FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-7411
ALLCITY INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
New York 13-2530665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
122 Fifth Avenue, New York, New York 10011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)387-3000
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.
Yes[X] No[ ]
On November 3, 1995 there were 7,078,625 shares of Common Stock outstanding.
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ALLCITY INSURANCE COMPANY
INDEX
PAGE
PART I Financial Information
Item 1. Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1995 and December 31,
1994................................................................ 2
Consolidated Statements of Income - Nine months ended September
30, 1995 and September 30, 1994 and three months ended September 30,
1995 and September 30, 1994......................................... 3-4
Consolidated Statements of Cash Flows - Nine months ended September
30, 1995 and September 30, 1994..................................... 5
Notes to Interim Consolidated Financial Statements.................. 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8-9
PART II Other Information
Item 4. Submission of Matters to a Vote of Security Holders.......... 10
Item 6. Exhibits and Reports on Form 8-K............................. 10
Signatures............................................................ 11
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<TABLE>
CONSOLIDATED BALANCE SHEETS
ALLCITY INSURANCE COMPANY
(Thousands of dollars, except share and per share amounts)
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Investments $259,729 $237,878
Cash 6,910 3,943
Agents' balances, less allowance for doubtful
accounts ($1,050 in 1995 and $952 in 1994) 23,110 19,319
Accrued investment income 3,361 3,321
Reinsurance balances receivable 245,791 219,854
Prepaid reinsurance premiums 84,761 77,614
Equity in pools and associations 575 1,175
Deferred policy acquisition costs 9,264 8,569
Deferred tax benefit 10,132 8,535
Other assets 2,402 2,300
TOTAL ASSETS $646,035 $582,508
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES
Unpaid losses $331,591 $297,846
Unpaid loss adjustment expenses 50,601 43,753
Unearned premiums 135,217 123,186
Accounts payable and accrued liabilities 1,857 2,347
Drafts payable 4,070 3,436
Due to affiliates 15,772 20,422
Unearned service fee income 5,558 4,256
Reserve for servicing carrier claim expenses 6,183 5,250
Other postretirement benefits 3,497 3,335
Other liabilities 3,226 2,502
Surplus note 13,375 12,911
TOTAL LIABILITIES 570,947 519,244
CAPITAL
Common stock, par value $1.00: 7,368,420
shares authorized; 7,078,625 shares issued
and outstanding 7,079 7,079
Additional paid-in capital 9,331 9,331
Net unrealized depreciation on investments (net
of taxes of $(340) in 1995 and $(406) in 1994) (632) (10,869)
Retained earnings 59,310 57,723
TOTAL CAPITAL 75,088 63,264
TOTAL LIABILITIES AND CAPITAL $646,035 $582,508
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars, except share and per share amounts)
<CAPTION>
Nine Months Ended
September 30
1995 1994
<S> <C> <C>
REVENUES
Premiums earned $70,619 $64,421
Net investment income less expenses of $279
in 1995 and $220 in 1994 11,446 9,639
Service fee income 5,723 3,477
Net securities losses (205) (601)
Other income 633 607
88,216 77,543
LOSSES AND EXPENSES
Losses 56,230 44,325
Loss adjustment expenses 9,248 7,356
Other underwriting expenses less deferrals
of $14,147 in 1995 and $13,894 in 1994 6,380 6,081
Amortization of deferred policy acquisition
costs 13,452 12,286
Interest on surplus note 464 367
85,774 70,415
INCOME BEFORE FEDERAL INCOME TAXES 2,442 7,128
FEDERAL INCOME TAXES 855 2,501
NET INCOME $ 1,587 $ 4,627
Per share data, based on 7,078,625
shares outstanding in 1995 and 1994:
NET INCOME PER SHARE $0.22 $0.65
See Notes to Interim Consolidated Financial Statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars, except share and per share amounts)
<CAPTION>
Three Months Ended
September 30
1995 1994
<S> <C> <C>
REVENUES
Premiums earned $23,890 $22,905
Net investment income less expenses of $81
in 1995 and $68 in 1994 3,902 3,248
Service fee income 1,772 1,250
Net securities gains 72 -
Other income 216 232
29,852 27,635
LOSSES AND EXPENSES
Losses 19,371 15,234
Loss adjustment expenses 3,010 2,541
Other underwriting expenses less deferrals
of $4,361 in 1995 and $4,349 in 1994 2,305 2,346
Amortization of deferred policy acquisition
costs 4,552 4,222
Interest on surplus note 153 135
29,391 24,478
INCOME BEFORE FEDERAL INCOME TAXES 461 3,157
FEDERAL INCOME TAXES 162 1,100
NET INCOME $ 299 $ 2,057
Per share data, based on 7,078,625
shares outstanding in 1995 and 1994:
NET INCOME PER SHARE $0.04 $0.29
</TABLE>
See Notes to Interim Consolidated Financial Statements.
