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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 June 30, 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 August 6, 1994
Voting Common Stock, $1.00 Par Value 5,704,576
Nonvoting Common Stock, $1.00 Par Value 7,459,924
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
JUNE 30, 1995 AND DECEMBER 31, 1994
(000 OMITTED)
June 30 December 31
1995 1994
ASSETS
Investments:
Debt securities - available for sale $ 654,801 $ 603,421
Debt securities - held to maturity 51,136 51,048
Equity securities 182,498 156,596
Mortgage loans 143,517 143,677
Real estate 11,889 17,110
Policy loans 34,619 33,967
Short-term investments 21,104 13,728
- -
Total investments 1,099,564 1,019,547
Cash 4,485 10,533
Reinsurance recoverables 15,435 26,290
Property, furniture and equipment 44,336 45,770
Deferred policy acquisition costs 186,860 195,053
Accounts and notes receivable 6,603 6,145
Income tax receivable 5,446 15,790
Other assets 44,987 44,636
TOTAL $ 1,407,716 $ 1,363,764
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy reserves $ 852,060 $ 861,453
Policyholders' funds 104,593 103,771
Postretirement and postemployment benefits 71,868 70,501
Other liabilities 49,779 53,281
Notes payable 5,600 7,500
Total liabilities 1,083,900 1,096,506
Shareholders' equity:
Voting common stock 5,705 5,725
Nonvoting common stock 9,001 8,981
Additional paid-in capital 6,378 6,378
Net unrealized gain on equity securities 19,696 (31,222)
Retained earnings 307,587 301,947
Treasury stock-at cost:
Nonvoting common stock, 1,542 shares (24,551) (24,551)
Total shareholders' equity 323,816 267,258
TOTAL $ 1,407,716 $ 1,363,764
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Premium and other income $ 68,546 $ 72,722 $ 135,818 $ 146,108
Net investment income 16,854 16,780 33,795 33,707
Realized investment
gains (losses) (142) 2,417 460 2,636
Total 85,258 91,919 170,073 182,451
Benefits 30,221 35,170 63,794 76,440
Policy reserve increase
(decrease) 1,305 (1,565) 2,429 (5,420)
Amortization of deferred
policy acquisition costs 8,285 11,956 18,295 26,520
Other operating expenses 40,120 41,090 76,139 80,209
Restructuring credit (1,100) 0 (1,100) 0
Total 78,831 86,651 159,557 177,749
Income before income taxes 6,427 5,268 10,516 4,702
Provison (credit) for income taxes:
Current 1,227 1,423 2,435 2,181
Deferred 824 201 861 (1,136)
Total 2,051 1,624 3,296 1,045
Net income $ 4,376 $ 3,644 $ 7,220 $ 3,657
Per share
Net income $ 0.33 $ 0.28 $ 0.55 $ 0.28
Dividends $ 0.06 $ 0.06 $ 0.12 $ 0.12
Weighted average number of shares
outstanding (in thousands) 13,165 13,165 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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED)
1995 1994
OPERATING ACTIVITIES:
Net Income $ 7,220 $ 3,657
Adjustments to reconcile net income to net
cash provided by operating activities:
Change in -
Accrued policy reserves and benefits (771) (30,668)
Accounts receivable, unearned premiums (8,395) 2,446
Other assets and other liabilities 6,117 4,022
Accrued and unearned investment income 793 (33)
Liability for income taxes (2,154) 9,350
Amortization of policy acquisition costs 18,295 26,520
Deferral of policy acquisition costs (16,404) (22,209)
Depreciation of property and equipment 2,165 2,262
Purchase of property and equipment (732) (636)
Net realized (gains) on investments (460) (2,636)
Restructuring credit (1,100) -
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITES 4,574 (7,925)
INVESTING ACTIVITIES:
Sales, maturities or payments from investments
and loans 149,089 198,208
Purchases of investments and loans granted (157,054) (200,045)
NET CASH (USED) BY INVESTING ACTIVITIES (7,965) (1,837)
FINANCING ACTIVITIES:
Additions to notes payable - 7,000
Reductions in notes payable (1,900) (3,200)
Receipts credited to policyholders' funds 6,017 12,249
Return of policyholders' funds (5,194) (9,939)
Dividends to shareholders (1,580) (1,580)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,657) 4,530
INCREASE (DECREASE) IN CASH (6,048) (5,232)
CASH, BEGINNING OF YEAR 10,533 13,451
CASH, AS OF JUNE 30 $ 4,485 $ 8,219
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in satisfaction of debt $ 782 $ 2,026
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED)
Capital Stock $1 Par
(Shares and Amounts)
Voting Nonvoting
Balance, December 31, 1993 $ 6,100 $ 8,606
Net income
Dividends to shareholders ($.12 per share)
Issue and (retirement) of stock (306) 306
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, June 30, 1994 $ 5,794 $ 8,912
Balance, December 31, 1994 $ 5,725 $ 8,981
Net income
Dividends to shareholders ($.12 per share)
Issue and (retirement) of stock (20) 20
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, June 30, 1995 $ 5,705 $ 9,001
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED)
Net
Unrealized
Gain (Loss)
on Debt
Securities
Available
for Sale
Addititonal and Equity
Paid-in Securities
Capital net of tax
Balance, December 31, 1993 $ 6,378 $ 25,393
Net income
Dividends to shareholders ($.12 per share)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes) (38,423)
Balance, June 30, 1994
$ 6,378 $(13,030)
Balance, December 31, 1994 $ 6,378 $(31,222)
Net income
Dividends to shareholders ($.12 per share)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes) 50,918
Balance, June 30, 1995 $ 6,378 $ 19,696
See notes to consolidated condensed financial statements.
