<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------- ----------
AMERICAN BANKERS INSURANCE GROUP, INC.
11222 QUAIL ROOST DRIVE
MIAMI, FLORIDA 33157
(305) 253-2244
Commission File Number: 0-9633
State of Incorporation: Florida
I.R.S. Employer Identification Number: 59-1985922
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 report), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Common Stock - Par Value $1.00
20,724,211 Shares Outstanding on May 2, 1997
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Form 10-Q
Company or group of companies for which report is filed:
AMERICAN BANKERS INSURANCE GROUP, INC.
This quarterly report, filed pursuant to Rule 13A-13 of the General Rules and
Regulations under the Securities Exchange Act of 1934, consists of the
following information as specified in Form 10-Q.
Part I - Financial Information
Item 1 - Financial Statements
1. Consolidated Balance Sheets at March 31, 1997 and December 31, 1996.
2. Consolidated Statements of Income for the three months ended March
31, 1997 and 1996.
3. Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996.
4. Notes to Consolidated Financial Statements.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Part II - Other Information
Item 1 - Legal Proceedings
Item 4 - Submission of matters to a vote of security holders
Item 6 - Exhibits and Reports
a. Exhibits.
The following exhibits are included herein:
(10) Amended and restated $23,000,000, 10.2% Promissory Notes dated
as of September 12, 1991, as amended and restated as of March
15, 1997 and as of April 14, 1994
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
b. Report on Form 8-K.
None
2
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Form 10-Q
SIGNATURE
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.
AMERICAN BANKERS
INSURANCE GROUP, INC.
May 13, 1997
Date
-----------------------------------
Robert Hill
Senior Vice President and Principal
Accounting Officer (ABIC/ABLAC)
3
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PART I
FINANCIAL INFORMATION
4
<PAGE> 5
AMERICAN BANKERS INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
Assets (unaudited)
- ------
<S> <C> <C>
Investments
Held-to-Maturity securities, at amortized cost $ 847,863 $ 851,146
Available-for-Sale securities, at approximate market value 823,676 805,124
Trading securities, at fair value - 9,038
Equity securities, at approximate market value 115,461 112,895
Mortgage loans on real estate 10,087 10,236
Policy loans 8,521 8,290
Short-term and other investments 182,161 171,674
------------ -------------
Total investments 1,987,769 1,968,403
Cash 21,097 30,434
Accounts receivable, net of allowance for doubtful
accounts of $3,964 in 1997 and $4,526 in 1996 102,448 128,963
Reinsurance receivable 226,195 202,626
Accrued investment income 25,998 24,296
Deferred policy acquisition costs 410,979 387,993
Prepaid reinsurance premiums 476,565 507,077
Other assets 220,241 219,711
------------ -------------
Total assets $ 3,471,292 $ 3,469,503
============ =============
Liabilities and Stockholders' Equity
- ------------------------------------
Policy liabilities $ 295,763 $ 291,756
Unearned premiums 1,278,796 1,291,142
Claim liabilities 520,736 487,596
------------ -------------
2,095,295 2,070,494
Other policyholders' funds 7,895 6,795
Notes payable 223,452 222,490
Deferred income taxes 35,271 40,795
Accrued commissions and other expenses 128,105 156,896
Other liabilities 259,855 261,826
------------ -------------
Total liabilities 2,749,873 2,759,296
------------ -------------
Commitments and Contingencies (Note 4)
Stockholders' Equity
- --------------------
Preferred Stock. $3.125 Series B Cumulative Convertible Preferred Stock
Authorized 3,500 shares. Issued and Outstanding: 2,300 shares in 1997 and 1996 115,000 115,000
Common stock of $1 par value. Authorized 35,000 shares.
