U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995 Commission File Number 0-9934
----------------- ------
Health Insurance of Vermont, Inc.
----------------------------------------------
(Name of Small Business Issuer In Its Charter)
Vermont 03-0211497
- ------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Roosevelt Highway, Colchester, Vermont 05446
- ------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code 802/655-5500
------------
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $3.00 per share
---------------------------------------
(Title of class)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 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 [ ].
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Revenues for the year ended December 31, 1995: $7,062,375
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $10,213,167. The aggregate market value has been computed as of
March 18, 1996, using a per share value of $18.60 being the average of bid and
asked price of the stock on that date.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of March 18, 1996, there were 549,095 shares outstanding of the
registrant's $3.00 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference within various Parts of
this report as follows:
<TABLE>
<CAPTION>
Document Reference To
- -------- ------------
<S> <S>
Form 8-K filed on March 22, 1996 Part I, Item 1
Part II, Item 6
Part III, Item 13
</TABLE>
(Cover page 1 of 1 page)
<PAGE> 1 of 24 pages
PART I
------
Item 1. Business.
The Company was incorporated in the State of Vermont in February, 1961 as an
accident and health insurance Company. The Company markets guaranteed
renewable disability income insurance which is written on an individual basis.
The Company does not intend to market any line of insurance other than
accident and health, and intends to continue the marketing of competitive,
quality insurance in those states in which it is licensed.
At December 31, 1995, the Company was licensed to write business in the States
of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode
Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont,
Virginia, Washington, West Virginia, Wyoming and the District of Columbia.
Renewal of these licenses on a year to year basis is contingent upon the
Company's ability to meet various standards and requirements imposed by the
states.
All of the Company's business is produced by licensed insurance agents who
have broker contracts with the Company. These brokers may have broker
agreements with other insurance companies and generally write life insurance
for such companies. The Company does not maintain its own sales force and
therefore operates on a brokerage basis, distributing its product in those
states in which it is licensed.
The accident and health insurance business is highly competitive. A large
number of competitor companies have been in business for many years and have
financial resources far in excess of those of the Company.
No material amount of the Company's business is dependent on any one customer
or a limited number of customers. There is no one customer of the Company to
which sales are made in an amount equalling 10 per cent or more of gross
revenue.
During January, 1995, the Company received a federal certificate of
registration for its service mark "America's Blue Collar Disability Company."
The Company does not hold other patents, trademarks, franchises or
concessions material to its business.
The Company employs thirty five persons in total, twenty seven of which are
full time employees.
On March 15, 1996, the Company executed a Plan and Agreement of Merger with
Penn Treaty American Corporation as disclosed in the Company's Form 8-K filed
on March 22, 1996, which is incorporated by reference herein.
Item 2. Properties.
The Company owns land and an office building located at One Roosevelt Highway,
Colchester, Vermont. This property comprises one floor of a three story
condominium office building.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE> 2 of 24 pages
PART II
-------
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's common stock is traded in the over--the--counter market and is
not listed on any stock exchange. Quotations reflect inter--dealer prices,
without retail mark--up, mark--down or commissions, and may not represent
actual transactions. The high and low bid quotations as furnished through the
National Daily Quotation Bureau are set forth in the following table:
<TABLE>
<CAPTION>
Price First Second Third Fourth
Range Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
1995 High 10-1/2 11-1/4 14-1/2 15
Low 9 9-1/2 9-1/2 9-1/2
1994 High 9 10-1/2 11 11-1/4
Low 8-1/2 9 9-1/2 9-1/2
</TABLE>
At March 18, 1996 there were approximately 510 holders of record of common
stock. On that date, both the high and low bid quotation on the Company's
stock was $17.75.
Reference is made to Note J of Notes to Financial Statements regarding divided
restrictions.
Item 6. Management's Discussion and Analysis.
Liquidity and Capital Resources:
The Company is engaged in the accident and health insurance business, which
has historically provided substantial cash flow. The Company utilizes its
excess cash flow for investing purposes and at present has approximately 68%
of its total assets readily convertible into cash. This compares to
approximately 66% at the prior year end. The Company is required by statute to
invest only in high grade securities to provide ample protection for both
policyholders and stockholders. At present over 97% of the Company's
investment portfolio is in U.S. Government and U.S. Government backed
securities.
Cash flow provided by operations, as shown by the Statement of Cash Flows, was
approximately 13% of total income for 1995, up from approximately 12% for
1994. For 1993, cash flow provided by operations was approximately 22%. The
decrease for the years 1995 and 1994 from the year 1993 was due to a decline
in net income, as shown in the Statements of Income. Management believes the
decrease to be an anomaly and not representative of a trend, as discussed
under "Results of Operations". There has been no material impact on either
short--term or long--term liquidity.
Results of Operations:
For the period ended December 31, 1995, premium considerations increased by
approximately 7.8% or approximately $458,000, as compared to an increase of
approximately 15.1% or approximately $765,000 at December 31, 1994.
The increase in premium considerations was the major determinant of the
Company's increase in total income from approximately $6,476,000 for the year
ended December 31, 1994, to approximately $7,062,000 for the year ended
December 31, 1995. The increase of approximately $586,000 compares to an
increase of approximately $830,000 for the year ended December 31, 1994, over
the year ended December 31, 1993.
During the 12 month period under review, underwriting, acquisition and
insurance expenses increased by approximately $627,000 from approximately
$2,753,000 for the year ended December 31, 1994, to approximately $3,380,000
for the year ended December 31, 1995. The year ended December 31, 1994, had
shown an increase of approximately $412,000 over the previous year.
<PAGE> 3 of 24
Specific expenses which had a significant impact on the increase in
underwriting, acquisition and insurance expenses included increases in
salaries, wages and consultant fees of approximately $144,000, legal fees of
approximately $244,000, travel expenses of approximately $16,000, and postage,
telephone and telegraph expenses of approximately $15,000.