INDEPENDENT INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED)
Retained Treasury Stocks
Earnings Shares Amounts
Balance, December 31, 1993 $ 293,996 (1,542) $(24,551)
Net income 3,657
Dividends to shareholders ($.12 per share) (1,580)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, June 30, 1994 $ 296,073 (1,542) $(24,551)
Balance, December 31, 1994 $ 301,947 (1,542) $ (24,551)
Net income 7,220
Dividends to shareholders ($.12 per share) (1,580)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes)
Balance, June 30, 1995 $ 307,587 (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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(000 OMITTED)
Total
Balance, December 31, 1993 $ 315,922
Net income 3,657
Dividends to shareholders ($.12 per share) (1,580)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes) (38,423)
Balance, June 30, 1994 $ 279,576
Balance, December 31, 1994 $ 267,258
Net income 7,220
Dividends to shareholders ($.12 per share) (1,580)
Issue and (retirement) of stock
Adjustment of debt securities available for sale and
equity securities to market (net of taxes) $ 50,918
Balance, June 30, 1995 $ 323,816
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 June 30, 1995 and December 31, 1994, the results of
operations for the three months and six months ended June 30,
1995 and 1994 and cash flows for the three months and six
months ended June 30, 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.
Results for both the second quarter of 1995 and the first six
months of this year improved over the similar periods of 1994.
Net income, which includes realized investment gains and losses,
this quarter totaled $4.4 million, or $.33 per share compared
with $3.6 million, or $.28 per share in the year-ago quarter.
Net income for the first half of 1995 totaled $7.2 million, or
$.55 per share compared with $3.7 million, or $.28 per share in
the first six months of 1994. All material lines of non-Home
Service business were wound down by the end of 1994; accordingly,
the amounts in the accompanying tables for 1995 periods reflect
Home Service business only.
Pretax income, exclusive of realized investment gains and losses,
was $6.6 million in the current quarter, an increase of $3.7
million over the second quarter of 1994. This improvement stems
primarily from favorable policy benefit experience and lower
administrative costs. Home Service premiums this quarter grew
modestly over the comparable quarter in 1994. Property/casualty
premiums rose due to product demand in this segment. Life and
accident/health premiums remained level, as a moderate increase
in the accident/health lines was offset by a similar decrease in
the life lines. Also, during the current three months management
lowered its estimate of ultimate restructuring costs that had
been previously recorded in conjunction with our announced plan
to exit non-Home Service lines of business. This revision added
$1.1 million of pretax income in this quarter.
At the end of June, book value per share reached $24.60, an
increase of $2.62 during the current quarter. Of the
improvement, a gain of $2.35 is attributable to recording an
increase in the market value of our debt and equity security
investments. Accounting standards require the Company to record
such changes directly through shareholders' equity without
affecting reported earnings. As we have reported in the past,
the market value of our debt securities available for sale will
fluctuate with changing interest rates. The increase in market
value thus far in 1995 has more than offset the decrease the
Company recorded in 1994 in the rising interest rate environment.
As was previously communicated to you, at the July 12 meeting of
the Board of Directors, the Board authorized management to look
into various methods of maximizing shareholder value, including
investigating the terms on which the Company might be combined
with another company. Alex. Brown & Sons, Inc., the Company's
investment banker, will act as its financial advisor. It should
be emphasized that the process continues to be in a preliminary
stage and that there is no assurance any transaction involving
the Company will take place.
Also at the meeting, the Board of Directors declared the regular
cash dividend. A dividend of 6 cents per share on voting and
nonvoting common stock of the corporation is payable September 1,
1995, to shareholders of record at the close of business on
August 11, 1995.
Item 6. Exhibits and Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the three
months ended September 30, 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 GROUP, INC.
(Registrant)
Date: August 12, 1995 By: Boyd E. Lyon
Boyd E. Lyon, Sr., Vice President,
Treasurer and Chief Financial Officer
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<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 654801
<DEBT-CARRYING-VALUE> 51136
<DEBT-MARKET-VALUE> 58170
<EQUITIES> 182498
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<NOTES-PAYABLE> 5600
<COMMON> 14706
0
0
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131272
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<UNDERWRITING-AMORTIZATION> 18295
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<INCOME-PRETAX> 10516
<INCOME-TAX> 3296
<INCOME-CONTINUING> 7220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7220
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
<RESERVE-OPEN> 45606<F1>
<PROVISION-CURRENT> 55976
<PROVISION-PRIOR> (2434)
<PAYMENTS-CURRENT> 38491
<PAYMENTS-PRIOR> 19972
<RESERVE-CLOSE> 40685<F1>
<CUMULATIVE-DEFICIENCY> 0
<FN>
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</FN>
</TABLE>
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