Issued and outstanding: 1997-20,698 shares; 1996-20,530 shares 20,698 20,530
Additional paid-in capital 220,789 217,939
Net unrealized investment and foreign exchange (losses) gains (4,196) 7,437
Retained earnings 379,874 359,359
Less:
Treasury stock, at cost - 93 shares in 1997 and 93 shares in 1996 (1,426) (1,426)
Unamortized restricted stock (5,601) (4,382)
Collateralization of loan to Leveraged Employee
Stock Ownership Plan (3,719) (4,250)
------------ -------------
Total stockholders' equity 721,419 710,207
------------ -------------
Total liabilities and stockholders' equity $ 3,471,292 $ 3,469,503
============ =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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AMERICAN BANKERS INSURANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS EXCEPT PER COMMON SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Gross collected premiums $ 637,126 $ 604,649
Premiums and other revenues:
Net premiums earned $ 363,775 $ 341,854
Net investment income 32,106 27,439
Realized investment gains 1,930 1,029
Other income 7,070 5,375
=========== ============
Total premiums and other revenues 404,881 375,697
=========== ============
Benefits and expenses:
Net benefits, claims, losses and settlement expenses 138,890 147,358
Commissions 151,637 127,694
Operating expense 73,083 65,657
Interest expense 3,957 4,101
=========== ============
Total benefits and expenses 367,567 344,810
=========== ============
Income before taxes 37,314 30,887
=========== ============
Income tax expense:
Current 9,504 7,299
Deferred 1,391 2,952
=========== ============
10,895 10,251
=========== ============
Net Income $ 26,419 $ 20,636
=========== ============
PER COMMON SHARE AND COMMON EQUIVALENT SHARE DATA
Primary:
Net Income $ 1.18 $ .99
=========== ============
Weighted average number of shares outstanding 20,948 20,929
=========== ============
Fully diluted:
Net Income $ 1.13 $ .99
=========== ============
Weighted average number of shares outstanding 23,395 20,976
=========== ============
Dividends per common share $ .20 $ .19
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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AMERICAN BANKERS INSURANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 26,419 $ 20,636
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in policy liabilities, unearned premiums, claim
liabilities, reinsurance receivable and prepaid reinsurance premiums 36,830 66,543
Change in other assets and other liabilities (10,828) (13,240)
Decrease (increase) in accounts receivable 26,515 (618)
(Increase) decrease in accrued investment income (1,702) 843
(Decrease) increase in accrued commission and expenses (28,791) 19,929
Increase in policyholders' funds 1,100 158
Increase in policy loans (231) (110)
Amortization of deferred policy acquisition costs 145,018 127,753
Amortization of cost of insurance acquired 381 481
Policy acquisition costs deferred (168,005) (156,372)
Provision for amortization and depreciation 3,721 4,189
Provision for deferred income taxes 1,798 2,952
Net gain on sale of investments (1,930) (1,029)
Compensation and tax effect on stock option shares 477 477
Net cash flow from purchases and sales of trading securities 13,808 (5,884)
--------- ----------
Net cash provided by operating activities 44,580 66,708
--------- ----------
INVESTING ACTIVITIES:
Purchase of investments
Held-to-maturity securities (34,343) (91,900)
Available-for-sale securities (293,753) (38,126)
Proceeds from sale of investments
Available-for-sale securities 248,286 21,412
Mortgage loans 152 149
Real Estate 18 -
Proceeds from maturities of investments
Held-to-maturity securities 26,363 22,302
Available-for-sale securities 13,309 11,557
Increase in short-term investments (4,433) (18,925)
Transactions related to capital assets
Capital expenditures (6,565) (3,689)
Sales of capital assets 58 255
--------- ----------
Net cash used in investing activities (50,908) (96,965)
--------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,493 58,000
Repayment of debt -- (37,000)
Dividends paid to shareholders (5,904) (3,829)
Proceeds from issuance of stock 1,322 334
Purchase of treasury stock -- (175)
--------- ----------
Net cash (used in) financing activities (3,089) 17,330
--------- ----------
Net decrease in cash (9,417) (12,927)
Cash at beginning of period 30,434 23,257
Rate change effect on cash flow 80 40
Cash at end of period --------- ----------
$ 21,097 $ 10,370
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 2,365 $ 2,904
Income taxes $ 6,457 $ 12,043
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
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AMERICAN BANKERS INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997. These statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report Form 10-K for the year ended December 31, 1996.
2. Translation of Foreign Currencies
Unrealized foreign exchange losses, totaling $10,731,000 and $9,688,000 as
of March 31, 1997 and December 31, 1996 respectively, are included in
Stockholders' Equity under the caption "Net unrealized investment and
foreign exchange (losses) gains."
3. Reinsurance
The Company accounts for reinsurance contracts under Financial Accounting
Standards Board's Statement 113. The Company recognizes the income on
reinsurance contracts principally on a pro-rata basis over the life of the
policies covered under the reinsurance agreements. Reinsurance
Recoverables on Unpaid Losses are included as an asset in the Balance
Sheet under the caption "Reinsurance Receivable". Ceded Unearned Premiums
are included as an asset in the Balance Sheet under the caption "Prepaid
Reinsurance Premiums".
