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FORM 10-Q/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-8007
FREMONT GENERAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THIS CHARTER)
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<S> <C>
NEVADA 95-2815260
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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2020 SANTA MONICA BLVD.
SANTA MONICA, CALIFORNIA 90404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(310) 315-5500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15 (d) of 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock:
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<CAPTION>
SHARES OUTSTANDING
CLASS JULY 31, 1995
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<S> <C>
Common Stock, $1.00 par value 16,926,948
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<CAPTION>
June 30, December 31,
1995 1994
---------- ----------
(Unaudited)
(Thousands of dollars)
<S> <C> <C>
ASSETS
Securities held to maturity:
Fixed maturity investments at amortized cost
fair value: 1995 - $334,637; 1994 - $199,103) $ 319,423 $ 206,416
Securities available for sale:
Fixed maturity investments, at fair value
(amortized cost: 1995 - $857,856; 1994 - $311,701) 843,320 235,442
Non-redeemable preferred stock at fair value
(amortized cost: 1995 - $320,463; 1994 - $213,935) 310,586 189,632
---------- ----------
Total securities available for sale 1,153,906 425,074
Loans receivable 1,491,807 1,440,774
Short-term investments 180,430 255,751
Other investments 2,425 1,677
---------- ----------
TOTAL INVESTMENTS AND LOANS 3,147,991 2,329,692
Cash 9,540 31,058
Accrued investment income 23,686 13,622
Premiums receivable and agents' balances 106,679 48,556
Reinsurance recoverable on paid losses 6,989 7,204
Reinsurance recoverable on unpaid losses 268,285 136,151
Deferred policy acquisition costs 81,080 59,286
Costs in excess of net assets acquired 75,517 28,776
Deferred income taxes 107,290 88,426
Other assets 71,828 54,806
Assets held for discontinued operations 267,944 336,813
---------- ----------
TOTAL ASSETS $4,166,829 $3,134,390
========== ==========
LIABILITIES
Claims and policy liabilities:
Losses and loss adjustment expenses $1,459,292 $746,661
Life insurance benefits and liabilities 258,001 172,425
Unearned premiums 117,733 47,551
Dividends to policyholders 42,033 46,067
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TOTAL CLAIMS AND POLICY LIABILITIES 1,877,059 1,012,704
Reinsurance premiums payable and funds withheld 4,986 6,961
Other liabilities 82,068 68,721
Thrift deposits 787,817 746,977
Short-term debt 186,285 176,325
Long-term debt 564,383 468,390
Liabilities of discontinued operations 234,430 303,299
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TOTAL LIABILITIES 3,737,028 2,783,377
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share--Authorized:
30,000,000 shares; issued and outstanding:
1995 - 16,927,000 and 1994 - 15,388,000 16,927 15,388
Additional paid-in capital 117,926 80,264
Retained earnings 317,429 331,713
Unearned Employee Stock Ownership Plan shares (6,612) (10,987)
Net unrealized loss on investments, net of deferred taxes (15,869) (65,365)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 429,801 351,013
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,166,829 $3,134,390
========== ==========
</TABLE>
See notes to consolidated financial statements on Form 10-Q.
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FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Property and casualty premiums earne $175,146 $106,178 $298,569 $212,504
Net investment income 31,518 19,393 53,892 40,479
Loan interest 41,227 25,051 80,440 46,921
Realized investment gains 71 148 77 144
Other revenue 5,033 7,222 19,174 14,002
-------- -------- -------- --------
Total Revenues 252,995 157,992 452,152 314,050
EXPENSES
Losses and loss adjustment expenses 137,037 68,432 230,554 136,826
Life insurance benefits 318 3,174 8,529 6,017
Policy acquisition costs 28,091 21,107 51,801 42,213
Provision for loan losses 4,001 2,954 8,358 4,272
Other operating costs and expenses 33,566 18,416 59,499 36,071
Dividends to policyholders 0 10,284 0 23,622
Interest expense 24,807 12,860 47,421 24,083
-------- -------- -------- --------
Total Expenses 227,820 137,227 406,162 273,104
-------- -------- -------- --------
Income before taxes 25,175 20,765 45,990 40,946
Income tax expense 8,308 6,688 14,917 13,382
-------- -------- -------- --------
NET INCOME $ 16,867 $ 14,077 $ 31,073 $ 27,564
======== ======== ======== ========
PER SHARE DATA
Net income:
Primary $ 0.97 $ 0.82 $ 1.80 $ 1.60
Fully diluted 0.81 0.69 1.51 1.35
Cash dividends 0.20 0.17 0.37 0.34
Weighted average shares:
Primary 17,300 17,207 17,257 17,233
Fully diluted 22,172 22,018 22,096 22,041
</TABLE>
See notes to consolidated financial statements on Form 10-Q.
