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 March 31, 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 May 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 - March 31, 1996 and December 31,
1995................................................................. 2
Consolidated Statements of Income - Three months ended March
31, 1996 and March 31, 1995.......................................... 3
Consolidated Statements of Cash Flows - Three months ended March
31, 1996 and March 31, 1995.......................................... 4
Consolidated Statements of Changes in Shareholders' Equity - Three
Months ended March 31, 1996 and March 31, 1995....................... 5
Notes to Interim Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 7
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K.............................. 9
Signatures............................................................. 10
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<TABLE>
CONSOLIDATED BALANCE SHEETS
ALLCITY INSURANCE COMPANY
(Thousands of dollars, except par value amounts)
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Investments:
Available for sale (aggregate cost of
$269,808 in 1996 and $259,566 in 1995) $266,720 $261,473
Held to maturity (aggregate fair value
of $496 in 1996 and $503 in 1995) 478 478
Short term (at cost) 3,892 11,597
TOTAL INVESTMENTS 271,090 273,548
Cash 5,003 3,272
Agents' balances, less allowance for doubtful
accounts ($1,168 in 1996 and $1,093 in 1995) 25,290 21,155
Accrued investment income 3,836 3,720
Reinsurance balances receivable 263,251 257,615
Prepaid reinsurance premiums 84,596 79,285
Equity in pools and associations 1,706 667
Deferred policy acquisition costs 9,554 8,578
Deferred tax benefit 12,659 10,281
Other assets 4,515 2,699
TOTAL ASSETS $681,500 $660,820
LIABILITIES
Unpaid losses $355,928 $348,832
Unpaid loss adjustment expenses 51,803 51,047
Unearned premiums 137,784 125,942
Accounts payable and accrued liabilities 2,245 1,964
Drafts payable 5,337 4,844
Due to affiliates 19,442 17,865
Unearned service fee income 6,714 5,109
Reserve for servicing carrier claim expenses 7,897 6,910
Other postretirement benefits 3,601 3,537
Reinsurance balances payable 2,074 3,476
Other liabilities 1,757 1,834
Surplus note 13,673 13,524
TOTAL LIABILITIES 608,255 584,884
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 gains(losses) on investments (2,007) 1,240
Retained earnings 58,842 58,286
TOTAL SHAREHOLDERS' EQUITY 73,245 75,936
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $681,500 $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>
Three Months Ended
March 31
1996 1995
<S> <C> <C>
REVENUES
Premiums earned $24,943 $23,103
Net investment income less expenses of $98
in 1996 and $120 in 1995 4,072 3,647
Service fee income 1,230 1,595
Net securities gains and (losses) 464 (191)
Other income 175 178
30,884 28,332
LOSSES AND EXPENSES
Losses 18,565 17,419
Loss adjustment expenses 3,414 3,033
Other underwriting expenses less deferrals
of $5,867 in 1996 and $5,216 in 1995 3,008 2,198
Amortization of deferred policy acquisition
costs 4,892 4,451
Interest on surplus note 149 157
30,028 27,258
INCOME BEFORE FEDERAL INCOME TAXES 856 1,074
FEDERAL INCOME TAXES 300 376
NET INCOME $ 556 $ 698
Per share data, based on 7,078,625 average
shares outstanding in 1996 and 1995:
NET INCOME PER SHARE $0.08 $0.10
<FN>
See Notes to Interim Consolidated Financial Statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ALLCITY INSURANCE COMPANY
(Thousands of dollars)
<CAPTION>
Three Months Ended
March 31
1996 1995
NET CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 556 $ 698
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 5,026 4,360
Net securities (gains)/losses (464) 191
Increase in agents' balances (4,135) (3,780)
Increase in reinsurance balances receivable (5,636) (7,339)
Increase in prepaid reinsurance premiums (5,311) (3,418)
Increase in deferred policy acquisition costs (5,868) (5,216)
(Increase) decrease in deferred tax benefits (2,378) 100
Increase in unpaid losses and loss
adjustment expenses 7,852 11,583
Increase in unearned premiums 11,842 8,922
Increase in drafts payable 493 338
Increase (decrease) in due to affiliates 1,577 (2,431)
Increase in unearned services fees 1,605 2,477
Increase in reserve for servicing carrier
claim expenses 987 273
Decrease in reinsurance balances payable (1,402) (7)
Other items, net (798) (3,372)
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,946 3,379
NET CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale:
Acquisition of investments (93,588) (17,074)
Proceeds from sale of investments 75,974 9,633
Proceeds from maturities of investments 7,694 2,445
Net change in short-term investments 7,705 1,592
NET CASH USED BY INVESTING ACTIVITIES (2,215) (3,404)
NET INCREASE (DECREASE) IN CASH 1,731 (25)
Cash at beginning of period 3,272 3,943
Cash at the end of period $ 5,003 $ 3,918
<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 5,574 5,574
Net income 698 698
Balance, March 31, 1995 $7,079 $9,331 $ (5,295) $58,421 $69,536
Balance, January 1, 1996 $7,079 $9,331 $ 1,240 $58,286 $75,936
Net change in unrealized
gain (loss) on
investments (3,247) (3,247)
Net income 556 556
Balance, March 31, 1996 $7,079 $9,331 $ (2,007) $58,842 $73,245
<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 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 three month periods ended March 31, 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 $2,007,000
as of March 31, 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--THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1995
Revenues for the three months ended March 31, 1996 increased by
$2,552,000 compared to the three months ended March 31, 1995 due to higher
premium rates charged on certain lines of business, including additional
premiums related to increased minimum automobile liability coverage
<PAGE>
required by New York State in 1996. 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.
Losses and loss adjustment expenses incurred in 1996 increased by
$1,146,000 and $381,000, respectively, compared to 1995. These increases were
primarily due to catastrophe losses estimated at approximately $300,000, less
favorable claims experience due to severe winter storms and an unusually high
assessment from the New York State workers' compensation fund.
Other underwriting expenses in 1996 increased by $810,000 as a result of
higher operating costs coupled with severance benefits for certain employees.
<PAGE>
Part II - Other Information
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 March 31, 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: May 14, 1996 By FRANCIS M. COLALUCCI
Francis M. Colalucci
Senior Vice President, CFO and Treasurer
(Principal Financial and Accounting
Officer)
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May 14, 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 March 31, 1996.
Very truly yours,
Enclosure
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<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 266,720
<DEBT-CARRYING-VALUE> 271,090
<DEBT-MARKET-VALUE> 271,108
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 271,090
<CASH> 5,003
<RECOVER-REINSURE> 347,847
<DEFERRED-ACQUISITION> 9,554
<TOTAL-ASSETS> 681,500
<POLICY-LOSSES> 407,731
<UNEARNED-PREMIUMS> 137,784
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 7,079
<OTHER-SE> 66,166
<TOTAL-LIABILITY-AND-EQUITY> 681,500
24,943
<INVESTMENT-INCOME> 4,072
<INVESTMENT-GAINS> 464
<OTHER-INCOME> 1,405
<BENEFITS> 21,979
<UNDERWRITING-AMORTIZATION> 4,892
<UNDERWRITING-OTHER> 3,008
<INCOME-PRETAX> 856
<INCOME-TAX> 300
<INCOME-CONTINUING> 556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 556
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