The effect of reinsurance on premiums earned is as follows for the three
months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Direct premiums $ 596,607 $ 537,903
Reinsurance assumed 35,072 19,435
Reinsurance ceded (267,904) (215,484)
============= ==============
Net premiums earned $ 363,775 $ 341,854
============= ==============
</TABLE>
Reinsurance ceded incurred losses for the three months ended March 31,
1997 and 1996 were $116,652,000 and $82,919,000 respectively.
4. Commitments and Contingencies
For a comprehensive description of the Company's litigation, see Item
III of the Company's 1996 Form 10-K.
Alabama and Related Litigation:
Certain of ABIG's subsidiaries, including ABIC, ABLAC and Voyager, are
presently parties to a number of individual consumer and class action
lawsuits pending in Alabama involving premium, rate, marketing and
policy coverage issues. While a number of similar suits have been filed
in other jurisdictions, the insurance and finance industries have been
targeted in Alabama by plaintiffs'
8
<PAGE> 9
lawyers who enjoy a favorable judicial climate. The Company typically
has been named as a co-defendant with one or several retailer or finance
companies who have sold the Company's product to a consumer. A number of
other insurers are also named as co-defendants in many of the suits.
Although the Alabama lawsuits and similar suits pending in other
jurisdictions generally involve relatively small amounts of actual or
compensatory damages, they typically assert claims requesting
substantial punitive awards or purport to represent a large class of
policyholders. The Company denies any wrongdoing in any of these suits
and believes that it has not engaged in any conduct that would warrant
an award of punitive damages or that the class allegations have merit.
The Company has been advised by legal counsel that it has meritorious
defenses to all claims being asserted against it.
While no one individual lawsuit is necessarily significant in terms of
financial risk to the Company, the judicial climate in Alabama is such
that the outcome of these cases is extremely unpredictable. Moreover,
class action lawsuits to which the Company is a party do not lend
themselves to potential damage calculation. Without admitting any
wrongdoing, the Company has settled a number of these suits, but there
are still a significant number of cases pending, and it is expected that
more suits alleging essentially the same causes of action are likely to
continue to be filed during 1997. The Company intends to continue to
defend itself vigorously against all such suits and believes, based on
information currently available, that any liabilities that could result
are not expected to have a material adverse effect on the Company's
financial position.
The Company is involved with a number of cases in the ordinary course of
business relating to insurance matters, or more infrequently, certain
corporate matters. Generally, the Company's liability is limited to
specific amounts relating to insurance or policy coverage for which
provision has been made in the financial statements. Other cases involve
general corporate matters which generally do not represent significant
contingencies for the Company.
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<PAGE> 10
5. Segment Information
Gross collected premiums, net premiums earned and income (loss) before
federal income taxes are summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended
March 31,
--------
1997 1996
---- ----
<S> <C> <C>
GROSS COLLECTED PREMIUMS:
Life $ 187,577 $ 178,091
Property and Casualty 449,549 426,558
============ ==========
Total $ 637,126 $ 604,649
============ ==========
NET PREMIUMS EARNED:
Life $ 100,077 $ 101,164
Property and Casualty 263,698 240,690
============ ==========
Total $ 363,775 $ 341,854
============ ==========
INCOME (LOSS) BEFORE INCOME TAXES:
Life $ 18,400 $ 16,333
Property and Casualty 26,450 22,789
Other (3,579) (4,134)
============ ==========
41,271 34,988
Interest Expense 3,957 4,101
============ ==========
Total Income before Income Taxes $ 37,314 $ 30,887
============ ==========
</TABLE>
6. Accounting for Investments
The Company accounts for its investments according to the Financial
Accounting Standards Board's Statement 115 - Accounting for Certain
Investments in Debt and Equity Securities.
This Statement addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are to be classified
in three categories and accounted for as follows:
Held-to-Maturity - Securities for which the enterprise has the positive
intent and ability to hold to maturity. These securities are carried at
amortized cost.
Trading Securities - Securities that are bought and held principally for
the purpose of selling them in the near term. These securities are
carried at market value with the unrealized holding gain or loss included
in earnings.
Available-for-Sale - Securities not classified as trading or
held-to-maturity. These securities are carried at market value with the
unrealized holding gain or loss reported as a separate component of
equity, net of the income tax effect.