During the fourth quarter of 1994 and through the 12 month period ending
December 31, 1995, the Company incurred significant expenses associated with
shareholder proposals with regard to exploring strategic opportunities for the
Company. These expenses included legal fees, consulting fees, fees associated
with additional directors' meetings and directors' travel as well as other
various expenses associated with this process.
Since these proposals have been voted upon by the Company's shareholders, the
Company does not expect these increased expenses to continue, although no
assurance can be given. However, the Company does expect to incur significant
expenses in connection with its proposed merger with Penn Treaty American
Corporation described below.
On March 15, 1996, the Company and Penn Treaty American Corporation of
Allentown, Pennsylvania, executed an Agreement and Plan of Merger, as
disclosed in a Form 8-K filed on March 22, 1996, which is incorporated by
reference herein.
Item 7. Financial Statements.
<PAGE> 4 of 24
Report of Independent Accountants
To the Board of Directors and Stockholders
of Health Insurance of Vermont, Inc.
We have audited the accompanying balance sheets of Health Insurance of
Vermont, Inc., as of December 31, 1995 and 1994, and the related statements of
income, changes in stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Health Insurance of Vermont,
Inc. as of December 31, 1995 and 1994 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Albany,New York
February 9, 1996
<PAGE> 5 of 24
HEALTH INSURANCE OF VERMONT, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31
ASSETS 1995 1994
<S> <C> <C>
Investments (Notes A and B):
Fixed maturities:
Bonds, available--for--sale at fair value (amortized
cost 1995- $12,044,712; 1994-$11,888,564) $12,385,547 $11,603,155
Short--term investments, at cost:
Certificates of deposit 290,000 290,000
----------- -----------
Total Investments 12,675,547 11,893,155
Cash 1,072,807 248,455
Accrued investment income 244,743 225,249
Other assets 109,638 93,036
Intangible asset - pension (Note D) 53,151 -
Reinsurance recoverable on paid losses 25,576 18,733
Prepaid reinsurance premium 96,409 97,321
Reinsurance receivables (Note A) 1,685,495 1,673,584
Deferred policy acquisition costs (Note A) 4,013,804 3,665,508
Cash surrender value of life insurance 540,386 495,644
Property and equipment, at cost:
Land and office building 602,464 602,464
Office equipment and furniture 447,814 394,531
Less accumulated depreciation (430,030) (340,606)
----------- -----------
Net property and equipment 620,248 656,389
----------- -----------
Total Assets $21,137,804 $19,067,074
=========== ===========
LIABILITIES
Policy liabilities (Notes A and H):
Future accident and health policy benefits and claims $10,820,386 $ 9,872,915
Unearned premiums 480,311 567,828
Other policy claims and benefits 444,522 312,683
Other policyholders' funds 36,741 74,657
Additional liability - pension (Note D) 95,135 -
Other liabilities 327,460 289,856
Federal income taxes payable (Note C) 7,778 3,803
Deferred federal income taxes (Note C) 205,491 100,107
----------- -----------
Total Liabilities 12,417,824 1,221,849
----------- -----------
Commitments and contingent liabilities (Note D)
STOCKHOLDERS' EQUITY
Common stock, $3.00 par value, 1,000,000 shares authorized;
549,095 and 522,660 shares issued and outstanding at
1995 and 1994, respectively (Note F) 1,647,285 1,567,980
Additional paid--in capital 1,193,642 1,072,744
Pension liability adjustment (Note D) (35,724) -
Net unrealized gain (loss) on available--for--sale securities 282,893 (236,889)
Retained earnings, unappropriated (Note J) 5,631,884 5,441,390
----------- -----------
Total Stockholders' Equity (Note I) 8,719,980 7,845,225
----------- -----------
Total Liabilities and Stockholders' Equity $21,137,804 $19,067,074
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 6 of 24
HEALTH INSURANCE OF VERMONT, INC.
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Revenues (Note A):
Premiums (Note E) $6,284,099 $5,826,411 $5,061,033
Net investment income (Note B) 778,276 659,222 576,480
Realized gains on investments (Note B) - - 8,295
Realized losses on investments (Note B) - (9,738) (292)
---------- ---------- ----------
Total Income 7,062,375 6,475,895 5,645,516
---------- ---------- ----------
Benefits, Losses and Expenses:
Benefits, claims, losses and settlement
expenses (Note E) 3,453,126 3,250,197 2,485,215
Underwriting, acquisition and insurance
expenses (Note G) 3,379,738 2,753,437 2,341,069
---------- ---------- ----------
Total Benefits, Losses and Expenses 6,832,864 6,003,634 4,826,284
---------- ---------- ----------
Income Before Income Tax Expense 229,511 472,261 819,232
---------- ---------- ----------
Income Tax Expense (Benefit) (Note C):
Current 32,778 97,302 126,957
Deferred 6,239 (17,483) (64,044)
---------- ---------- ----------
Total Income Tax Expense 39,017 79,819 62,913
---------- ---------- ----------
Net Income (Note I) $ 190,494 $ 392,442 $ 756,319
========== ========== ==========
Earnings Per Share $ .35 $ .74 $ 1.44
========== ========== ==========
Shares used to calculate net income per
share, based on weighted average
number of shares outstanding 549,565 529,238 526,910
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 7 of 24
HEALTH INSURANCE OF VERMONT, INC.
