SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO 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: 0-5562
HOME BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0884714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3901 West Broad Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
804-358-8431
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the 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
Number of shares outstanding of each of the Registrant's classes of
Common Stock as of November 8, 1995:
Class
Class A Common Stock
$.3125 Par Value 8,446,200 Shares
Class B Common Stock
$.3125 Par Value 8,992,910 Shares
Total number of pages 14
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HOME BENEFICIAL CORPORATION
INDEX
Page
PART I - Financial Information
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Item 1. Financial Statements
Consolidated Condensed Balance Sheet at
September 30, 1995 and December 31, 1994............................ 4
Consolidated Condensed Statement of Income for the three months and
nine months ended September 30, 1995 and 1994 ...................... 5
Consolidated Condensed Statement of Cash Flows
for the nine months ended September 30, 1995 and 1994............... 6
Notes to Consolidated Condensed Financial Statements ............... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 8
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K ............................. 9
SIGNATURES ............................................................ 10
</TABLE>
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PART I. FINANCIAL INFORMATION
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
<S> <C> <C>
ASSETS
Investments
Securities available-for-sale at fair value
Fixed maturities (Amortized value: 1995,
$737,152,838; 1994, $718,305,895) $ 758,671,945 $ 691,976,855
Equities (Cost: 1995, $8,944,983;
1994, $9,728,145) 28,099,210 24,229,849
Mortgage loans on real estate 330,892,663 338,458,261
Policy loans 54,089,799 53,425,676
Short-term investments 45,868,531 32,459,616
Other 6,803,131 6,167,002
Total investments 1,224,425,279 1,146,717,259
Cash and cash equivalents 2,555,124 1,726,812
Receivables 22,797,405 22,190,964
Deferred policy acquisition costs 98,249,515 96,246,153
Other assets 12,370,327 21,944,872
$ 1,360,397,650 $ 1,288,826,060
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and accruals
Future policy benefits and claims $ 669,131,666 $ 660,081,842
Unearned premiums 26,245,751 25,658,167
Other policy claims and benefits payable 10,396,948 11,004,362
Total policy liabilities and accruals 705,774,365 696,744,371
Other policyholder funds 69,004,451 65,821,085
Other liabilities 70,716,213 59,490,670
Total liabilities 845,495,029 822,056,126
Stockholders' Equity
Capital stock
Class A common stock, voting, $.3125 par value,
12,800,000 shares authorized; 8,446,200 issued
at September 30, 1995 and 8,476,576 issued
at December 31, 1994 2,639,438 2,648,930
Class B common stock, non-voting, $.3125 par
value, 19,200,000 shares authorized;
8,992,910 issued at September 30, 1995 and
9,087,534 issued at December 31, 1994 2,810,284 2,839,854
Total capital stock 5,449,722 5,488,784
Unrealized gains (losses) on securities
available-for-sale less related deferred
income taxes 27,348,334 (6,652,336)
Retained earnings 482,104,565 467,933,486
Total stockholders' equity 514,902,621 466,769,934
$ 1,360,397,650 $ 1,288,826,060
</TABLE>
See accompanying notes.
4
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HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Premiums $28,413,634 $29,045,487 $ 85,753,749 $ 86,217,807
Net investment income 22,188,336 21,148,611 66,009,163 63,300,802
Realized investment
(losses)gains (100,147) (49,617) (50,168) 7,729
Total revenues 50,501,823 50,144,481 151,712,744 149,526,338
Benefits, claims and expenses
Benefits and claims 22,354,794 22,284,384 69,668,560 68,182,133
Underwriting, acquisition
and insurance expenses 14,297,737 14,724,118 39,878,669 40,311,097
Total benefits, claims
and expenses 36,652,531 37,008,502 109,547,229 108,493,230
Income before income taxes 13,849,292 13,135,979 42,165,515 41,033,108
Income taxes 4,450,000 4,150,000 14,300,000 14,100,000
Net income $9,399,292 $8,985,979 $27,865,515 $26,933,108
Net income per share of common stock
(Average shares outstanding:
1995-17,559,073; 1994-17,822,424) $ .54 $ .51 $1.59 $1.51
Dividends per share $ .21 $ .20 $ 62 $ .595
</TABLE>
See accompanying notes.