10
<PAGE> 11
The detail of Cost and Statement Value for the Fixed Maturities and Equity
Securities held at March 31, 1997 is as follows:
<TABLE>
<CAPTION>
(in thousands)
Amortized Statement
Cost Value
------------ -----------
<S> <C> <C>
Fixed Maturities
Held-to-Maturity Securities $ 847,863 $ 847,863
Available-for-Sale Securities 825,700 823,676
Trading Securities - -
============ ===========
Total Fixed Maturities $ 1,673,563 $ 1,671,539
============ ===========
Net unrealized loss $ (2,024)
===========
Market
Cost Value
------------ -----------
Equity Securities
Held-to-Maturity Securities $ - $ -
Available-for-Sale Securities 102,975 115,461
Trading Securities - -
============ ===========
Total Equity Securities $ 102,975 $ 115,461
============ ===========
Net unrealized gain $ 12,486
===========
</TABLE>
The net unrealized gain for "Available-for-Sale Securities" decreased by
$10,595,000 (net of $5,087,000 in deferred income taxes) from December 31, 1996
to March 31, 1997. There were no unrealized gains and losses from transfers of
Held-to-Maturity Securities.
An analysis of the realized gains and losses of the Company for the three
months ended March 31, 1997 is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Gross realized gains from sales of Available-for-Sale Securities $ 5,151
Gross realized losses from sales of Available-for-Sale Securities (3,044)
Gross realized gains from sales of Trading Securities 165
Gross realized losses from sales of Trading Securities (315)
----------
Net realized gain from investment activity 1,957
Net realized loss from other investment activity (27)
----------
Total realized gain $ 1,930
==========
</TABLE>
The Company uses the specific identification method to determine cost for
computing the realized gains and losses. There were no transfers of securities
from Available-for-Sale to Trading for the three months ended March 31, 1997.
The Company disposed of certain Held-to-Maturity securities due to
deteriorating credit quality, mandatory redemption, or that were within three
months of maturity.
11
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AMERICAN BANKERS INSURANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Gross collected premiums increased $32.5 million or 5% to $637.1 million for
the three months ended March 31, 1997, from $604.6 million for the same period
of 1996. Approximately 60% or $19.4 million of the increase came from the
largest product line - Credit Unemployment.
During the three months ended March 31, 1997, total premiums and other revenues
were $404.9 million, an increase of $29.2 million over total premiums and other
revenues of $375.7 million for the same period in 1996. The increase includes a
$21.9 million increase in net premiums earned. The overall growth in invested
assets generated an additional $4.7 million of investment income for the first
quarter of 1997 as compared to the same period of 1996.
The benefits and claims ratio improved to 38.2% for the three months ended
March 31, 1997, compared to 43.1% for the same period of 1996. However, this
improvement was offset by an increase in the commissions ratio from 37.4% for
the three months ended March 31, 1996, to 41.7% for the same period of 1997.
The effective tax rate improved from 33.2% for the three months ended March 31,
1996, to 29.2% for the same period of 1997. The improvement is primarily
attributable to the improved operating results in the Company's United Kingdom
subsidiary compared with the same period last year. The 1996 operating loss in
the United Kingdom did not generate a tax benefit and adversely affected the
tax rate in the first quarter of 1996. The continued use of tax advantaged
investments, also favorably impacts the statutory rate.
Financial Condition
Stockholders' Equity increased $11.2 million from $710.2 million at December 31,
1996, to $721.4 million at March 31, 1997. The contribution of net income of
$26.4 million less stockholder dividends of $5.9 million was the primary cause
for the increase. This increase was offset partially by unrealized investment
losses recorded by the Company. The unrealized investment losses were a result
of the impact of increasing interest rates on the market values of the
Company's investment portfolio.
Liquidity and Capital Resources
On March 31, 1997, $2.0 billion of securities, short-term investments and cash
comprised 57% of the Company's total assets. The securities were principally
readily marketable and did not include any significant concentration in private
placements.
The Company does not hold significant investments in equity securities;
consequently, market changes in the equity securities markets do not
significantly affect the investment portfolio.
The Company expects to continue its policy of paying regular cash dividends;
however, future dividends are dependent on the Company's future earnings,
capital requirements and financial condition. In addition, the payment of
dividends is subject to the restrictions described in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
12
<PAGE> 13
Private Securities Litigation Reform Act of 1995 - Safe Harbor Cautionary
Statement
Except for the historical information contained herein, certain of the matters
discussed in this quarterly report are "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995, which involve certain
risks and uncertainties, including but not limited to, changes in general
economic conditions, interest rates, consumer confidence, competition,
environmental factors, and governmental regulations affecting the Company's
operations. See the Company's Annual Report Form on 10-K for the year ended
December 31, 1996, for a further discussion of these and other risks and
uncertainties applicable to the Company's business.