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
Appreciation Retained
Common Additional Pension (Depreciation) Earnings,
Stock Paid--In Liability of Investments Unappropriated Total
(Note F) Capital Adjustment (Notes A and B) (Note J) (Note I)
-------- ---------- ---------- --------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $1,567,980 $1,072,744 $ - $ - $4,272,629 $6,913,353
Net income - 756,319 756,319
---------- ---------- -------- --------- ----------
Balance, December 31, 1993 1,567,980 1,072,744 - - 5,028,948 7,669,672
Net income 392,442 392,442
Adjustments to beginning
balance for change in
accounting principle net of
income taxes of $58,998 288,051 288,051
Change in unrealized gains
(losses) net of income taxes
of $(107,518) (524,940) (524,940)
Decrease in provision for
deferred compensation 20,000 20,000
---------- ---------- -------- --------- ---------- ----------
Balance, December 31, 1994 1,567,980 1,072,744 - (236,889) 5,441,390 7,845,225
Net income 190,494 190,494
Change in unrealized gains
(losses) net of income taxes
of $(106,462) 519,782 519,782
Issuance of 26,458 shares
under stock option plan 79,374 121,064 200,438
Retirement of 23 shares
acquired through repurchase (69) (166) (235)
Change in adjustment for
pension liability (35,724) (35,724)
---------- ---------- -------- --------- ---------- ----------
Balance, December 31, 1995 $1,647,285 $1,193,642 $(35,724) $ 282,893 $5,631,884 $8,719,980
========== ========== ======== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 8 of 24
HEALTH INSURANCE OF VERMONT, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Cash flow from operations:
Net income $ 190,494 $ 392,442 $ 756,319
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy acquisition costs deferred (1,042,552) (1,003,883) (751,488)
Amortization of deferred acquisition costs 694,256 609,449 461,590
Increase (decrease) in deferred federal
income taxes 15,621 (17,483) (64,044)
Depreciation of property and equipment 89,424 80,534 70,417
Accretion of fixed maturities (31,800) (63,765) (91,583)
(Gain) loss on sale of fixed maturities - 9,738 (8,003)
Changes in operating assets and liabilities:
Increase (decrease) in federal income
taxes payable (3,803) 2,846 (7,827)
Increase in policy liabilities 991,793 834,467 796,852
(Increase) decrease in accrued investment income (19,494) (97,633) 15,560
(Increase) decrease in other assets (30,262) 50,338 25,298
Increase in reinsurance recoverable (6,843) (4,640) (4,797)
Increase in other liabilities 37,604 2,515 65,036
----------- ----------- -----------
Total provided by operations 884,438 794,925 1,263,330
----------- ----------- -----------
Cash flow from investing activities:
Sources:
Sale of fixed maturities - 1,937,005 429,408
Proceeds from matured fixed maturities 2,767,000 287,500 -
Principal payments on bonds 68,573 165,572 397,458
Uses:
Purchase of fixed maturities (2,959,922) (3,956,094) (3,295,803)
Purchase of other investments (44,742) (42,830) (44,409)
Purchase of furniture and equipment (53,282) (54,365) (127,388)
----------- ----------- -----------
Total used by investing activities (222,373) (1,663,212) (2,640,734)
----------- ----------- -----------
Cash flow from financing activities:
Increase (decrease) in policyholder funds (37,916) 11,512 3,786
Stock options exercised 200,438 - -
Repurchase of common stock (235) - -
----------- ----------- -----------
Total provided by financing activities 162,287 11,512 3,786
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 824,352 (856,775) (1,373,618)
Cash and cash equivalents at beginning of year 248,455 1,105,230 2,478,848
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,072,807 $ 248,455 $ 1,105,230
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 9 of 24
HEALTH INSURANCE OF VERMONT, INC.
Notes to Financial Statements
A. Description of Operations and Significant Accounting Policies:
Health Insurance of Vermont, Inc. is engaged in the accident and health
insurance business specializing in disability income insurance, all of which
is written on an individual basis. Its product portfolio includes non-
cancelable to age 65 disability income, guaranteed renewable to age 65
disability income, and accident only disability income insurance written on
male and female lives in most occupational classes.
All of the Company's business is produced by licensed career life, accident
and health, and casualty insurance agents under broker commission contracts
with the Company. These agents usually have broker contracts with several
companies and are compensated by the Company exclusively on a commission
basis.
At December 31, 1995, Health Insurance of Vermont, Inc. was licensed to write
business in the District of Columbia and all states except Alaska, Iowa, New
York and Wisconsin. The Company does not conduct any foreign operations.
The Company does not intend to market any line of insurance other than
accident and health. As only one line of business is conducted, segmentation
of its business is not applicable.
The Company's financial statements have been prepared on the basis of
generally accepted accounting principles. The Company has adopted the
following accounting policies:
1. Premiums are earned ratably over the estimated premium paying
period of the policies. Unearned premiums represent the portion of
premiums written which is applicable to the unexpired terms of the
policies in force calculated principally by the application of
monthly pro rata fractions.
2. The costs of acquiring new business, principally first--year
commissions and certain expenses of policy issue and underwriting
(principally medical examinations, inspection report fees and
certain agency related costs), all of which vary with and are
related to the production of new business, have been deferred. These
acquisition costs are being amortized over the estimated premium
paying period of related policies in proportion to the ratio of the
annual premium revenue to the total premium revenue anticipated.
Such anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future policy
benefits.
3. Liabilities for future policy benefits and claims consist of an
active life reserve and the present value of unpaid claims which
will come due together with an estimate for incurred but not
reported claims. The active life reserve has been computed primarily
by a net level premium method based upon estimated future investment
yield, morbidity and withdrawals. The significant assumptions
pertinent to the active life reserve are as follows:
Interest - 6 percent for the first ten policy
years and 5 percent thereafter.
Morbidity - Modification of industry experience
for various coverages with the introduction of
appropriate five--year select periods.
Withdrawal - Based upon the grading of the
Company's actual and anticipated experience.
In establishing the liability for unpaid claims and claim adjusting
expenses, management considers facts currently known and the current
state of the law and coverage litigation. Liabilities are recognized
for known claims (including the cost of related litigation) when
sufficient information has been developed to indicate the
involvement of a specific insurance policy, and management can
reasonably estimate its liability. In addition, liabilities have
been established to cover additional exposures on both known and
unasserted claims. Estimates of the liabilities are reviewed and
updated continually.
<PAGE> 10 of 24
HEALTH INSURANCE OF VERMONT, INC.
4. The liability for other policy claims represents the amount due
policyholders to pay benefits up to December 31, 1995 and includes
an estimate for incurred but not reported claims. Such estimates are
continually revised and updated and any adjustments resulting
therefrom are reflected in earnings currently.
