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 March 31, 1996 Commission File Number 0-9934
-------------- ------
Health Insurance Of Vermont, Inc.
(Exact Name of Small Business Issuer as Specified 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
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 April 30, 1996, there were 549,095 shares outstanding of the issuer's
$3.00 par value common stock.
<PAGE>
PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 1996 1995
- ------ ------------ ------------
<S> <C> <C>
Investments:
Fixed maturities:
Bonds, available-for-sale $ 13,164,532 $ 12,385,547
Short-term investments:
Certificates of deposit 200,000 290,000
------------ ------------
Total Investments 13,364,532 12,675,547
Cash 577,596 1,072,807
Accrued investment income 257,057 244,743
Other assets 79,390 109,638
Intangible asset - pension 53,151 53,151
Reinsurance recoverable on paid losses 13,907 25,576
Prepaid reinsurance premium 93,487 96,409
Reinsurance receivables 1,432,368 1,685,495
Deferred policy acquisition costs 4,069,640 4,013,804
Cash surrender value of life insurance 548,915 540,386
Property and equipment, at cost:
Land and office building 602,464 602,464
Office equipment and furniture 447,814 447,814
Less accumulated depreciation (449,576) (430,030)
------------ ------------
Net property and equipment 600,702 620,248
------------ ------------
Total Assets $ 21,090,745 $ 21,137,804
============ ============
LIABILITIES
- -----------
Policy liabilities:
Future accident and health policy benefits and claims $ 10,624,447 $ 10,820,386
Unearned premiums 472,954 480,311
Other policy claims and benefits 552,199 444,522
Other policyholders' funds 62,204 36,741
Additional liability - pension 95,135 95,135
Other liabilities 392,440 327,460
Federal income taxes payable 29,514 7,778
Deferred federal income taxes 176,719 205,491
------------ ------------
Total Liabilities 12,405,612 12,417,824
------------ ------------
STOCKHOLDERS' EQUITY
- --------------------
Common stock, $3.00 par value, 1,000,000 shares
authorized; 549,095 shares issued and outstanding 1,647,285 1,647,285
Additional paid-in capital 1,193,642 1,193,642
Pension liability adjustment (35,724) (35,724)
Net unrealized gains on debt securities 128,828 282,893
Retained earnings, unappropriated 5,751,102 5,631,884
------------ ------------
Total Stockholders' Equity 8,685,133 8,719,980
------------ ------------
Total Liabilities and Stockholders' Equity $ 21,090,745 $ 21,137,804
============ ============
</TABLE>
<PAGE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues:
Premiums $ 1,554,709 $1,497,994
Net investment income 225,485 188,612
----------- ----------
Total Income 1,780,194 1,686,606
----------- ----------
Benefits, Losses and Expenses:
Benefits, claims, losses and settlement expenses 740,024 790,895
Underwriting, acquisition and insurance expenses 904,063 865,584
----------- ----------
Total Benefits, Losses and Expenses 1,644,087 1,656,479
----------- ----------
Income Before Income Tax Expense 136,107 30,127
----------- ----------
Income Tax Expense:
Current 29,736 --
Deferred (6,598) 5,122
----------- ----------
Total Income Tax Expense 23,138 5,122
----------- ----------
Net Income $ 112,969 $ 25,005
=========== ==========
Earnings Per Share $ .21 $ .05
=========== ==========
Shares Used To Calculate Earnings Per Share 549,095 524,650
=========== ==========
Earnings Per Share (Fully Diluted) $ .21 $ .05
=========== ==========
Shares Used To Calculate Earnings Per Share
(Fully Diluted) 549,095 531,793
=========== ==========
Dividends Per Share 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 principals.