13
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PART II
OTHER INFORMATION
14
<PAGE> 15
Item 1 - Legal Proceedings
Commitments and Contingencies information which appears on pages 8 and 9
elsewhere in this report is incorporated by reference in this item. Additional
information regarding litigation can be found in the Company's 1996 Annual
Report on Form 10-K.
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 6(a) - Exhibits
Exhibit 10 - Amended and restated $23,000,000, 10.2% Promissory Notes dated as
of September 12, 1991 as amended and restated as of March 15, 1997
and as of April 14, 1994
Exhibit 11 - Statement Re: Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule (for SEC use only)
Item 6(b) - Reports on Form 8-K
None
15
<PAGE> 1
EXHIBIT 10
NOTE MODIFICATION AGREEMENT AND WAIVER
THIS NOTE MODIFICATION AGREEMENT AND WAIVER dated as of March 15, 1997
("Effective Date") by and among American Bankers Insurance Group, Inc. a Florida
corporation (the "Company"), and the lenders signatory hereto (the "Lenders").
WITNESSETH:
WHEREAS, on September 12, 1991, the Company issued its $23,000,000
aggregate principal amount of 10.20% Promissory Notes (the "Notes") to the
several Lenders pursuant to that certain Loan Agreement dated as of September
12, 1991 (the "Loan Agreement"), by and between the Company, on the one hand,
and the several Lenders, on the other hand; and
WHEREAS, the Company has informed the Lenders that prior to the effective
date of this Note Modification Agreement and Waiver, Company or its subsidiaries
entered into and maintained, on a continuous basis in any 12-month period,
Rentals (as defined in Section 9(J) of the Notes) in aggregate amounts up to
$7,500,000; and
WHEREAS, the provisions of the Notes may be amended and/or waived if the
Company obtains the agreement or consent in writing to such amendment and waiver
by the holders of at least 66 2/3% in aggregate principal amount of all
outstanding Notes; and
WHEREAS, the Lenders listed below as signatories to this Note Modification
Agreement and Waiver represent that collectively they hold, at a minimum, the
requisite percentage referenced above; and
WHEREAS, the Lenders pursuant to Section 10 of the Notes agree to waive
Company's compliance with the provision of Section 9(J) relative to the
authorized Rental amounts for all time periods prior to the effective date of
this Note Modification Agreement and Waiver and further, agree to modify and
increase the maximum authorized aggregate amount of Rentals as set forth below;
and
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained and other consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Modification to the Notes: The Notes are each hereby amended and modified
as follows:
A. Paragraph (J) of Section 9 of each of the Notes is hereby amended to
read in its entirety as follows:
Rentals. The Company will not, and will not cause or permit any
subsidiary to, enter into, as lessee, or be a party to, any
lease having an original or unexpired term (including renewals
at the option of the lessor or lessee) of more than three (3)
years, if after giving effect to such lease, the aggregate
amount of rentals for any period of twelve (12) consecutive
months payable by the Company and its subsidiaries with respect
to all such leases shall exceed $7,500,000 (excluding any
rentals payable under leases between the Company and any
subsidiary or between any subsidiaries, any rentals included
within the definition of "Funded Indebtedness" and any rentals
resulting from any sale and leaseback of the Company's Miami
Headquarters). For purposes of this Paragraph (J), the term
"rentals," with respect to any lease and for any
-1-
<PAGE> 2
period, shall mean the aggregate amount payable under such lease
for such period by the lessee to the lessor.
2. The provisions of Paragraph 9(J) of the Notes shall be waived as
follows:
Pursuant to Section 10 of the Notes, the Lenders agree for all
time periods prior to the effective date of this Note
Modification Agreement and Waiver to waive the condition
contained in Paragraph 9(J) of the Notes concerning the maximum
authorized amount of Rentals which Company may maintain during
the term of the Notes and further waive all rights or remedies
which Lenders had, have or may have in the future regarding
Company's maintenance of Rentals in excess of said authorized
maximum Rental amounts during said time periods.