5
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HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30
1995 1994
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<CAPTION>
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OPERATING ACTIVITIES
Net income $ 27,865,515 $ 26,933,108
Adjustments to reconcile net income to
net cash provided by operating activities 7,795,530 8,589,722
Net cash provided by operating activities 35,661,045 35,522,830
INVESTING ACTIVITIES
Proceeds from sales or maturities of investments
Fixed maturities 90,484,132 186,004,181
Mortgage loans on real estate 25,093,951 38,062,081
Short-term investments -- net 0 8,976,428
Other 10,307,278 14,362,549
Total proceeds 125,885,361 247,405,239
Costs of investments acquired
Fixed maturities 109,668,604 201,653,079
Mortgage loans on real estate 17,996,335 54,716,700
Short-term investments -- net 13,408,915 0
Other 9,094,108 14,494,853
Total costs 150,167,962 270,864,632
Net cash used in investing activities (24,282,601) (23,459,393)
FINANCING ACTIVITIES
Dividends paid (10,889,748) (10,589,750)
Purchase of Class B Common Stock (2,843,750) (7,675,184)
Other 3,183,366 3,285,530
Net cash used in financing activities (10,550,132) (14,979,404)
Net increase(decrease) in cash and
cash equivalents 828,312 (2,915,967)
Cash and cash equivalents at beginning of y 1,726,812 6,039,294
Cash and cash equivalents at end of period $ 2,555,124 $ 3,123,327
Supplemental disclosure of cash flow information
Income tax payments $14,700,000 $15,300,000
</TABLE>
See accompanying notes.
6
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HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation - In the opinion of management, the accompanying
unaudited interim consolidated condensed financial statements of the
Corporation contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
September 30, 1995 and December 31, 1994, and the results of operations
and cash flows for the three months and nine months ended September 30,
1995 and 1994. The consolidated condensed financial statements include
the accounts of the Corporation, its principal subsidiary, Home Beneficial
Life Insurance Company (the Life Company), and its other subsidiaries. All
significant intercompany accounts and transactions are eliminated.
The accompanying financial statements should be read in conjunction with the
financial statements and notes thereto included in the Corporation's 1994
Annual Report to Stockholders.
2. In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting for Creditors
for Impairment of a Loan." SFAS No 114 requires that impaired loans be
valued at the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price, or the fair market value of the collateral, if the
loan is collateral dependent. The Corporation adopted the provisions of SFAS
No. 114 as of January 1, 1995. Adoption of this Standard does not have any
significant effect on the financial condition or results of operations of
the Corporation.
3. During the third quarter of 1995, the Corporation purchased 30,376 shares of
its Class A and 94,624 shares of its Class B Common Stock at a cost of $2.8
million. In the first nine months of 1994, the Corporation purchased 374,948
shares of its Class B Common Stock at a cost of $7.7 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The Corporation is primarily engaged in the life insurance business which
historically has provided a positive cash flow. By statute, the Life
Company is required to invest in quality securities which provide ample
protection for its policyholders. Policy liabilities of the Life Company are
predominately long term in nature and are supported primarily by long term
fixed maturity investments and mortgage loans on real estate.
Assets totaled $1.4 billion at September 30, 1995 with investment assets
totalling $1.2 billion or 90% of total assets. Both total assets and
invested assets increased over year-end 1994 results. The Corporation's
fixed maturity and equity securities portfolio is classified in the balance
sheet as available-for-sale and carried at fair value. At September 30,
1995 the fair value of these securities exceeded their cost by $40
million. At September 30, 1995 there were no principal and interest
payments past due on fixed maturities, and over 99% of the mortgage loans
on real estate were current for both principal and interest.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting for Creditors for
Impairment of a Loan." SFAS No. 114 requires that impaired loans be valued
at the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price, or the fair market value of the collateral, if
the loan is collateral dependent. The Corporation adopted the provisions
of SFAS 114 as of January 1, 1995. Adoption of this Standard does not
have any significant effect on the financial condition or results of
operations of the Corporation.
The Life Company continually matches the investment portfolio to the cash
flow demands of the types of insurance being written and maintains adequate
cash and short term investments to meet cash requirements for policy loans
and voluntary policy terminations, as well as investment commitments. Policy
loans account for less than 5% of total cash and invested assets.
As disclosed in the Notes to Consolidated Financial Statements as of December
31, 1994, $140 million of consolidated stockholders' equity represents net
assets of the Life Company that cannot be transferred in the form of
dividends, loans or advances to the Corporation. However, this poses no
liquidity concerns to the Corporation as it has sufficient cash flow to meet
its operational requirements.
Results of Operations
Net income for the first nine months of 1995 was $27,865,515 compared to
$26,933,108 for the same period in 1994. Realized investment gains and
losses were insignificant for the two periods.
Individual life insurance sales for 1995 increased by 20% and amounted to
$704 million compared to $584 million for the first nine months of 1994. A
substantial part of the 1995 sales improvement occurred during the last four
months of the period ending September 30, 1995.
Net investment income, excluding realized investment gains and losses,
increased 4.2% compared to a decrease of 2.5% for the 1994 period. The
improvement for 1995 results from growth in portfolio assets. The decrease
for 1994 was attributable to the downward trend experienced in portfolio
interest rates during 1993 and 1992, and the use of $14 million of
internally generated funds to repurchase approximately 600,000 shares of
common stock in the second quarter of 1993.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS: The exhibits listed in the accompanying Index to Exhibits on
page 11 are filed as part of this quarterly report.
