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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange
Act of 1934
Date of Report (Date of earliest event reportable):
February 13, 1996
Investors Insurance Group, Inc.
(Exact name of registrant a specified in its charter)
Florida 1-8069 13-2574130
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7200 West Camino Real
Boca Raton, Florida 33433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(407)-391-5043
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Item 4. Change in Registrant's Certifying Accountant.
On February 7, 1996, Investors Insurance Group, Inc. ("IIG") dismissed its
prior independent certifying public accountants, KPMG Peat Marwick LLP
("KPMG"), and retained as its new independent certifying public accountants,
BDO Seidman, LLP ("BDO"). KPMG's report on IIG's financial statements as of
and for the years ended December 31, 1994 and 1993 contained no adverse opinion
or a disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles, except as follows:
KPMG's audit report dated June 30, 1995 on the
consolidated financial statements of IIG and
subsidiaries as of and for the year ended December 31,
1994 contained a separate paragraph stating that IIG had
changed its method of accounting for excess ceding
commissions and adopted the provisions of the Financial
Accounting Standard No. 115 "Accounting for Certain
Investments in Debt and Equity Securities"; KPMG's audit
report dated March 25, 1994 on the consolidated
financial statements of IIG and subsidiaries as of and
for the year ended December 31, 1993 contained a
separate paragraph stating that IIG had adopted the
provisions of Financial Accounting Standard No. 113
"Accounting and Reporting for Reinsurance for Short-
Duration and Long-Duration Contracts."
The decision to change accountants was recommended by IIG's Audit Committee and
approved by its Board of Directors.
In connection with the audits of the two fiscal years ended December 31, 1994
and the subsequent interim period through February 7, 1996, except for the
matter discussed below, there were no disagreements between IIG and KPMG on any
matters of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.
As IIG sells an annuity contract, it cedes a significant
portion of the resulting investment risk and benefit to
another insurance company under a coinsurance agreement.
Similar to an insurance agency, IIG receives a commission
from the coinsurer to compensate it for its sales and
distribution efforts. Any excess of this ceding commission
over the related policy acquisition cost is profit to IIG.
IIG's right to this commission is in no way contingent;
other than the risk of default on the part of the coinsurer,
IIG has no further potential for profit or loss from the
portion of the business ceded. Prior to January 1, 1994,
IIG used an accounting policy that recognized the earnings
process as completed when these investment risks and
benefits were ceded. Thus, the related excess ceding
commissions were recognized at the time of receipt of the
ceding commission. Under the prior accounting method, as
investment risks were ceded, the deferred acquisition costs
related to the annuity contracts
were reduced by the portion of the costs recovered through
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the ceding commission; the remaining excess ceding commission
was recognized as revenue in the period the investment risks
and benefits were transferred. IIG changed its accounting
policy so that the deferred acquisition costs
related to the annuities are not reduced; the full ceding
commission, including the excess ceding commissions and the
recovery of the annuity acquisition costs, is treated as
unearned income. Under the new policy the unearned ceding
commission is treated as earned in direct relation to the
present value of expected gross profits of the related
annuity contracts, which is the same manner in which the
related deferred amortization costs are amortized. Like
deferred acquisition costs, the unearned ceding commission
will be adjusted retrospectively when changes are made to the
current or future estimated gross profits. As the ceding
commission is earned, the excess ceding commission is
recognized as commission income and the cost recovery portion
is offset against the amortization of deferred acquisition
costs. KPMG indicated such changes were necessary to permit
it to issue an unqualified report.
After discussing this issue with KPMG, the IIG Board of
Directors engaged BDO Seidman, LLP ("BDO") as a consultant to
offer its opinion on this accounting issue. Upon completion
of its research, BDO concurred with the accounting treatment
recommended by KPMG and IIG adopted the new accounting policy
effective January 1, 1994.
IIG has requested both KPMG and BDO to furnish it with a letter addressed to
the Securities and Exchange Commission stating whether they agree with the
statements contained in the description above. Copies of their letters are
filed as Exhibits 1 and 2 hereto.
None of the "reportable events" described in Item 304(a)(1)(v) of Regulation S-
K occurred with respect to IIG within the last two fiscal years and subsequent
interim periods to the date hereof.
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Item 7: Financial Statements and Exhibits
1. Letter from KPMG Peat Marwick LLP to the Securities and
Exchange Commission dated February 13, 1996.
2. Letter from BDO Seidman, LLP to the Securities and Exchange
Commission dated February 8, 1996.
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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 hereunto duly authorized.
INVESTORS INSURANCE GROUP, INC.
(Registrant)
February 13, 1996 By /s/ Melvin C. Parker
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Melvin C. Parker
President
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Exhibit 1
Securities and Exchange Commission
Washington, D. C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Investors Insurance Group, Inc.
and, under the date of June 30, 1995, we reported on the consolidated financial
statements of Investors Insurance Group, Inc. and subsidiaries as of and for
the years ended December 31, 1994 and 1993. On February 7, 1996, our
appointment as principal; accountants was terminated. We have read Investors
Insurance Group, Inc.'s statements included under Item 4 of its Form 8-K dated
February 13, 1996, and we agree with such statements, except that we are not in
a position to agree or disagree with Investors Insurance Group, Inc.'s
statement that the change was recommended by Investors Insurance Group, Inc.'s
Audit Committee and approved by its Board of Directors nor are we in a position
to agree or disagree with Investors Insurance Group, Inc.'s statement that BDO
Seidman, LLP was engaged as a consultant by the Company an that BDO Seidman,
LLP concurred with the accounting treatment recommended by KPMG Peat Marwick
LLP.
Very truly yours,
/s/ KPMG Peat Marwick LLP
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KPMG Peat Marwick LLP
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Exhibit 2
Securities and Exchange Commission
450 5th Street NW
Washington, DC 20549
Gentlemen:
We have been furnished with a copy of the response to Item 4 of the 8-K for the
event that occurred on February 7, 1996 to be filed by Investors Insurance
Group. We agree with the statements made in response to that Item insofar as
they relate to our Firm.
Very truly yours,
/s/ BDO Seidman, LLP
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BDO Seidman, LLP