3. Representations and Warranties. As, among other things, an inducement
to each of the Lenders to enter into this Note Modification Agreement
and Waiver and to consent to the waiver contained herein, the Company
represents and warrants as of the date hereof, after giving effect to
the execution and delivery of this Note Modification Agreement and
Waiver that:
(A) Each of the representations and warranties of the Company made in
or pursuant to the Loan Agreement, or pursuant to any certificate or
other document delivered in connection therewith including all
amendments thereto is true and correct in all material respects on
and as of the date hereof (except to the extent that any such
representations and warranties expressly relate to an earlier date,
in which case such representations and warranties were true and
correct in all material respects on and as of such earlier date)
including all representations and warranties made in Note
Modification Agreement dated April 14, 1994.
(B) Except as otherwise indicated in this Note Modification Agreement
and Waiver, no event has occurred nor has any situation existed,
since September 12, 1991, which would have resulted, either
immediately, or with notice or the lapse of time or both, in an Event
of Default under the Loan Agreement or the Notes (in each case as
amended by this Note Modification Agreement and Waiver), and the
execution and delivery of this Note Modification Agreement and Waiver
will not result, either immediately, or with notice or lapse of time
or both, in an Event of Default under the Loan Agreement or the Notes
(in each case as amended by this Note Modification Agreement and
Waiver). No event has occurred which, either immediately, or after
the giving of notice or the lapse of time or both, would constitute
an event of default under any other evidence of Funded Indebtedness
of the Company.
4. Miscellaneous.
(A) Defined Terms. Capitalized terms used herein but not defined
shall have the respective meanings ascribed thereto in the Notes.
(B) No Other Amendments. Except as expressly provided herein, no term
or provision of the Notes or the Loan Agreement shall be deemed to be
amended, supplemented or modified, and each term and provision of the
Notes and the Loan Agreement shall remain in full force and effect.
-2-
<PAGE> 3
(C) Governing Law. This Note Modification Agreement and Waiver shall
be governed by and construed in accordance with the laws of the state
of New York.
(D) Counterparts. This Note Modification Agreement and Waiver may be
executed in any number of counterparts, each of which shall
constitute on and the same instrument.
All other terms of the Notes and Loan Agreement remain as written.
IN WITNESS WHEREOF, the parties hereto have caused this Note Modification
Agreement and Waiver to be duly executed and delivered in their respective names
by their duly authorized officers, as of the date first above written.
AMERICAN BANKERS INSURANCE GROUP, INC.
("Company")
By:
Name: Floyd Denison
Title: Executive Vice President
NEW YORK LIFE INSURANCE COMPANY
("Lender")
By:
Name:
Title:
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
("Lender")
By:
New York Life Insurance Company
By:
Name:
Title:
-3-
<PAGE> 4
NOTE MODIFICATION AGREEMENT
NOTE MODIFICATION AGREEMENT dated as of April 14, 1994 by and among
American Bankers Insurance Group, Inc., a Florida corporation (the "Company"),
and each of the lenders set forth on Annex I hereto (the "Lenders").
WITNESSETH:
WHEREAS, on September 12, 1991, the Company issued its $23,000,000
aggregate principal amount of 10.20% Promissory Notes (the "Notes") to the
several Lenders pursuant to that certain Loan Agreement dated as of September
12, 1991 (the "Loan Agreement"), by and between the Company, on the one hand,
and the several Lenders, on the other hand;
WHEREAS, the Company has informed the Lenders that it intends to issue on a
continuous basis up to $200,000,000 aggregate principal amount of medium term
notes, due nine months to thirty years from the date of issuance (the "Medium
Term Notes"), pursuant to an Indenture of Trust (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Trustee");
WHEREAS, the Company has informed the Lenders that, in connection with the
issuance of the Medium Term Notes, it will enter into an amendment (the
"Amendment") of that certain Amended and Restated Revolving Credit and
Reimbursement Agreement by and between the Company and Barclays Bank PLC, New
York Branch, as agent (in such capacity, the "Agent"), the Issuing Bank, as
defined therein, and the Banks, as described therein (the "Revolving Credit
Agreement"), pursuant to which the security interest granted by the Company in
favor of the Agent for the ratable benefit of the Issuing Bank and the Banks,
pursuant to the Pledge Agreement (as defined in the Revolving Credit Agreement),
in the Pledged Stock (as defined in the Pledge Agreement) shall be released and