5. In the normal course of business, the Company seeks to limit
its exposure to loss and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers
under coinsurance contracts. Amounts paid or deemed to have been
paid for reinsurance contracts are recorded as reinsurance
receivables. The cost of reinsurance related to long--duration
contracts is accounted for over the life of the underlying reinsured
policies using assumptions consistent with those used to account for
the underlying policies.
6. Bonds are stated at market value. All other invested assets are
stated at cost. Realized investment gains or losses are credited or
charged to income and unrealized investment gains or losses are
recorded in a separate stockholders' equity account, net of
applicable federal income taxes, if any.
7. Property and equipment are carried at cost less accumulated
depreciation. Depreciation is computed on the straight--line method
and is charged to income over the estimated useful life of the
respective asset. Maintenance and repairs are charged to expense as
incurred; betterments are capitalized.
8. The Company considers deposits in banks and money market funds
as cash and cash equivalents for the purposes of the statements of
cash flows. At December 31, 1995 and 1994, cash and cash equivalents
included $867,623 and $100,953, respectively, in a money market fund
which is fully invested in United States Government backed
securities.
9. Net income per share is based upon the weighted average number
of common and common equivalent shares outstanding. Common
equivalent shares are included in the per share calculation where
the effect of their inclusion would be dilutive.
10. The Company adopted Statement of Financial Accounting Standards
No. 109 (SFAS No. 109), "Accounting for Income Taxes" as of January
1, 1993. Under SFAS No. 109, deferred tax assets and liabilities are
recognized based on temporary differences between the financial
statement and tax basis of assets and liabilities using enacted
statutory tax rates for years in which taxes are expected to be paid
or recovered. The impact upon adoption of this statement was
immaterial to the Company's financial statements.
11. On January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The
cumulative effect as of January 1, 1994 of adopting Statement 115
was an increase in the opening balance of shareholders equity of
$288,051 (net of $58,998 in deferred income taxes) to reflect the
net unrealized gains on securities classified as available--for--
sale that were previously carried at amortized cost.
12. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE> 11 of 24
HEALTH INSURANCE OF VERMONT, INC.
B. Summary of Investments:
A summary comparison of amortized cost and market values of debt securities is
as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Gains Losses Value
- ----------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Bonds:
United States Government
and government agencies
and authorities $11,645,208 $338,679 $ 653 $11,983,234
Public utilities 200,746 - 746 200,000
All other corporate bonds 198,758 3,555 202,313
----------- -------- -------- -----------
Total debt securities $12,044,712 $342,234 $ 1,399 $12,385,547
=========== ======== ======== ===========
<CAPTION>
December 31, 1994
- -----------------
<S> <C> <C> <C> <C>
Bonds:
United States Government
and government agencies
and authorities $11,223,179 $ 11,875 $277,569 $10,957,485
Public utilities 300,909 - 21,909 279,000
All other corporate bonds 364,476 2,194 - 366,670
----------- -------- -------- -----------
Total debt securities $11,888,564 $ 14,069 $299,478 $11,603,155
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less $ 2,500,839 $ 2,520,000
Due after one year through five years 8,452,628 8,675,313
Due after five years through ten years - -
Due after ten years 1,091,245 1,190,234
----------- -----------
Total debt securities $12,044,712 $12,385,547
=========== ===========
</TABLE>
There were no sales of fixed maturities in 1995. Proceeds from the sale of
fixed maturities were $1,937,005 in 1994 and $429,408 in 1993. Gross gains of
$8,295 were realized from sales in 1993. Gross losses amounted to $9,738 in
1994 and $292 in 1993.
Information with respect to net investment income is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Fixed maturities $764,482 $667,090 $552,926
Equity securities - - -
Short--term investments 49,397 34,631 61,183
-------- -------- --------
Total 813,879 701,721 614,109
Investment expenses 35,603 42,499 37,629
-------- -------- --------
Net investment income $778,276 $659,222 $576,480
======== ======== ========
</TABLE>
<PAGE> 12 of 24
HEALTH INSURANCE OF VERMONT, INC.
Information with respect to realized gains and unrealized appreciation
(depreciation) on fixed maturity and equity security investments for the years
ended December 31 is as follows;
<TABLE>
<CAPTION>
Fixed Equity Tax
Maturities Securities Effects Total
<S> <C> <C> <C> <C>
1995:
Realized $ - $ - $ - $ -
Unrealized 626,244 - (106,462) 519,782
--------- ------ --------- ---------
Total $ 626,244 $ - $(106,462) $ 519,782
========= ====== ========= =========
1994:
Realized $ (9,738) $ - $ 1,656 $ (8,082)
Unrealized (632,458) - 107,518 (524,940)
--------- ------ --------- ---------
Total $(642,196) $ - $ 109,174 $(533,022)
========= ====== ========= =========
1993:
Realized $ 8,003 $ - $ (1,360) $ 6,643
Unrealized 103,058 - - 103,058
--------- ------ --------- ---------
Total $ 111,061 $ - $ (1,360) $ 109,701
========= ====== ========= =========
</TABLE>
The cost of investments sold is determined by using the identified certificate
method.
C. Income Taxes:
The components of net deferred tax liability were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994
<S> <C> <C>
Deferred tax assets:
Difference in accounting for policy liabilities $ 351,782 $ 293,014
Difference in accounting for deferred compensation 32,724 31,177
Difference in accounting for pension liabilities 7,317 -
Unrealized loss on debt securities - 48,520
AMT credit carry forward 251,985 233,680
--------- ---------
Total deferred tax assets 643,808 606,391
--------- ---------
Deferred tax liabilities:
Difference in accounting for deferred acquisition costs (783,728) (688,712)
Difference in accounting for discounts on fixed maturities (7,352) (15,945)
Unrealized gain on debt securities (57,942) -
Other (277) (1,841)
--------- ---------
Total deferred tax liabilities (849,299) (706,498)
--------- ---------
Net deferred tax liability $(205,491) $(100,107)
========= =========
</TABLE>
<PAGE> 13 0f 24
HEALTH INSURANCE OF VERMONT, INC.
