SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number
September 30, 1995 0-9934
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Health Insurance Of Vermont, Inc.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Vermont 03-0211497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Roosevelt Highway, Colchester, Vermont 05446
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(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code 802/655-5500
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Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act past 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 [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 25, 1995, there were 543,095 shares outstanding of the issuer's
$3.00 par value common stock.
PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
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<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Bonds $12,252,661 $11,603,155
Short-term investments:
Money market funds 594,541 100,953
Certificates of deposit 390,000 290,000
Total Investments 13,237,202 11,994,108
Cash 204,155 147,502
Accrued investment income 249,142 225,249
Other assets 124,208 93,036
Reinsurance recoverable on paid losses 19,092 18,733
Prepaid reinsurance premium 97,171 97,321
Reinsurance receivables 1,899,196 1,673,584
Deferred policy acquisition costs 3,963,441 3,665,508
Cash surrender value of life insurance 537,307 495,644
Property and equipment, at cost:
Land and office building 602,464 602,464
Office equipment and furniture 410,248 394,531
Less accumulated depreciation (406,174) (340,606)
Net property and equipment 606,538 656,389
Total Assets $20,937,452 $19,067,074
LIABILITIES
Policy liabilities:
Future accident and health policy benefits and claims $10,802,025 $ 9,872,915
Unearned premiums 579,012 567,828
Other policy claims and benefits 330,919 312,683
Other policyholders' funds 61,456 74,657
Other liabilities 455,331 289,856
Federal income taxes payable -- 3,803
Deferred federal income taxes 198,438 100,107
Total Liabilities 12,427,173 11,221,849
STOCKHOLDERS' EQUITY
Common stock, $3.00 par value, 1,000,000 shares
authorized; 542,095 and 522,660 shares issued
and outstanding, respectively 1,626,285 1,567,980
Additional paid-in capital 1,157,142 1,072,744
Retained earnings, unappropriated 5,561,674 5,441,948
Net unrealized losses on debt securities 165,178 (236,889)
Total Stockholders' Equity 8,510,279 7,845,225
Total Liabilities and Stockholders' Equity $20,937,452 $19,067,074
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Revenues:
Premiums $1,589,547 $1,469,141 $4,649,513 $4,295,117
Net investment income 207,931 178,991 604,925 512,147
Realized losses on investments -- -- -- (9,738)
Total Income 1,797,478 1,648,132 5,254,438 4,797,526
Benefits, Losses and Expenses:
Benefits, claims, losses and settlement
expenses 906,190 901,763 2,277,151 2,354,749
Underwriting, acquisition and insurance
expenses 808,519 712,154 2,532,367 2,019,811
Total Benefits, Losses and Expenses 1,714,709 1,613,917 5,109,518 4,374,560
Income Before Income Tax Expense 82,769 34,215 144,920 422,966
Income Tax Expense:
Current 8,665 21,366 8,665 64,204
Deferred 5,405 (16,924) 16,971 (13,112)
Total Income Tax Expense 14,070 4,442 24,636 51,092
Net Income $ 68,699 $ 29,773 $ 120,284 $ 371,874
Earnings Per Share $.13 $.06 $.22 $.71
Shares Used To Calculate Earnings Per Share 542,095 522,660 542,095 522,660
Earnings Per Share (Fully Diluted) $.13 $.06 $.22 $.70
Shares Used To Calculate Earnings Per Share
(Fully Diluted) 545,548 528,123 545,548 528,123
Dividends Per Share NONE NONE NONE NONE
</TABLE>
The above financial information, in the opinion of management reflects all
adjustments necessary to a fair statement, and has been prepared in
accordance with generally accepted accounting principles.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
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1995 1994
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<S> <C> <C>
Cash flow from operations:
Net income $ 120,284 $ 371,874
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy acquisition costs deferred (781,315) (744,448)
Amortization of deferred acquisition costs 483,382 434,159
(Increase) decrease in deferred federal income taxes 15,971 (13,112)
Depreciation of property and equipment 65,569 68,618
Accretion of fixed maturities (26,621) (52,162)
Loss on sale of fixed maturities -- 9,738
Changes in operating assets and liabilities:
Decrease in federal income taxes payable (3,803) (957)
Increase in policy liabilities 958,530 227,654
Increase in reinsurance receivables (225,612)
Increase in accrued investment income (23,893) (72,590)
(Increase) decrease in other assets (31,022) 352,308
Increase in reinsurance recoverable (359) (1,449)
Increase in other liabilities 165,475 35,620
Total provided by operations 716,586 615,253
Cash flow from investing activities:
Sources:
Sale of fixed maturities -- 1,937,005
Proceeds from matured fixed maturities 2,767,000 287,500
Principal payments on bonds 54,456 153,280
Uses:
Purchase of fixed maturities (2,959,922) (3,471,876)
Purchase of other investments (141,663) (39,919)
Purchase of furniture and equipment (15,718) (50,689)
Total provided (used) by investing activities (295,847) (1,184,699)
Cash flow from financing activities:
Sources:
Increase in premium deposit funds (13,201) 18,218
Other 142,703 --
Total provided by financing actives 129,502 18,218
Net increase (decrease) in cash and cash equivalents 550,241 (551,228)
Cash and cash equivalents at beginning of period 248,455 1,105,230
Cash and cash equivalents at end of period $ 798,696 $ 554,002
</TABLE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
As shown by the Statements of Cash Flows, cash flow provided by
operations for the nine month period under review was equal to
13.6% of total income, which compares to 12.8% for the same period
in the previous year. Cash flows are expected to remain in a
similar range in the future. The Company utilizes its excess cash
flow for investing purposes and at September 30, 1995
approximately 67% of total assets were readily convertible into
cash. Measured in dollars, this amounts to approximately
$13,979,000 on total assets of $20,943,000. At September 30, 1994,
approximately $13,187,000 of the Company's assets were readily
convertable into cash, amounting to approximately 67% on total
assets of $19,067,000.
