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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 September 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)
<TABLE>
<S> <C>
NEVADA 95-2815260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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:
<TABLE>
<CAPTION>
Shares Outstanding
Class October 31, 1995
<S> <C>
Common Stock, $1.00 par value 16,929,010
</TABLE>
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PART I --- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Assets
Securities held to maturity:
Fixed maturity investments at amortized cost
(fair value: 1994 - $199,103)............................. $0 $206,416
Securities available for sale:
Fixed maturity investments, at fair value
(amortized cost: 1995 - $1,253,001; 1994 - $311,701).... 1,247,805 235,442
Non-redeemable preferred stock at fair value
(amortized cost: 1995 - $289,312; 1994 - $213,935)...... 283,646 189,632
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Total securities available for sale.................... 1,531,451 425,074
Loans receivable............................................ 1,508,074 1,440,774
Short-term investments...................................... 215,825 255,751
Other investments........................................... 2,707 1,677
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Total Investments and Loans............................ 3,258,057 2,329,692
Cash........................................................ 29,341 31,058
Accrued investment income................................... 23,437 13,622
Premiums receivable and agents' balances.................... 108,087 48,556
Reinsurance recoverable on paid losses...................... 9,911 7,204
Reinsurance recoverable on unpaid losses.................... 261,889 136,151
Deferred policy acquisition costs........................... 86,883 59,286
Costs in excess of net assets acquired...................... 74,637 28,776
Deferred income taxes....................................... 105,095 88,426
Other assets................................................ 64,253 54,806
Assets held for discontinued operations..................... 211,540 269,817
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Total Assets........................................... $4,233,130 $3,067,394
========== ==========
Liabilities Claims and policy liabilities:
Losses and loss adjustment expenses......................... $1,451,573 $746,661
Life insurance benefits and liabilities..................... 316,881 172,425
Unearned premiums........................................... 105,948 47,551
Dividends to policyholders.................................. 41,062 46,067
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Total Claims and Policy Liabilities.................... 1,915,464 1,012,704
Reinsurance premiums payable and funds withheld............. 5,587 6,961
Other liabilities........................................... 88,072 68,721
Thrift deposits............................................. 829,124 746,977
Short-term debt............................................. 16,704 176,325
Long-term debt.............................................. 746,308 468,390
Liabilities of discontinued operations...................... 178,026 236,303
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Total Liabilities...................................... 3,779,285 2,716,381
Commitments and contingencies...............................
Stockholders' Equity
Common Stock, par value $1 per share--Authorized:
30,000,000 shares; issued and outstanding:
1995 - 16,929,000 and 1994 - 15,388,000................... 16,929 15,388
Additional paid-in capital.................................. 118,280 80,264
Retained earnings........................................... 332,308 331,713
Unearned Employee Stock Ownership Plan shares............... (6,612) (10,987)
Net unrealized loss on investments, net of deferred taxes... (7,060) (65,365)
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Total Stockholders' Equity............................. 453,845 351,013
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Total Liabilities and Stockholders' Equity............. $4,233,130 $3,067,394
========== ==========
</TABLE>
See notes to consolidated financial statements on Form 10-Q.
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FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Property and casualty premiums earned........ $159,125 $116,839 $457,694 $329,343
Net investment income........................ 31,950 18,483 85,842 58,962
Loan interest................................ 40,488 30,484 120,928 77,405
Realized investment gains (losses)........... (69) (24) 8 120
Other revenue................................ 7,005 7,967 26,179 21,969
------------ ------------ ------------ ------------
Total Revenues....................... 238,499 173,749 690,651 487,799
Expenses.....................................
Losses and loss adjustment expenses ......... 122,463 74,754 353,017 211,580
Life insurance benefits...................... 5,151 3,800 13,680 9,817
Policy acquisition costs..................... 34,980 22,443 95,026 64,656
Provision for loan losses.................... 2,146 2,868 10,504 7,140
Other operating costs and expenses........... 21,563 20,696 72,817 56,767
Dividends to policyholders................... 0 12,952 0 36,574
Interest expense............................. 25,336 15,858 72,757 39,941
------------ ------------ ------------ ------------
Total Expenses....................... 211,639 153,371 617,801 426,475
------------ ------------ ------------ ------------
Income before taxes.......................... 26,860 20,378 72,850 61,324
Income tax expense........................... 8,595 6,283 23,512 19,665
------------ ------------ ------------ ------------
Net Income........................... $18,265 $14,095 $49,338 $41,659
============ ============ ============ ============
Per Share Data
Net income:
Primary................................ $1.05 $0.82 $2.85 $2.42
Fully diluted.......................... 0.87 0.69 2.38 2.04
Cash dividends.............................. 0.20 0.17 0.57 0.51
Weighted average shares:
Primary................................ 17,460 17,208 17,325 17,224
Fully diluted.......................... 22,272 22,016 22,155 22,032
</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
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 49,338 $ 41,659
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........ 762 11,000
Change in accrued investment income................... (10,124 4,686
Change in claims and policy liabilities............... (35,987) (13,151)
Amortization of policy acquisition costs.............. 95,026 64,656
Policy acquisition costs deferred..................... (113,414) (67,167)
Provision for deferred income taxes................... 8,841 (4,328)
Provision for loan losses............................. 10,504 7,140
Provision for depreciation and amortization........... 13,769 11,592
Net amortization on fixed maturity investments........ (1,888) 1,475
Realized investment gains............................. (8) (120)
Change in other assets and liabilities................ 9,890 (1,700)
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Net Cash Provided by Operating Activities.......... 26,709 55,742
INVESTING ACTIVITIES Securities held to maturity:
Purchases of securities............................... (117,660) (148,754)
Sales of securities................................... 0 0
Securities matured or called.......................... 5,464 0
Securities available for sale:
Purchases of securities............................... (2,353,101) (860,728)
Sales of securities................................... 1,611,086 991,226
Securities matured or called.......................... 65,359 47,315
Decrease in short-term and other investments............ 761,212 (41,732)
Loan originations and bulk purchases funded............. (334,566) (539,986)
Receipts from repayments of loans....................... 256,762 124,012
Purchase of subsidiaries, less cash acquired............ (249,305) 0
Purchase of property and equipment...................... (5,623) (6,537)
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Net Cash Used in Investing Activities.............. (360,372) (435,184)
FINANCING ACTIVITIES
Proceeds from short-term debt........................... 30,134 104,373
Repayments of short-term debt........................... (189,755) (21,889)
Proceeds from long-term debt............................ 315,000 11,000
Repayments of long-term debt............................ (42,808) (12,500)
Net increase in thrift deposits......................... 82,147 272,838
Annuity contract receipts............................... 154,087 34,659
Annuity contract withdrawals............................ (12,068) (3,932)
Dividends paid.......................................... (9,234) (8,434)
Stock options exercised.................................. 80 22
Purchase of fractional shares........................... (12) 0
Decrease in unearned Employee Stock
Ownership Plan shares............................... 4,375 2,647
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Net Cash Provided by Financing Activities........... 331,946 378,784
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Decrease in Cash........................................ (1,717) (658)
Cash at beginning of year............................... 31,058 28,433
----------- ---------
Cash at September 30,................................... $ 29,341 $ 27,775
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</TABLE>
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 $0.12 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 third quarter and nine months September 30 ended,
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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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
FREMONT GENERAL CORPORATION
Date: January 19, 1996 JOHN A. DONALDSON
------------------------------------
John A. Donaldson, Controller
and Chief Accounting Officer
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