The provision for income tax expense is calculated as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Income before income tax expense $ 229,511 $ 472,261 $ 819,232
Less small and special life insurance
company deductions (152,386) (243,313) (520,510)
--------- --------- ---------
Taxable from operations $ 77,125 $ 228,948 $ 298,722
========= ========= =========
Tax at 34% $ 26,223 $ 77,842 $ 101,565
Adjustments:
Surtax exemption (11,750) (5,302) (1,813)
Alternative minimum tax 18,305 24,762 24,205
--------- --------- ---------
Current tax expense 32,778 97,302 126,957
Deferred tax expense (benefit) 6,239 (17,483) (64,044)
--------- --------- ---------
Total income tax expense $ 39,017 $ 79,819 $ 62,913
========= ========= =========
</TABLE>
Amounts paid for income taxes totaled $30,074 for 1995; $83,420 for 1994; and
$134,921 for 1993.
The "policyholders' surplus account" which arose under prior tax law is
generally that portion of the gain from operations which has not been
subjected to tax, plus certain deductions. The balance of this account, which
under provisions of the Tax Reform Act of 1984 will not increase after 1983,
is estimated to be $396,000. This amount has not been subjected to current
income taxes, but under certain conditions which management considers to be
remote, may become subject to income taxes in future years. At current rates,
the maximum amount of such tax (for which no provision has been made in the
financial statements) is approximately $54,000.
The Company has never been examined by the Internal Revenue Service.
D. Commitments and Contingent Liabilities:
1. Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company. The Company
evaluates the financial condition of its reinsurers to minimize its
exposure to significant losses from reinsurer insolvencies. Amounts
carried on the Company's books as reinsurance receivables represent
those liabilities related to its policyholders on which the Company
has reinsurance contracts.
2. The President of the Company has an employment contract with a
provision providing for a lump sum payment equal to 2.99 times
his current salary in the event that after the Company has undergone
a "change of control" and he is involuntarily terminated by the
Company or he voluntarily terminates his employment for "good
reason." A "change in control" of the Company, as defined in the
employment agreement, occurred on September 11, 1995.
3. The Company has a noncontributory defined benefit pension plan
covering substantially all of its employees. The benefits are based
on years of service and the employee's compensation during the last
five years of employment. The Company's funding policy is to
contribute annually the amount required to meet the funding
requirements of the Internal Revenue Code.
In accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" the Company recorded a minimum pension
liability in 1995. The transaction, which had no effect on net income, was
offset by recording an intangible asset and reducing stockholders' equity.
<PAGE> 14 of 24
HEALTH INSURANCE OF VERMONT, INC.
The plan's funded status and amounts recognized in the Company's
statements of financial position are as follows:
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including
vested benefits of $713,023 for 1995 and
$470,379 for 1994) $(715,951) $(483,148)
Effects of projected future
compensation levels (203,175) (156,647)
--------- ---------
Projected benefit obligation for
service rendered to date (919,126) (639,795)
Plan assets at fair value 620,816 500,061
--------- ---------
Projected benefit obligation in excess
of plan assets (298,310) (139,734)
Adjustment to recognize minimum liability (96,192) -
Unrecognized net loss 246,216 88,058
Unrecognized net obligation 53,151 59,057
--------- ---------
(Accrued) or prepaid pension cost $ (95,135) $ 7,381
========= =========
</TABLE>
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Service cost benefits earned during the period $ 46,884 $ 30,536 $ 30,374
Interest cost on projected benefit obligation 58,048 45,505 42,040
Actual return on plan assets (83,625) 16,444 (34,273)
Net amortization and deferral 49,018 (43,899) 12,157
-------- -------- --------
Net periodic pension cost $ 70,325 $ 48,586 $ 50,298
======== ======== ========
</TABLE>
The weighted--average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% for December 31, 1995 and
8.5% for December 31, 1994. The rate of increase in future compensation levels
was 4.0% for December 31, 1995 and 1994. The expected long--term rate of
return on was 8.0% and 7.5%, respectively, for December 31, 1995 and 1994.
<PAGE> 15 of 24
HEALTH INSURANCE OF VERMONT, INC.
E. Reinsurance:
1. The Company reinsures a portion of its risk with three
reinsuring companies, all of which are authorized to do business in
the State of Vermont. Reinsurance premiums ceded to these companies
are as follows:
<TABLE>
<CAPTION>
Gross Net
Premiums Ceded Premiums
<S> <C> <C> <C>
Accident and health insurance premiums
for the years ended December 31:
1995 $6,757,537 $473,438 $6,284,099
========== ======== ==========
1994 $6,252,764 $426,353 $5,826,411
========== ======== ==========
1993 $5,469,609 $408,576 $5,061,033
========== ======== ==========
</TABLE>
The Company does not assume any reinsurance from other companies.
Amounts recovered from reinsurers were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
On claims paid $332,848 $306,127 $375,848
======== ======== ========
</TABLE>
F. Common Stock:
Under the Company's current stock option plan adopted April 25, 1985, options
to purchase 31,625 shares of common stock may be granted to employees of the
Company at exercise prices not less than 100% of the fair market value on the
date of grant.
Information with respect to options granted under the plan at December 31,
1995 is as follows:
<TABLE>
<S> <C>
Options outstanding 1,000
=====
Exercise price $8.13-$8.75
===========
Options exercisable 1,000
=====
Exercise price $8.13-$8.75
===========
Options exercised during 1995 26,458
======
Price of options exercised during 1995 $5.63-$8.75
===========
</TABLE>
There were no options exercised in 1994 or 1993.
G. Underwriting, Acquisition and Insurance Expenses:
Information with respect to underwriting, acquisition and insurance
expenses is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Amortization of deferred acquisition costs $ 694,256 $ 609,449 $ 461,590
Commissions 785,965 728,596 593,688
Taxes, licenses and fees 285,933 227,712 220,024
General insurance expenses 1,524,160 1,107,146 995,350
Depreciation of property and equipment 89,424 80,534 70,417
---------- ---------- ----------
Total $3,379,738 $2,753,437 $2,341,069
========== ========== ==========
</TABLE>
<PAGE> 16 of 24
HEALTH INSURANCE OF VERMONT, INC.