[CAPTION]
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars)
<CAPTION>
Nine Months Ended
September 30
1995 1994
NET CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,587 $ 4,627
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization (194) 319
Net securities losses 205 601
Increase in agents' balances (3,791) (4,516)
Increase in reinsurance balances receivable (25,937) (21,884)
Increase in prepaid reinsurance premiums (7,147) (17,927)
Increase in deferred policy acquisition costs (695) (1,607)
Increase in deferred tax benefits (1,597) (1,939)
Increase in unpaid losses and loss
adjustment expenses 40,593 33,436
Increase in unearned premiums 12,031 27,764
Increase in drafts payable 634 103
(Decrease) increase in due to affiliates (4,650) 3,554
Increase in unearned services fees 1,302 1,944
Increase in reserve for servicing carrier
claim expenses 933 1,058
Other items, net 1,403 (2,863)
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,677 22,670
NET CASH FLOWS FROM INVESTING ACTIVITIES
Investments available for sale:
Acquisition of fixed maturities (49,202) (59,706)
Proceeds from sale of fixed maturities 48,405 56,303
Proceeds from redemptions of fixed maturities 16,997 12,014
Net change in short-term investments (27,910) (32,989)
NET CASH USED BY INVESTING ACTIVITIES (11,710) (24,378)
NET INCREASE (DECREASE) IN CASH 2,967 (1,708)
Cash at beginning of period 3,943 6,063
Cash at the end of period $ 6,910 $ 4,355
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
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ALLCITY INSURANCE COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited interim consolidated financial statements, which
reflect all adjustments (consisting only of normal recurring items) that
management believes necessary to present fairly results of interim
operations, should be read in conjunction with the Notes to Consolidated
Financial Statements included in the Company's audited consolidated
financial statements for the year ended December 31, 1994, which are
included in the Company's Annual Report filed on Form 10-K for such year
(1994 10-K). Results of operations for interim periods are not
necessarily indicative of annual results of operations. The balance sheet
at December 31, 1994 was extracted from the audited annual financial
statements and does not include all disclosures required by generally
accepted accounting principles for annual financial statements.
2. Claim liabilities (unpaid losses and unpaid loss adjustment expenses)
are periodically reviewed. Any adjustments to claim liabilities are
reflected in current operations. Liabilities for newly reported losses
have generally been provided based upon averages for claims reported
within the most recent 12 months; for other unpaid losses, case basis
estimates and calculated estimates for incurred but not reported losses
are used. Liabilities for unpaid losses are stated net of estimated
salvage and subrogation.
3. Certain prior period amounts have been reclassified to conform with
the 1995 presentation.
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4. On January 1, 1996, a New York Insurance Law will become effective
and is expected to impact the operating results of the Company. Under the
new "Increased Limits Law", the minimum statutory limits for all
automobile insurance policies will be increased. As a result of the
increased statutory limits, claims costs are expected to be higher and
premium rates will be increased. The Company is currently unable to
estimate the impact, if any, that the increased statutory limits will have
on results of operations.
<PAGE)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the 1994 10-K.
For all periods presented in this report, the Company has operated
profitably and net cash was provided by operating activities.
