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 June 30, 1996
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 August 6, 1996 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 - June 30, 1996 and December 31, 1995.... 2
Consolidated Statements of Income - Six months ended June
30, 1996 and June 30, 1995 and three months ended June 30, 1996 and
June 30, 1995........................................................ 3-4
Consolidated Statements of Cash Flows - Six months ended June
30, 1996 and June 30, 1995........................................... 5
Consolidated Statements of Changes in Shareholders' Equity - Six
months ended June 30, 1996 and June 30, 1995......................... 6
Notes to Interim Consolidated Financial Statements................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8-9
PART II Other Information
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 par value amounts)
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Investments:
Available for sale (aggregate cost of
$259,348 in 1996 and $259,566 in 1995) $254,307 $261,473
Held to maturity (aggregate fair value
of $491 in 1996 and $503 in 1995) 477 478
Short term (at cost) 19,023 11,597
TOTAL INVESTMENTS 273,807 273,548
Cash 2,885 3,272
Agents' balances, less allowance for doubtful
accounts ($1,232 in 1996 and $1,093 in 1995) 25,453 21,155
Accrued investment income 3,588 3,720
Reinsurance balances receivable 268,594 257,615
Prepaid reinsurance premiums 85,623 79,285
Equity in pools and associations 1,055 667
Deferred policy acquisition costs 9,361 8,578
Deferred tax benefit 13,641 10,281
Other assets 2,151 2,699
TOTAL ASSETS $686,158 $660,820
LIABILITIES
Unpaid losses $359,865 $348,832
Unpaid loss adjustment expenses 53,503 51,047
Unearned premiums 137,601 125,942
Accounts payable and accrued liabilities 2,297 1,964
Drafts payable 5,606 4,844
Due to affiliates 18,756 17,865
Unearned service fee income 6,526 5,109
Reserve for servicing carrier claim expenses 8,203 6,910
Other postretirement benefits 3,665 3,537
Reinsurance balances payable 2,220 3,476
Other liabilities 1,623 1,834
Surplus note 13,821 13,524
TOTAL LIABILITIES 613,686 584,884
SHAREHOLDERS' EQUITY
Common stock, par value $1.00: 7,368,420
shares authorized; 7,078,625 shares issued
and outstanding in 1996 and 1995 7,079 7,079
Additional paid-in capital 9,331 9,331
Net unrealized (losses) gains on investments (3,277) 1,240
Retained earnings 59,339 58,286
TOTAL SHAREHOLDERS' EQUITY 72,472 75,936
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $686,158 $660,820
<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 per share amounts)
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C> <C>
REVENUES
Premiums earned $49,843 $46,729
Net investment income less expenses of $182
in 1996 and $198 in 1995 7,977 7,544
Service fee income 2,958 4,078
Net securities gains and (losses) 464 (277)
Other income 356 417
61,598 58,491
LOSSES AND EXPENSES
Losses 37,691 36,859
Loss adjustment expenses 6,831 6,238
Other underwriting expenses less deferrals
of $10,190 in 1996 and $9,786 in 1995 5,752 4,202
Amortization of deferred policy acquisition
costs 9,407 8,900
Interest on surplus note 297 311
59,978 56,510
INCOME BEFORE FEDERAL INCOME TAXES 1,620 1,981
FEDERAL INCOME TAXES:
Current 1,495 1,391
Deferred (benefit) (928) (698)
567 693
NET INCOME $ 1,053 $ 1,288
Per share data, based on 7,078,625 average
shares outstanding in 1996 and 1995:
NET INCOME PER SHARE $0.15 $0.18
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars, except per share amounts)
<CAPTION>
Three Months Ended
June 30
1996 1995
<S> <C> <C>
REVENUES
Premiums earned $24,900 $23,626
Net investment income less expenses of $84
in 1996 and $78 in 1995 3,905 3,897
Service fee income 1,728 2,483
Net securities losses - (86)
Other income 181 239
30,714 30,159
LOSSES AND EXPENSES
Losses 19,126 19,440
Loss adjustment expenses 3,417 3,205
Other underwriting expenses less deferrals
of $4,323 in 1996 and $4,570 in 1995 2,744 2,004
Amortization of deferred policy acquisition
costs 4,515 4,449
Interest on surplus note 148 154
29,950 29,252
INCOME BEFORE FEDERAL INCOME TAXES 764 907
FEDERAL INCOME TAXES:
Current 565 1,049
Deferred (benefit) (298) (732)
267 317
NET INCOME $ 497 $ 590
Per share data, based on 7,078,625 average
shares outstanding in 1996 and 1995:
NET INCOME PER SHARE $0.07 $0.08
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars)
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,053 $ 1,288
Adjustments to reconcile net income to net
cash provided by operations:
Provision for deferred tax benefits (928) (698)
Amortization 9,747 8,725
Provision for doubtful accounts 139 (36)
Net securities (gains)/losses (464) 277
Policy acquisition costs incurred and deferred (10,190) (9,786)
Net change in:
Agents' balances (4,437) (5,153)
Reinsurance balances receivable (10,979) (16,492)
Prepaid reinsurance premiums (6,338) (7,843)
Unpaid losses and loss adjustment expenses 13,489 24,377
Unearned premiums 11,659 13,949
Drafts payable 762 589
Due to affiliates 891 352
Unearned services fees 1,417 1,233
Reserve for servicing carrier claim expenses 1,293 634
Reinsurance balances payable (1,256) 126
Other 847 1,113
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,705 12,655
NET CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale:
Acquisition of investments (93,714) (27,403)
Proceeds from sales of investments 75,974 37,154
Proceeds from maturities of investments 18,074 7,883
Net change in short-term investments (7,426) (29,497)
NET CASH (USED FOR) INVESTING ACTIVITIES (7,092) (11,863)
NET (DECREASE) INCREASE IN CASH (387) 792
Cash at beginning of period 3,272 3,943
Cash at the end of period $ 2,885 $ 4,735
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars)
<CAPTION>
Net
Common Unrealized
Shares Additional Gain
$1 Par Paid-in (Loss) on Retained