H. Liability for Unpaid Claims and Claim Adjustment Expenses:
Activity in the liability for unpaid claim and claim adjustment expenses (a
component of future accident and health policy benefits and claims) is
summarized as follows.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance at January 1 $ 2,599,032 $ 2,143,973
Less reinsurance recoverables 816,151 549,606
----------- -----------
Net Balance at January 1 1,782,881 1,594,367
----------- -----------
Incurred related to:
Current year 1,367,541 1,090,676
Prior years increase (decrease) 82,770 (54,712)
----------- -----------
Total incurred 1,450,311 1,035,964
----------- -----------
Paid related to prior year (1,117,964) (847,450)
----------- -----------
Net Balance at December 31 2,115,228 1,782,881
Plus reinsurance recoverables 725,260 816,151
----------- -----------
Balance at December 31 $ 2,840,488 $ 2,599,032
=========== ===========
</TABLE>
I. Reconciliation with Statutory Basis:
Reconciliations of statutory net income and stockholders' equity with the
amounts shown in the accompanying financial statements are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Net income, statutory basis $ 13,221 $ 287,565 $ 474,201
Deferred policy acquisition costs, net of
current year amortization 348,296 394,434 289,898
Current year adjustment of policy liabilities (168,964) (331,218) (68,678)
Interest maintenance reserve adjustment,
net of amortization (1,794) (9,311) (8,877)
Deferred federal income taxes (6,239) 17,483 64,044
Other 5,974 33,489 5,731
----------- ----------- -----------
Net income in accordance with generally
accepted accounting principles $ 190,494 $ 392,442 $ 756,319
=========== =========== ===========
Stockholders' equity, statutory basis $ 5,856,132 $ 5,589,298 $ 5,221,278
Deferred policy acquisition costs, net of amortization 4,013,804 3,665,508 3,271,074
Deferred federal income taxes (214,873) (100,107) (166,110)
Adjustment to policy liabilities (1,343,754) (1,174,790) (843,572)
Asset valuation reserve 37,102 41,148 44,485
Interest maintenance reserve 3,973 5,767 15,078
Non admitted assets 69,802 103,810 127,439
Pension liability adjustment (43,041) - -
Unrealized gain (loss) on debt securities 340,835 (285,409) -
----------- ----------- -----------
Stockholders' equity in accordance with
generally accepted accounting principles $ 8,719,980 $ 7,845,225 $ 7,669,672
=========== =========== ===========
</TABLE>
<PAGE> 17 of 24
HEALTH INSURANCE OF VERMONT, INC.
J. Dividend Restrictions:
The maximum amount of dividends which can be paid by State of Vermont
insurance companies to shareholders without prior approval of the Insurance
Commissioner is subject to restrictions. The maximum dividend payment for the
year cannot exceed the lesser of (1) 10 percent of Unassigned funds (surplus)
at end of year or (2) net income for the year. The maximum dividend payment
which may be made without prior approval for 1995 is $13,221.
Information with respect to statutory net income and statutory unrestricted
retained earnings is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Net income, statutory basis $ 13,221 $ 287,565 $ 474,201
========== ========== ==========
Unrestricted retained earnings, statutory basis $2,907,364 $2,840,733 $2,472,713
========== ========== ==========
</TABLE>
K. Subsequent events:
On March 15, 1996, the Company entered into a merger agreement with Penn
Treaty American Corporation. Pursuant to that transaction, the Company would
become a wholly owned subsidiary of Penn Treaty. The merger would be
accomplished through the exchange of all stock of the Company held by its
shareholders for consideration of $20 for each share of Company stock. The
consideration is to consist of $4.00 in cash and $16.00 in Penn Treaty common
stock per share. Completion of the merger is subject to a number of
conditions, including the approval of various regulatory agencies. The merger
is expected to be completed prior to June 30, 1996.
<PAGE> 18 of 24
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
--------
Item 9. Directors and Executive Officers of the Registrant.
(a) The nominees for director are Robert J. Kecseg and David W. Menard, both
of whom are currently serving on the Board of Directors.
The following table sets forth pertinent information with regard to each
member currently serving on, and nominees to, the Board of Directors.
<TABLE>
<CAPTION>
Present Term
Name Age Expires Principal Occupation
- ---- --- ------------ --------------------
<S> <C> <C> <C> <C>
Alfred J. Beauchamp 69 1998 Director of the Corporation since 1985;
Registered representative since 1961
for Connecticut Mutual Life Insurance
Company, Rutland, Vermont; General
agent emeritus of Connecticut Mutual
Life Insurance Company. Formerly a
Director and Vice Chairman of the
Board of Marble Financial Corporation,
Rutland, Vermont.
James L. Fraser 65 1997 Director of the Corporation since September 1995;
President of Fraser Management Associates,
Burlington, Vermont, since 1969; Registered
Investment Advisor with Securities & Exchange
Commission; Secretary of the Corporation.
Robert J. Kecseg 43 1996 Director of the Corporation since September 1995;
(Note A) Broker and Supervisory Analyst of First Research
Financial, Irving, Texas, since October 1995;
Formerly Broker and Supervisory Analyst of
Southwest Securities, Inc., Irving, Texas, 1981-1995.
Robert S.W. Leong 46 1998 Director and Chairman of the Corporation since
September 1995; Private Investor, Seattle, Washington;
Vice President of Administration, Mutual Distributors,
Honolulu, Hawaii 1978-1989.
John W. Mahoney 53 1998 Director of the Corporation since 1980; President
of the Corporation since December, 1988; Executive
Vice President of the Corporation, 1985--1988; Vice
President of the Corporation, 1968--1985; Secretary
of the Corporation, 1972--1988; employed by the
Corporation since 1967.