the Pledge Agreement shall be terminated; and
WHEREAS, the Amendment and the Indenture will provide that if an event of
default under the Revolving Credit Agreement shall have occurred and be
continuing, immediately upon the request of the Agent, the Company will (i)
pledge, or to the extent applicable, cause its Subsidiaries to pledge, free and
clear of all encumbrances, all the outstanding capital stock of each Significant
Subsidiary (as defined in the Revolving Credit Agreement) on an equal and
ratable basis (a) to the Agent, for the ratable benefit of the Issuing Bank and
the Banks, and (b) to the Trustee, for the ratable benefit of the beneficial
holders of the Medium Term Notes, and (ii) execute and deliver, and to the
extent applicable, cause its subsidiaries and the Significant Subsidiaries to
execute and deliver, a stock pledge agreement and any other documents in
connection with such stock pledge agreement;
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained and other consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE> 5
1. Modifications to the Notes. The Notes are each hereby amended and
modified as follows:
(A) Paragraph (A) of section 9 of each of the Notes is hereby amended to
read in its entirety as follows:
"(A) Funded Indebtedness. The Company will not, and will not cause or
permit any subsidiary to, create, incur, assume, guarantee or in any manner
become liable in respect of any Funded Indebtedness other than
(i) the Notes and the Medium Term Notes;
(ii) Funded Indebtedness of any subsidiary to the Company or to
another subsidiary, or Funded Indebtedness owing to a subsidiary;
(iii) guarantees of Funded Indebtedness by any subsidiary existing
as of April 14, 1994 pursuant to the LESOP Guaranty Agreement;
(iv) renewals, extensions or modifications of existing Funded
Indebtedness; or
(v) additional Funded Indebtedness of the Company, if
immediately after giving effect thereto and to the retirement of any
indebtedness which is being retired concurrently with the incurrence of such
additional Funded Indebtedness of the Company:
(i) consolidated Senior Indebtedness, excluding the
Notes, does not exceed 40% of Total Capitalization;
(ii) consolidated Funded Indebtedness does not exceed
60% of Total Capitalization; and
(iii) the Company is not in default in any material
respect in any covenant contained in this section 9."
(B) Paragraph(D) of section 9 of each of the Notes is amended to
replace the reference to "Section 7.02(o) of the Revolving Credit Agreement"
with a reference to "Section 7.01(m) of the Revolving Credit Agreement".
(C) Paragraph (F) of section 9 of each of the Notes is amended to
replace the reference to "Section 7.02(o) of the Revolving Credit Agreement"
with a reference to "Section 7.01(m) of the Revolving Credit Agreement".
(D) Paragraph (G) of section 9 of each of the Notes is hereby amended
to replace the reference to the figure "$150 million" with a reference to the
figure "$325 million".
<PAGE> 6
(E) Paragraph (N) of section 9 of each of the Notes is hereby amended
to replace the reference to the ratio "2.0 to 1" with a reference to the ratio
"4.0 to 1".
(F) Section 11 of each of the Notes is hereby amended as follows:
(i) A new definition of the term "Medium Term Notes" is hereby
added in the appropriate alphabetical order, to read
"Medium Term Notes" shall mean the promissory notes of the
Company issued on a continuous basis in an aggregate principal amount of up to
$200,000,000 outstanding at any one time, due nine months to thirty years from
the date of issuance, pursuant to an Indenture of Trust dated as of April 15,
1994, between the Company and The Bank of New York, as trustee.
(ii) The definition of "Revolving Credit Agreement" set
forth in section 11 of each of the Notes is hereby amended to replace the phrase
"as amended to the Closing Date" with the phrase "as amended or restated through
April 4, 1994".
(iii) A new definition of the term "Revolving Credit
Agreement Amendment" is hereby added in the appropriate alphabetical order, to
read:
"Revolving Credit Agreement Amendment" shall mean the amendment
dated as of April 4, 1994 to the Revolving Credit Agreement."
(G) Paragraph (G) of section 12 of the Notes is hereby amended to read
in its entirety as follows:
"(G) any default shall occur or condition shall exist in respect of
any indebtedness of $1 million or more (other than the Notes) of the Company or
any subsidiary outstanding or under any agreement or instrument relating to any
such indebtedness, the effect of which is to cause (or permit any holder thereof
to cause) the acceleration of the maturity of such indebtedness, and in such
event the entire principal of, and all accrued interest on, and a premium
calculated in accordance with paragraph (A) of section 4 with respect to, this
Note shall become immediately due and payable, without demand or notice of any
kind;".