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flow from operations:
Net income $ 112,969 $ 25,005
Adjustments to reconcile net income to net cash provided by
operating activities:
Policy acquisition costs deferred (231,344) (256,295)
Amortization of deferred acquisition costs 175,508 130,551
Increase (decrease) in deferred federal income taxes (6,598) 5,122
Depreciation of property and equipment 19,545 21,594
Accretion of fixed maturities (4,880) (11,225)
Changes in operating assets and liabilities:
Increase (decrease) in federal income taxes payable 29,514 (3,803)
Ddecrease in policy liabilities (95,619) (43,364)
Decrease in reinsurance receivables 253,127 242,698
(Increase) decrease in accrued investment income (12,314) 1,454
Decrease in other assets 34,774 14,671
(Increase) decrease in reinsurance recoverable 11,669 (18,896)
Increase in other liabilities 71,230 106,526
----------- -----------
Total provided by operations 357,581 214,038
----------- -----------
Cash flow from investing activities:
Sources:
Proceeds from matured fixed maturities 590,000 1,000,000
Principal payments on bonds 36,055 25,660
Uses:
Purchase of fixed maturities (1,495,781) (1,095,781)
Purchase of other investments (8,529) (8,968)
Purchase of furniture and equipment 0 (7,727)
----------- -----------
Total used by investing activities (878,255) (86,816)
----------- -----------
Cash flow from financing activities:
Sources:
Increase in premium deposit funds 17,423 18,964
Other 8,040 39,021
----------- -----------
Total provided by financing actives 25,463 57,985
----------- -----------
Net increase (decrease) in cash and cash equivalents (495,211) 185,207
Cash and cash equivalents at beginning of period 1,072,807 248,455
----------- -----------
Cash and cash equivalents at end of period $ 577,596 $ 433,662
=========== ===========
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Company is engaged in the accident and health insurance business, which, by
its nature, has historically provided substantial cash flow. Cash flow provided
by operations, as shown by the Statement of Cash Flows, was approximately 20%
of total income for the three month period ended March 31, 1996. For the same
period in the prior year, cash flow was approximately 13% of total income.
Management believes the 20% figure is more indicative of the Company's historic
performance and cash flow from operations is expected to remain in this range
in the near future.
The Company utilizes its excess cash flow for investing purposes and at March
31, 1996 approximately 69%, or $14,491,000, of its assets were readily
convertible into cash. This compares to approximately 68% at December 31 ,1995.
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
The three month period ending March 31, 1996, saw a decrease in annualized
premiums in force of approximately $67,000 to approximately $6,640,000,
compared to an increase of approximately $153,000 for the three month period
ending March 31, 1995.
In spite of the decrease in annualized premium in force, the momentum built in
the past by the Company's ability to consistently increase the volume of
business it conducts allowed for an increase in total income of approximately
$94,000 for the three month period ending March 31, 1996. This compares to an
increase of approximately $164,000 for the same period prior year.
As shown by the statements of income, total benefits, losses and expenses
showed a slight decrease for the three month period under review, from
approximately $1,656,000 at March 31, 1995, to approximately $1,644,000 at
March 31, 1996. This decrease combined with the increase in total income
resulted in an increase in income before income taxes of approximately
$106,000 over the same period prior year.
On March 15, 1996, the Company and Penn Treaty American Corporation of
Allentown, Pennsylvania, executed an Agreement and Plan of Merger. The
completion of the transaction is subject to a number of conditions, including
the approval of the transaction by HIVT shareholders, as well as appropriate
regulatory authorities. The merger would give Health Insurance of Vermont
access to Penn Treaty's agency force, allowing HIVT to attain premium growth.
This potential and the Company's performance during the period under review
strengthen Management's optimism for the future.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not aware of any material pending legal proceedings.
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. There have been no
matters submitted to a vote of security holders.
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.
No filings have been made on Form 8-K during the quarter ended
March 31, 1996.
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.
May 8, 1996 /s/ John W. Mahoney
----------------------------------
John W. Mahoney, President
May 8, 1996 /s/ David W. Lesperance
----------------------------------
David W. Lesperance, Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 13,009,318
<DEBT-CARRYING-VALUE> 13,009,318
<DEBT-MARKET-VALUE> 13,164,532
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 13,364,532
<CASH> 977,596
<RECOVER-REINSURE> 13,907
<DEFERRED-ACQUISITION> 4,069,640
<TOTAL-ASSETS> 21,090,745
<POLICY-LOSSES> 10,624,447
<UNEARNED-PREMIUMS> 472,954
<POLICY-OTHER> 552,199
<POLICY-HOLDER-FUNDS> 62,204
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,647,285
<OTHER-SE> 7,037,848
<TOTAL-LIABILITY-AND-EQUITY> 21,090,745
1,554,709
<INVESTMENT-INCOME> 225,485
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 740,024
<UNDERWRITING-AMORTIZATION> 130,551
<UNDERWRITING-OTHER> 773,512
<INCOME-PRETAX> 136,107
<INCOME-TAX> 23,138
<INCOME-CONTINUING> 112,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,969
<EPS-PRIMARY> $.21
<EPS-DILUTED> $.21
<RESERVE-OPEN> 2,115,228
<PROVISION-CURRENT> 719,576
<PROVISION-PRIOR> (277,710)
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 425,802
<RESERVE-CLOSE> 2,131,292
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