David W. Menard 57 1996 Director of the Corporation since September 1995;
(Note A) President of Colmen Menard Company, Inc., Bala Cynwyd,
Pennsylvania, since 1993; President 1982-1993 of
Colmen Management Company.
Robert S. Savage 67 1997 Director of the Corporation since September 1995;
Private Investor, Denver, North Carolina; Formerly
Executive Vice President and Director 1975-1984 of
ANTA Corporation, Oklahoma City, Oklahoma. He is also
a Director of Bonray Drilling, Oklahoma City, Oklahoma.
- -------------------
<F1> Note A. The terms of Kecseg and Menard will expire in 1999 if they are
elected to the Board at the annual meeting.
</TABLE>
<PAGE> 19 of 24 pages
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name and Age Year Appointed Position
- ------------ -------------- --------
<S> <C> <C>
John W. Mahoney, 53 1988 President
James L. Fraser, 65 1995 Secretary
David W. Lesperance, 44 1994 Vice President & Treasurer
Anne M. Brosseau, 52 1986 Vice President
James R. Foster, 52 1991 Vice President
</TABLE>
Mr. Mahoney and Ms. Brosseau have been principally employed in executive
positions with the Company for more than five years.
Prior to his appointment as Vice President, Mr. Foster served the Company as
Director of Underwriting since 1988. Prior to Mr. Lesperance's appointment as
Vice President & Treasurer he served the Company as Assistant Treasurer since
1986.
Mr. Fraser has served as President of Fraser Management Associates,
Burlington, Vermont, since 1969 and is a Registered Investment Advisor with
Securities & Exchange Commission.
In accordance with the provisions of the Company's By-Laws, all officers, with
the exception of the secretary, are elected annually by the Board of
Directors. The secretary is elected annually by the stockholders.
President Mahoney and Vice President Brosseau were married in October, 1994.
President Mahoney has been with the Company since 1967 and has served as
President since 1988, and Vice President Brosseau has been with the Company
since 1986 and has served as Vice President since 1986.
Item 10. Executive Compensation.
The following table summarizes the compensation awarded to, earned by, or paid
to HIVT's chief executive officer for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE (Note A)
<TABLE>
<CAPTION>
Annual Compensation
Name and Principal -------------------
Position Year Salary $ Bonus $
- ------------------ ---- -------- -------
<S> <C> <C> <C>
President: John W. Mahoney 1993 80,000 -0-
1994 85,000 -0-
1995 90,000 -0-
</TABLE>
Directors who are neither employees nor consultants of the Corporation are
compensated for attendance at meetings of the Board of Directors by payment of
a fee of $400.00 per meeting and, in addition, receive a fee of $100.00 for
attendance at committee meetings.
During the 1995 fiscal year, HIVT paid consulting fees to Bernard Zais
totalling $50,000 pursuant to a consulting agreement. Under the consulting
agreement, Mr. Zais agreed to provide general consulting services as required
by HIVT's officers and directors for a set annual fee. The agreement provided
for the payment to Mr. Zais, or his designated heirs, over a period of five
years, of deferred compensation in the amount of $125,000 commencing upon the
termination of the agreement. This deferred compensation payment was approved
by the Board of Directors in 1969. The agreement was terminated in December,
1995 by Mr. Zais.
In 1994, HIVT entered into a written employment agreement with Mr. Mahoney
whereby Mr. Mahoney agreed to serve as an executive officer of HIVT and
perform the duties specified from time to time by the Board of Directors. The
annual term of the agreement is extended automatically for the next year
unless HIVT provides Mr. Mahoney with a written notice of termination on or
before October 30 of the then current year. Mr. Mahoney is to receive annual
compensation of not less than $90,000, as determined by the Board of
Directors. For two years following the termination of Mr. Mahoney's employment
he may not compete with HIVT in any capacity. In the event HIVT elects not to
renew Mr. Mahoney's employment at the end of any year, (i) HIVT shall continue
to pay Mr. Mahoney his salary for a period of one year reduced by the amount
of any compensation that Mr. Mahoney may earn from any other source and (ii)
Mr. Mahoney shall not be subject to the non-competition restriction described
above.
<PAGE> 20 of 24 pages
In March, 1995, the Board of Directors extended Mr. Mahoney's contract until
the end of 1998 and included a provision providing for the payment to Mr.
Mahoney of a lump sum payment equal to 2.99 times his current salary in the
event that after the Company has undergone a "change of control" and he is
involuntarily terminated by the Company or he voluntarily terminates his
employment for "good reason." Additionally, upon the occurrence of a change
of control, the term of Mr. Mahoney's employment agreement is automatically
extended for three years from the date of the change of control. A "change in
control" of the Company, as defined in the employment agreement, occurred on
September 11, 1995.
Note A: Not included in the Summary Compensation Table are contributions
to the Employees' Retirement Plan, since the amount of such
contributions is based upon actuarial values and cannot readily
be calculated for individual officers by the Corporation's actuary.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table presents information with respect to those persons known
by the Corporation to own beneficially, as of March 18, 1996, more than 5% of
the common stock issued by the Corporation.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name and Address of Beneficial Owner Beneficial Ownership (1) of Class
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Patrick W. Hopper 151,799 shares (2) 27.65
Las Vegas, NV 89109
Common Stock K.J. Seemann 33,147 shares (2) 6.04
Williston, VT 05495
Common Stock Bernard H. Zais 29,419 shares (2) 5.36
Burlington, VT 05401
Common Stock Security Group, Inc. 28,769 shares (2) 5.24
Spartanburg, SC 29304
Common Stock Thomas O. Putnam 27,703 shares (3) 5.05
Schoharie, New York 12157
- -------------------
<F1> Beneficial owners hold sole voting and investment powers with respect to
their shares.
<F2> Direct Beneficial ownership.
<F3> Indirect Beneficial ownership.