(b) No reports on Form 8-K were filed during the period covered by this
report.
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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 thereunto duly authorized.
Home Beneficial Corporation
(Registrant)
Date: November 8, 1995 R. W. Wiltshire, Jr.
President and
Chief Executive Officer
Date: November 8, 1995 Hugh D. Garnett
Vice President and Controller
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Exhibits
(Item 6(a))
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Sequential
Page Number
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EXHIBITS
10 - Material contracts - Supplemental Compensation Agreement
dated September 19, 1995 with J.M. Wiltshire, Jr., Vice
President, Secretary and Counsel 12-13
27 - Financial Data Schedule 14
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<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> 758,671,945
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 28,099,210
<MORTGAGE> 330,892,663
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,224,425,279
<CASH> 2,555,124
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 98,249,515
<TOTAL-ASSETS> 1,360,397,650
<POLICY-LOSSES> 669,131,666
<UNEARNED-PREMIUMS> 26,245,751
<POLICY-OTHER> 10,396,948
<POLICY-HOLDER-FUNDS> 69,004,451
<NOTES-PAYABLE> 0
<COMMON> 5,449,722
0
0
<OTHER-SE> 509,452,899
<TOTAL-LIABILITY-AND-EQUITY> 1,360,397,650
85,753,749
<INVESTMENT-INCOME> 66,009,163
<INVESTMENT-GAINS> (50,168)
<OTHER-INCOME> 0
<BENEFITS> 69,668,560
<UNDERWRITING-AMORTIZATION> 9,406,819
<UNDERWRITING-OTHER> 30,471,850
<INCOME-PRETAX> 42,165,515
<INCOME-TAX> 14,300,000
<INCOME-CONTINUING> 27,865,515
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,865,515
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
Exhibit 10
Home Beneficial Corporation
Post Office Box 27572
Richmond, VA 23261
September 19, 1995
Mr. J. M. Wiltshire, Jr.
3901 West Broad Street
Richmond, VA 23230
Dear Mr. Wiltshire:
Since you will be retiring from active service with the Corporation and its
subsidiaries as of December 31, 1995, your service as an employee will cease at
that time.
In consideration of your long record of outstanding service to the
Corporation and its subsidiaries as an employee, the Corporation and its
subsidiary Home Beneficial Life Insurance Company (the "Company") have approved,
effective beginning as of your retirement, the payment of deferred
compensation to you as provided herein subject to the following terms and
conditions:
1. Subject to the will of the stockholders you will continue to serve as a
Director of the Corporation and its subsidiaries following your
retirement. You will receive no compensation for serving as a Director.
2. Subject to the will of the other Directors you will continue to serve as
Secretary of the Corporation and its subsidiaries following your
retirement while you remain a Director. You will receive no
compensation for serving as Secretary.
3. In consideration of your past services, you will be paid the annual sum
of $25,000 ("supplemental retirement pay") commencing January 1, 1996
and payable monthly on the first of each month during your lifetime.
Payments may be made by the Corporation and/or the Company, as they
may determine, although each guarantees payment.
4. The undertaking to pay supplemental retirement pay hereunder shall be
an unfunded obligation payable solely from the general assets of the
Corporation and the Company subject to the claims of the Corporation's
and the Company's creditors. Your rights hereunder shall be no greater
than the right of any unsecured general creditor of the Corporation and
the Company.
Mr. J. M. Wiltshire, Jr.
September 19, 1995
Page 2
5. You will not be required to provide any services in return for the
supplemental retirement pay mentioned above. You will not be entitled
to benefits, nor have any rights, under the Home Beneficial Protection
and Retirement Plan or the Home Beneficial Thrift Plan as an active
employee, although you will be entitled to whatever rights are provided
thereunder to a retired employee.
6. You will not compete with the Corporation or it subsidiaries, directly
or indirectly, on a full-time or part-time basis or on a consulting or
advisory basis or otherwise for any other business organization in any
matter or in any manner which might be deemed to be in competition with
or against the best interest of the Corporation or its subsidiaries.
7. This agreement will completely terminate upon your death and may only
be modified by the mutual consent of you and the Board of Directors of
the Corporation and the Company.
Will you please acknowledge your agreement to the above by signed the
enclosed copy of this letter.
Sincerely,
/s/ R.W. Wiltshire, Jr.
Chief Executive Officer
Home Beneficial Corporation and
Home Beneficial Life Insurance
Company
Seen and Agreed to:
/s/ J. M. Wiltshire, Jr.
Dated: 9-19-95