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FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
Six Months Ended
June 30,
1995 1994
------ ------
(Thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 31,073 $ 27,564
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in premiums receivable and agents' balances
and reinsurance recoverable on paid losses 5,092 3,528
Change in accrued investment income (7,369) 5,206
Change in claims and policy liabilities (24,355) 1,377
Amortization of policy acquisition costs 51,801 42,213
Policy acquisition costs deferred (64,386) (43,650)
Provision for deferred income taxes 11,389 (4,657)
Provision for loan losses 8,358 4,272
Provision for depreciation and amortization 8,894 7,849
Net amortization on fixed maturity investments (2,656) 1,419
Realized investment gains (77) (144)
Change in other assets and liabilities (4,128) (392)
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Net Cash Provided by Operating Activities 13,636 44,585
INVESTING ACTIVITIES
Securities held to maturity:
Purchases of securities (117,660) 0
Sales of securities 0 0
Securities matured or called 5,464 0
Securities available for sale:
Purchases of securities (1,550,911) (739,958)
Sales of securities 901,091 643,795
Securities matured or called 15,567 34,360
Decrease in short-term and other investments 796,889 32,713
Loan originations and bulk purchases funded (189,180) (222,797)
Receipts from repayments of loans 129,789 72,753
Purchase of subsidiaries, less cash acquired (249,305) 0
Purchase of property and equipment (4,015) (4,039)
----------- ---------
Net Cash Used in Investing Activities (262,271) (183,173)
FINANCING ACTIVITIES
Proceeds from short-term debt 34,337 50,737
Repayments of short-term debt (24,377) (15,581)
Proceeds from long-term debt 105,000 0
Repayments of long-term debt (12,808) 0
Net increase in thrift deposits 40,840 88,641
Annuity contract receipts 93,278 20,568
Annuity contract withdrawals (7,692) (2,591)
Dividends paid (5,848) (5,524)
Stock options exercised 24 22
Purchase of fractional shares (12) 0
Decrease in unearned Employee Stock
Ownership Plan shares 4,375 2,647
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 227,117 138,919
----------- ---------
INCREASE (DECREASE) IN CASH (21,518) 331
Cash at beginning of year 31,058 28,433
----------- ---------
CASH AT JUNE 30, $ 9,540 $ 28,764
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See notes to consolidated financial statements on Form 10-Q.
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FREMONT GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ON FORM 10-Q
(UNAUDITED)
NOTE A --- BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
These statements have been prepared in accordance with generally
accepted accounting principles and, accordingly, adjustments (consisting of
normal accruals) have been made as management considers necessary for fair
presentations. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994. Certain 1994 amounts have been
reclassified to conform to the 1995 presentation, including the
reclassification of life insurance premiums to other revenue.
NOTE B --- ACQUISITION
On February 22, 1995, the Company completed the acquisition of
Casualty Insurance Company, an Illinois insurance company ("Casualty") pursuant
to a Stock Purchase Agreement dated as of December 16, 1994 among the Company,
Fremont Compensation Insurance Company, a California corporation and
wholly-owned subsidiary of the Company ("Fremont Compensation"), The Buckeye
Union Insurance Company, an Ohio insurance company ("Buckeye"), and The
Continental Corporation, a New York corporation, whereby Fremont Compensation
purchased all of the issued and outstanding capital stock of Casualty. The
purchase price paid by the Company was $250 million, comprised of $225 million
in cash and $25 million in a note payable to Buckeye. The cash used to fund
the acquisition includes $55 million in borrowings under the Company's existing
line of credit and the remainder from internally generated funds. The
acquisition was treated as a purchase for accounting purposes.
Casualty's operating results are included in the Company's
consolidated statement of income from the date of acquisition. If the
acquisition had occurred on January 1, 1995 the pro forma effect on
consolidated revenues would have been an increase in premiums earned of $57
million and an increase in net investment income of an estimated $5 million.
The pro forma effect on net income would have been an increase of $2 million or
$0.14 per share.
Prior to 1995 and its acquisition by the Company, Casualty
participated in an intercompany pooling arrangement with several insurance
subsidiaries of its former parent whereby Casualty ceded its insurance risks to
these affiliates and reassumed a portion of the former parent's pooled book of
business. Because of this intercompany pooling arrangement, separate financial
statements on an unpooled basis were not prepared. Accordingly, pro forma
results of Casualty's 1994 second quarter and six months June 30, operations
would not be meaningful.
NOTE C --- STOCKHOLDERS' EQUITY AND PER SHARE DATA
On May 11, 1995, the Board of Directors declared a ten percent stock
dividend that was distributed June 15, 1995 to stockholders of record May 30,
1995.
Per share data have been computed based on the weighted average number
of shares outstanding adjusted retroactively for this ten percent stock
dividend.
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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.
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<S> <C>
FREMONT GENERAL CORPORATION
Date: February 6, 1996 /s/ JOHN A. DONALDSON
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John A. Donaldson, Controller
and Chief Accounting Officer
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