wind-down stage. Comparisons
between periods are becoming easier since they no longer include
restructure charges, discontinued operations or the cumulative
effect of required accounting changes.
Pretax income totaled $3.5 million in the current quarter, an
increase of $4.3 million from the first quarter of 1994. This
comparison excludes realized investment gains, because such gains
generally vary between quarters due to market conditions and
investment strategies. Results of a year-ago were weakened by
recording estimated settlements on several lawsuits in Alabama,
and from losses in our group lines of business which we completed
exiting at the end of 1994.
Thusfar in 1995, Home Service premium revenue is slightly below
the level of similar premiums a year ago. Home Service
property/casualty premiums have grown due to product demand in
this segment, however, this growth was offset by a decrease in
life Home Service premiums. Life premium production in the first
two quarters of 1994 was enhanced by a special marketing campaign
introduced in late 1993. Accident/health production of our
recently introduced Loss of Time policy virtually offset the
runoff of the hospitalization product we stopped selling in 1994.
As previously reported, a major objective and challenge is to
increase premium revenue, particularly in the life and health
lines.
The Company had previously reported four successive quarters of
improved results from continuing operations. Results this
quarter were not as strong as those reported in the last three
months of 1994. This is primarily due to increased paid and
accrued life benefits, which historically have been higher in our
early quarters. Investment income, following a period of lower
interest rates and pressured cash flow during our restructuring,
appears to have leveled and is beginning to increase.
Book value per share totaled $21.98, an improvement of $1.68 per
share during the current three months. This increase stems from
net income, plus a gain of $1.53 in book value per share due to
recording an increase in the market value of our fixed maturity
and equity security investments. The change in market value is
recorded in shareholders' equity in accordance with accounting
standards. As previously communicated, the market value of our
fixed-maturity portfolio will fluctuate between periods due to
changing interest rates. The increase in market value this
quarter partially offsets the decrease the Company experienced in
1994.
In other areas, at the annual shareholders' meeting held in
April, the Board of Directors, as recommended, were elected for a
one-year term. At the ensuing board meeting a regular
quarterly cash dividend was declared. A dividend of 6 cents per
share on both voting and nonvoting common stock is payable on
June 1, 1995, to shareholders of record on May 11, 1995.
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 12, 1995, 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, 1995.
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 GROUP, INC.
(Registrant)
Date: May 13, 1995 By:
Boyd E. Lyon, Sr., Vice President,
Treasurer and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 625341
<DEBT-CARRYING-VALUE> 50892
<DEBT-MARKET-VALUE> 54532
<EQUITIES> 165547
<MORTGAGE> 141231
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<POLICY-LOSSES> 835523
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0
0
<OTHER-SE> 274648
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65017
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2844
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<RESERVE-OPEN> 45606<F1>
<PROVISION-CURRENT> 25991
<PROVISION-PRIOR> 846
<PAYMENTS-CURRENT> 12019
<PAYMENTS-PRIOR> 16597
<RESERVE-CLOSE> 43827<F1>
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>net of reinsurance
</FN>
</TABLE>
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