Value Capital Investments Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $7,079 $9,331 $(10,869) $57,723 $63,264
Net change in unrealized
gain (loss) on
investments 10,147 10,147
Net income 1,288 1,288
Balance, June 30, 1995 $7,079 $9,331 $ (722) $59,011 $74,699
Balance, January 1, 1996 $7,079 $9,331 $ 1,240 $58,286 $75,936
Net change in unrealized
gain (loss) on
investments (4,517) (4,517)
Net income 1,053 1,053
Balance, June 30, 1996 $7,079 $9,331 $ (3,277) $59,339 $72,472
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
<PAGE>
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 fairly present results of interim operations, should be
read in conjunction with the Notes to Consolidated Financial Statements
(including the Summary of Significant Accounting Policies) included in the
Company's audited consolidated financial statements for the year ended
December 31, 1995, which are included in the Company's Annual Report filed on
Form 10-K for such year (the "1995 10-K"). Results of operations for interim
periods are not necessarily indicative of annual results of operations. The
consolidated balance sheet at December 31, 1995 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. Certain amounts for prior periods have been reclassified to conform with
the 1996 presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Interim Operations
The following should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
1995 10-K.
LIQUIDITY AND CAPITAL RESOURCES
During each of the six month periods ended June 30, 1996 and 1995 the
Company operated profitably and net cash was provided from operations.
During 1996, the Company sold certain "Available for Sale" securities and
invested the proceeds in securities with longer duration. As more fully
described in the 1995 10-K, securities classified as "Available for Sale" are
carried at fair value with unrealized gains and losses reflected as a separate
component of shareholders' equity, net of taxes. Principally as a result of
increases in market interest rates during 1996, the unrealized gain on
investments at the end of 1995 decreased to an unrealized loss of $3,277,000
as of June 30, 1996. While this has resulted in a decrease in shareholders'
equity and book value per share it had no effect on results of operations or
cash flows.
RESULTS OF OPERATIONS--SIX AND THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO
THE SIX AND THREE MONTHS ENDED JUNE 30, 1995
Revenues for the six and three months ended June 30, 1996 increased by
$3,107,000 and $555,000, respectively, compared to the six and three months
ended June 30, 1995 principally due to higher premium rates charged on certain
lines of business, particularly related to increased minimum
<PAGE>
automobile liability coverage required by New York State in 1996 partially
offset by a decrease in the number of policies inforce. The Company is
continuing its program, which began in the fourth quarter of 1995, of raising
prices to cover increased loss costs in certain lines of business and reducing
volume in business lines that have not been profitable.
Net investment income increased in 1996 compared to 1995 reflecting
growth in invested assets and higher investment yields. The decrease in
service fee income was principally the result of a reduction in the estimate
of fees earned as a servicing carrier for the New York Public Automobile Pool
and assigned risk business.
During the six and three month periods ending June 30, 1996 and 1995, the
Company strengthened loss reserves. Losses for the six month period ended
June 30, 1996 were higher than those of 1995 due to catastrophe losses of
approximately $300,000 and less favorable claims experience due to severe
winter storms.
Loss adjustment expenses for the six and three month periods ended June
30, 1996 were higher than those of 1995 due largely to increased payments for
claims audits and outside counsel for litigated claims and increased pension
and severance benefits for certain employees, a portion of which is allocated
to loss adjustment expense.
Other underwriting expenses for the six months and second quarter ended
June 30, 1996 were higher than those of 1995 primarily as a result of higher
operating costs, primarily relating to pension and severance benefits for
certain employees.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule.
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended June 30, 1996.
<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: August 13, 1996 By FRANCIS M. COLALUCCI
Francis M. Colalucci
Senior Vice President, CFO and Treasurer
(Principal Financial and Accounting
Officer)
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August 13, 1996
FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Attention: Filing Desk, Stop 10-4
Re: Form 10-Q - Allcity Insurance Company
Gentlemen:
We enclose herewith one (1) manually signed copy and seven (7) additional
copies of the captioned form for the period ending June 30, 1996.
Very truly yours,
Enclosure
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 254,307
<DEBT-CARRYING-VALUE> 273,807
<DEBT-MARKET-VALUE> 273,821
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 273,807
<CASH> 2,885
<RECOVER-REINSURE> 354,217
<DEFERRED-ACQUISITION> 9,361
<TOTAL-ASSETS> 686,158
<POLICY-LOSSES> 413,368
<UNEARNED-PREMIUMS> 137,601
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 7,079
<OTHER-SE> 65,393
<TOTAL-LIABILITY-AND-EQUITY> 686,158
49,843
<INVESTMENT-INCOME> 7,977
<INVESTMENT-GAINS> 464
<OTHER-INCOME> 3,314
<BENEFITS> 44,522
<UNDERWRITING-AMORTIZATION> 9,407
<UNDERWRITING-OTHER> 5,752
<INCOME-PRETAX> 1,620
<INCOME-TAX> 567
<INCOME-CONTINUING> 1,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,053
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
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</TABLE>