There has been no material change in the Company's asset mix or in
the makeup of its liabilities.
The Company does not have any material commitment for capital
expenditures at this time.
Results of Operations
During the nine month period under review the Company's net
premium income increased by approximately $354,000 or 8.3% over
the same period in the prior year, contributing to an increase of
approximately $457,000 or 9.5% in total income. This compares
with an increase in total income of approximately $636,000 or
15.3% for the same period prior year.
Increases in total net premium income are the result of continued
growth in annualized premium in force which amounted to
approximately $390,000 during the nine month period under review
and approximately $440,000 for the same period prior year.
The improvement in total income was negated by a disproportional
increase in general expenses of approximately 25% or $513,000,
resulting in a decline of approximately $252,000 in net income
during the period. This is contrasted with an increase of
approximately 16% or $274,000 and a corresponding decrease in net
income of approximately $29,000 for the same period prior year.
A significant portion of the increase in general expenses is
attributable to legal fees and other expenses which the Company
incurred in connection with various shareholder proposals (see
PART II, Item 4."Submission of Matters to a vote of Security
Holders"). Since these proposals have been voted upon by the
Company's shareholders, the Company does not expect to continue to
incur these increased expenses, although no assurance can be
given.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not aware of any material pending legal proceedings, other than
ordinary routine litigation incidental to its business.
Item 2. Changes in Securities.
The Company has not made any changes which would modify the rights of the
holders of its registered securities.
Item 3. Defaults Upon Senior Securities.
The Company is not in default in the payment of any principal or dividends.
Item 4. Submission of Matters to a vote of Security Holders.
A special meeting of the shareholders of the Company was held on September 11,
1995. At the meeting the following persons were elected to the Board of
Directors of the Company by the following votes:
NAME FOR WITHHELD
Robert S. W. Leong 295,881 168,525
James L. Fraser 262,413 202,147
David W. Menard 295,237 168,410
Robert S. Savage 295,231 168,416
Robert J. Kecseg 260,612 203,035
Other directors continuing in office were John W. Mahoney and Alfred J.
Beauchamp.
In addition to the matters described above, the following matters were voted
upon by the shareholders of the Company at the meeting:
1. The removal of Section 2:8 and 2:9 of the Company's Bylaws, which
impose certain requirements upon shareholders who wish to nominate a
person to the Company's Board of Directors, or bring any other
business before an annual meeting of the shareholders of the
Company.
FOR AGAINST ABSTAIN
292,303 167,490 4,307
2. In accordance with 11(a) V.S.A. Section 8:08(a), the removal of the
following Directors:
FOR AGAINST ABSTAIN
Duncan F. Brown 288,946 172,122 2,716
Nelson S. Burbank 294,630 167,687 1,910
William H. Chadwick 257,339 203,904 2,288
Thomas O. Putnam 293,260 169,057 2,154
David E. Sams, Jr. 293,643 167,347 2,541
Hilton A. Wick 258,901 201,495 2,653
3. In accordance with Section 3:2 of the Company's Bylaws, reduction
of the size of the Company's Board of Directors from nine members to
seven members.
FOR AGAINST ABSTAIN
294,412 166,876 3,327
Item 5. Other Information.
There is no other information to report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
No exhibits are included herein.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on September 19, 1995. The Form 8-K
addressed submission of matters to a vote of the Company's security
holders at a special meeting of the Company's shareholders held
September 11, 1995. The Form 8-K also addressed the resignation of
the Chairman of the Company's Board of Directors on September 8, 1995.
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEALTH INSURANCE OF VERMONT, INC.
October 26, 1995 /s/ JOHN W. MAHONEY
John W. Mahoney, President
October 26, 1995 /s/ DAVID W. LESPERANCE
David W. Lesperance, Vice President & Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 12,252,661
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 13,237,202
<CASH> 204,155
<RECOVER-REINSURE> 19,092
<DEFERRED-ACQUISITION> 3,963,441
<TOTAL-ASSETS> 20,937,452
<POLICY-LOSSES> 10,802,025
<UNEARNED-PREMIUMS> 579,012
<POLICY-OTHER> 330,919
<POLICY-HOLDER-FUNDS> 61,456
<NOTES-PAYABLE> 0
<COMMON> 1,626,285
0
0
<OTHER-SE> 6,883,994
<TOTAL-LIABILITY-AND-EQUITY> 20,937,452
4,649,513
<INVESTMENT-INCOME> 604,925
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 2,277,151
<UNDERWRITING-AMORTIZATION> 483,382
<UNDERWRITING-OTHER> 2,048,985
<INCOME-PRETAX> 144,920
<INCOME-TAX> 24,636
<INCOME-CONTINUING> 120,284
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,284
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
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</TABLE>