</TABLE>
The following table presents information with respect to the beneficial
ownership of HIVT common stock by all directors and executive officers as of
March 18, 1996.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name and Address of Beneficial Owner Beneficial Ownership of Class
- ----------------------------------------------------------------------------------------------
<S> <S> <C> <C>
Directors:
Common Stock Alfred J. Beauchamp 589 shares (1) .11
Rutland, Vermont 05701
Common Stock James L. Fraser 7,565 shares (2) 1.38
Burlington, Vermont 05401
Common Stock Robert J. Kecseg -0- shares .00
Irving, Texas 75063
Common Stock Robert S. W. Leong 11,561 shares (2) 2.11
Seattle, Washington 98115
Common Stock John W. Mahoney 14,133 shares (3) 2.57
Burlington, Vermont 05401
Common Stock David W. Menard -0- shares .00
Bala Cynwyd, Pennsylvania 19004
Common Stock Robert S. Savage -0- shares .00
Charlotte, North Carolina 28233
- -------------------
<F1> Held jointly with spouse.
<F2> Direct and indirect beneficial ownership.
<F3> Direct beneficial ownership.
</TABLE>
<PAGE> 21 of 24
The following table presents information with respect to the beneficial
ownership of HIVT common stock by all directors, nominees, and executive
officers as a group as of March 18, 1996.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name of Beneficial Owner Beneficial Ownership of Class
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock Directors, nominees, and 33,848 shares (1)(2) 6.16
officers as a group.
- -------------------
<F1> Direct beneficial ownership with respect to 27,408 shares.
<F2> Investment and or voting power is shared with respect to 6,440 shares.
</TABLE>
The Company has entered into an Agreement and Plan of Merger with Penn Treaty
American Corporation as described in the Company's Form 8-K filed on March 22,
1996, incorporated by reference herein.
Item 12. Certain Relationships and Related Transactions.
Not applicable.
Item 13. Exhibits, Lists and Reports on Form 8-K.
Exhibits
The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities and Exchange Act
or 1934 and are referred to and incorporated herein by reference to such
filings.
<TABLE>
<CAPTION>
Exhibits No. Description
- ------------ -----------
<S> <C>
3.1 Articles of Association of the Corporation and Articles of
Amendment (filed with the Securities and Exchange Commission
as an exhibit to the Company's Form 8-K filed on September 19,
1995, and incorporated herein by reference)
3.2 Amended and Restated By-Laws of the Corporation (filed with the
Securities and Exchange Commission as an exhibit to the
Company's Form 8-K filed on September 19, 1995, and
incorporated herein by reference)
4.1 Form of Common Stock Certificate (filed with the Securities and
Exchange Commission as an exhibit to the Company's Registration
Statement on Form S-1 and incorporated herein by reference)
10.1 Employment Agreement, dated October 31, 1994, and First Amendment,
Approved by the Board of Directors February 21, 1995,
between the Company and John Mahoney (filed with the
Securities and Exchange Commission in the Exhibit to the
Company's Form 10-KSB for the period ended December 31, 1994,
and incorporated herein by reference)
10.2 Consulting Agreement between the Company and Bernard H. Zais,
approved by the Board of Directors on October 31, 1994 (filed
with the Securities and Exchange Commission in the Exhibit to
the Company's Form 10-KSB for the period ended December 31,
1994, and incorporated herein by reference)
</TABLE>
<PAGE> 22 of 24 pages
Exhibits (continued)
<TABLE>
<CAPTION>
Exhibits No. Description
- ------------ -----------
<S> <C>
10.3 Incentive Stock Option Plan, adopted by the Company's Board of
Directors and approved by a majority of its stockholders on
April 15, 1985 (filed with the Securities and Exchange
Commission as an Exhibit to the Company's Form 10-KSB filed for
the period ended December 31, 1994, and incorporated herein by
reference)
</TABLE>
Pursuant to the requirements of Section 13 or 15 (d) 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.
Health Insurance of Vermont, Inc.
---------------------------------
(Registrant)
Date: March 26, 1995 By: /s/ John W. Mahoney
-------------- --------------------------------------
John W. Mahoney, President
Date: March 26, 1995 By: /s/ David W. Lesperance
-------------- --------------------------------------
David W. Lesperance, Treasurer
<PAGE> 23 of 24
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Alfred J. Beauchamp
- --------------------------------------
Alfred J. Beauchamp, Director
March 12, 1996
/s/ James L. Fraser
- --------------------------------------
James L. Fraser, Director
March 12, 1996
/s/ Robert J. Kecseg
- --------------------------------------
Robert J. Kecseg, Director
March 12, 1996
/s/ Robert S. W. Leong
- --------------------------------------
Robert S.W. Leong, Director
March 12, 1996
/s/ David W. Menard
- --------------------------------------
David W. Menard, Director
March 12, 1996
/s/ John W. Mahoney
- --------------------------------------
John W. Mahoney, Director
March 12, 1996
/s/ Robert S. Savage
- --------------------------------------
Robert S. Savage, Director
March 12, 1996
<PAGE> 24 of 24 pages
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 12,044,712
<DEBT-CARRYING-VALUE> 12,044,712
<DEBT-MARKET-VALUE> 12,385,547
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 12,675,547
<CASH> 1,362,807
<RECOVER-REINSURE> 25,576
<DEFERRED-ACQUISITION> 4,013,804
<TOTAL-ASSETS> 21,137,804
<POLICY-LOSSES> 10,820,386
<UNEARNED-PREMIUMS> 480,311
<POLICY-OTHER> 444,522
<POLICY-HOLDER-FUNDS> 36,741
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,647,285
<OTHER-SE> 7,072,695
<TOTAL-LIABILITY-AND-EQUITY> 21,137,804
6,284,099
<INVESTMENT-INCOME> 778,276
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 3,453,126
<UNDERWRITING-AMORTIZATION> 694,256
<UNDERWRITING-OTHER> 2,685,482
<INCOME-PRETAX> 229,511
<INCOME-TAX> 39,017
<INCOME-CONTINUING> 190,494
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190,494
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<RESERVE-CLOSE> 2,115,228
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</TABLE>