Revenues for the nine month and three month periods ended September
30, 1995 increased by $10,673,000 and $2,217,000, respectively, over the
comparable 1994 periods principally as a result of increased earned
premiums, investment income and service fees. The increases in earned
premiums stems from the combination of increased premium exposures,
principally in the assigned risk automobile and commercial lines, as well
as rate increases in assigned risk automobile. The increases in
investment income are mainly attributable to the growth in invested assets
resulting from continued profitable operations and positive cash flows.
Service fee income is higher than the comparable 1994 periods as the
Company has realized additional earned fees from the substantial increase
in service contracts which became effective in 1994. The net securities
losses in 1995 stemmed from the Company's strategy to shorten the average
duration of its investment portfolio.
Losses and loss adjustment expenses incurred for the nine month and
three month periods ended September 30, 1995 increased by $13,797,000 and
$4,606,000 over the comparable 1994 periods. Principally during the first
half of 1995, additional payments were made related to 1994 claims
(primarily automobile no-fault claims). In addition, during the 1995
periods reserves were strengthened in workers' compensation and automobile
lines, principally as a result of revised loss development patterns. The
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loss development may indicate that the new automobile business acquired
during recent years will have greater ultimate loss experience than
previously expected. Should actual loss development prove to be greater
than expected, additional reserve strengthening will occur. The Company
will continue to analyze loss development patterns on a quarterly basis
and evaluate the adequacy of its loss reserves.
The combination of other underwriting expenses and the amortization
of deferred policy acquisition costs for the nine month and three month
periods ended September 30, 1995 increased by $1,465,000 and $289,000 over
the comparable 1994 periods. The nine month increase was principally the
result of a higher level of expenses associated with increased premium
volume coupled with an increase in amortization of acquisition costs
stemming from the growth in earned premiums. The three month increase
stemmed from an increase in amortization of acquisition costs.
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on Monday,
October 16, 1995. Of the 7,078,625 common shares issued and outstanding
and eligible to vote at the annual meeting, holders of record of 6,430,512
common shares were represented in person or by proxy and entitled to vote
at the meeting.
The shareholders were asked to approve an amendment to the Company
Charter to (1) reflect changes in the statutory definition under the New
York State Insurance Law of the kinds of insurance the Company shall have
the authority to transact, and (2) to add a date certain for the Annual
Meeting of Shareholders as required by the New York Insurance Department.
Of the shares represented at the meeting, 6,425,331 voted in favor of the
amendment and 5,181 voted against the amendment. Accordingly, the
amendment was approved.
Also at the Annual Meeting, the shareholders were asked to elect four
Class II Directors to serve for a three-year term expiring in 1998. The
following table sets forth the respective vote totals of each Class II
Director elected at the meeting:
Director Vote for Votes Withheld
Martin A. Bernstein 6,421,114 9,398
Louis V. Siracusano 6,420,614 9,898
Lucius Theus 6,421,114 9,398
Helen W. Vogel 6,421,114 9,398
Continuing as Directors after the meeting were Class I Directors, Ian
M. Cumming, Thomas E. Mara, Joseph S. Steinberg and Daniel G. Stewart and
Class III Directors, Andrew W. Attivissimo, Robert Iacona, Oliver L.
Patrell, Harry H. Wise and Henry H. Wulsin. At present, a vacancy exists
for a Class I Director caused by the resignation of Thomas A Ruden.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended September 30, 1995.
<PAGE>
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.
ALLCITY INSURANCE COMPANY
Registrant
Date: November 13, 1995 By ROBERT IACONA
Robert Iacona
Senior Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
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<CASH> 259729000
<RECOVER-REINSURE> 691000
<DEFERRED-ACQUISITION> 245791000
<TOTAL-ASSETS> 9264000
<POLICY-LOSSES> 646035000
<UNEARNED-PREMIUMS> 331591000
<POLICY-OTHER> 135217000
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<COMMON> 7079000
0
0
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<INCOME-TAX> 855000
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</TABLE>