2. Representations and Warranties. As, among other things, an
inducement to each of the Lenders to enter into this Agreement and to consent to
the issuance of the Medium Term Notes pursuant to the Indenture and the
execution of the Amendment in connection therewith, the Company represents and
warrants as of the date hereof, after giving effect to the execution and
delivery of this Agreement, the Amendment and the Indenture, and the
consummation of the transactions contemplated thereby, that:
(A) Each of the representations and warranties of the Company
made in or pursuant to the Loan Agreement, or pursuant to any certificate or
other document delivered in connection therewith, is true and correct in all
material respects on and as of the date hereof as if
<PAGE> 7
made on and as of the date hereof (except to the extent that any such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties were true and correct in all material
respects on and as of such earlier date); provided that for the purposes this
clause (A), the reference to the fiscal year ended December 31, 1990 contained
in section 2(A) of the Loan Agreement shall be deemed to be a reference to the
fiscal year ended December 31, 1993, and references to all reports filed with
the Securities and Exchange Commission shall be deemed to be the most recently
filed of such report or reports.
(B) No event has occurred nor has any situation existed, since
September 12, 1991, which would have resulted, either immediately, or with
notice or the lapse of time or both, in an Event of Default under the Loan
Agreement or the Notes (in each case as amended by this Agreement), and the
execution and delivery of the Amendment and the Indenture, and the consummation
of the transactions contemplated thereby, will not result, either immediately,
or with notice or lapse of time or both, in an Event of Default under the Loan
Agreement or the Notes (in each case as amended by this Agreement). No event has
occurred nor has any situation existed or is existing which, either immediately,
or after the giving of notice or the lapse of time or both, would constitute an
event of default under any other evidence of Funded Indebtedness of the Company.
3. Miscellaneous.
(A) Defined Terms. Capitalized terms used herein but not defined
shall have the respective meanings ascribed thereto in the Notes.
(B) No Other Amendments. Except as expressly provided herein, no
term or provision of the Notes or the Loan Agreement shall be deemed to be
amended, supplemented or modified, and each term and provision of the Notes and
the Loan Agreement shall remain in full force and effect.
(C) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(D) CounterParts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in their respective names by their duly authorized
officers, as of the date first above written.
AMERICAN BANKERS INSURANCE GROUP, INC.
By:
--------------------------
Name: Floyd Denison
Title: Executive Vice President
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------
Name:
Title:
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By:
--------------------------
Name:
Title:
PROVIDENTMUTUAL LIFE AND ANNUITY
COMPANY
By:
--------------------------
Name:
Title:
CONTINENTAL AMERICAN LIFE INSURANCE
COMPANY
By:
--------------------------
Name:
Title:
<PAGE> 1
ITEM 6 (A) EXHIBITS
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands except per common share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
PRIMARY: 1997 1996
---- ----
<S> <C> <C>
Weighted average shares outstanding 20,948 20,929
======= =======
Net Income $26,419 $20,636
Less convertible preferred stock dividends 1,797 -
------- -------
Total $24,622 $20,636
======= =======
Net Income - per share $ 1.18 $ .99
======= ======
FULLY DILUTED:
Weighted average of shares outstanding 20,948 20,929
Assumed conversion of common stock equivalents - 47
Assumed conversion of convertible securities 2,447 -
------- -------
Total 23,395 20,976
======= =======
Net income $26,419 $20,636
Add convertible debenture interest, net of federal income 56 62
tax
------- -------
Total $26,475 $20,698
======= =======
Net income - per share $ 1.13 $ .99
======= =======
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000350571
<NAME> AMERICAN BANKERS INSURANCE GROUP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 823,676
<DEBT-CARRYING-VALUE> 847,863
<DEBT-MARKET-VALUE> 847,863
<EQUITIES> 115,461
<MORTGAGE> 10,087
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,987,769
<CASH> 21,097
<RECOVER-REINSURE> 226,195
<DEFERRED-ACQUISITION> 410,979
<TOTAL-ASSETS> 3,471,292
<POLICY-LOSSES> 295,763
<UNEARNED-PREMIUMS> 1,278,796
<POLICY-OTHER> 520,736
<POLICY-HOLDER-FUNDS> 7,895
<NOTES-PAYABLE> 223,452
0
115,000
<COMMON> 20,698
<OTHER-SE> 585,721
<TOTAL-LIABILITY-AND-EQUITY> 3,471,292
363,775
<INVESTMENT-INCOME> 32,106
<INVESTMENT-GAINS> 1,930
<OTHER-INCOME> 7,070
<BENEFITS> 138,890
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 37,314
<INCOME-TAX> 10,895
<INCOME-CONTINUING> 26,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,419
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.13
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
