SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
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 office) (Zip Code)
Registrant's telephone number, including area code: 804-358-843l
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
None on which registered
Securities registered pursuant to Section 12(g) of the Act:
CLASS B COMMON STOCK
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [X]
The Registrant's Class A Voting Common Stock is closely held and is not
publicly traded. The aggregate market value of Class B Non-Voting Common
Stock held by nonaffiliates of the Registrant was $171,045,986 as of March
10, 1995.
Number of shares outstanding of each of the Registrant's classes of common
stock as of March 10, 1995:
Class Shares
Class A Common Stock
$.3125 Par Value 8,476,576
Class B Common Stock
$.3125 Par Value 9,087,534
Documents Incorporated by Reference
Part I and Part II of this Form 10-K incorporate certain information by
reference from the Registrant's Annual Report to Stockholders for the year
ended December 31, 1994.
<PAGE>
TABLE OF CONTENTS
PART I
PAGE
ITEM 1. Business .................................................... 3
ITEM 2. Properties .................................................. 8
ITEM 3. Legal Proceedings ........................................... 8
ITEM 4. Submission of Matters to a Vote of Security Holders ......... 8
PART II
ITEM 5. Market for the Registrants' Common Equity and
Related Stockholder Matters ................................. 9
ITEM 6. Selected Consolidated Financial Data ........................ 9
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 9
ITEM 8. Financial Statements and Supplementary Data ................. 9
ITEM 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosures ................................... 9
PART III
ITEM 10. Directors and Executive Officers of the Registrant .......... 10
ITEM 11. Executive Compensation ...................................... 12
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management .............................................. 16
ITEM 13. Certain Relationships and Related Transactions .............. 21
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ................................................. 22
SIGNATURES ........................................................... 30
<PAGE>
PART I
ITEM 1. Business
HOME BENEFICIAL CORPORATION
Home Beneficial Corporation ("the Corporation") was incorporated in
Virginia on March 5, 1970, for the purpose of becoming a holding company
for Home Beneficial Life Insurance Company ("the Life Company"), which
originated in 1899. On December 31, 1970, pursuant to a Plan of
Reorganization proposed by the Board of Directors and approved by the
stockholders of the Life Company, the Corporation acquired all of the
issued and outstanding capital stock of the Life Company by merger of the
Life Company into a wholly-owned subsidiary of the Corporation, the name
of which was immediately changed to Home Beneficial Life Insurance
Company. At the present time, the Life Company, which is engaged in the
life and accident and health insurance business, is the major subsidiary
of the Corporation.
There was no material change in the nature of business done by the
Corporation during 1994.
BUSINESS OF THE LIFE COMPANY
The Life Company sells group life insurance and substantially all of
the forms of ordinary insurance, including universal life, whole life,
term, and annuities, together with accidental death and disability
riders. The Life Company's business is concentrated in six Mid-Atlantic
states and the District of Columbia, and its products are marketed
through its own sales force of approximately 1,150 full-time personnel
assigned to some 47 district offices located in principal cities and
towns. In addition to the agency force, there were some 236 supervisory,
administrative, clerical and other personnel employed in the home office.
The following table sets forth the geographic distribution of direct
business premiums received during 1994:
Premiums
Jurisdiction (In 000's)
Delaware $ 2,582
District of Columbia 2,971
Maryland 15,774
North Carolina 9,947
Tennessee 22,186
Virginia 40,246
West Virginia 1,190
<PAGE>
The maximum amount of ordinary individual insurance presently retained by
the Life Company without reinsurance is $200,000 plus an additional
$75,000 coverage for accidental death. This maximum is scaled down
according to the age and physical classification of the insured. The
total amount of life insurance in force at December 31, 1994 reinsured by
the Life Company with other companies aggregated $97 million representing
less than 1% of the Life Company's life insurance in force on that date.
The Life Company participates in several group life insurance programs as
a reinsurer and also assumes reinsurance on a facultative (individual
risk) basis from two other life insurance companies. Life insurance
assumed relates principally to group life and represented approximately
17% of premium income and 55% of life insurance in force for 1994.
Claims incurred under these group life insurance programs approximate the
related premium income, and no significant assets or liabilities are
required in the balance sheet. A contingent liability exists on
insurance ceded to the reinsurer since the Life Company would be liable
in the event that the reinsurer is unable to meet obligations assumed by
it under the reinsurance agreement.
Accident and health insurance premiums accounted for less than 8% of
premium income for 1994. A significant proportion of the accident and
health premium is attributable to medical benefit coverage provided for
the Life Company's employees and their dependents under its Protection
and Retirement Plan. The Life Company offers no health insurance
coverage other than to its own employees. The Life Company writes
individual accident policies with death and dismemberment benefits.
These policies accounted for approximately 30% of total accident and
health premiums for 1994.
The Life Company, as a legal reserve company, is required by the various
laws of the states in which it is licensed to transact business to carry
as liabilities aggregate policy reserves which are considered adequate to
meet its obligations on insurance policies in force. Such required
reserves are considered statutory reserves because the methods and
assumptions used in their calculation are explicitly prescribed by the
laws of the various states. The liabilities shown herein for all
policies issued since 1948 are based on guidelines prescribed by the
American Institute of Certified Public Accountants and have been
calculated in accordance with generally accepted accounting principles.
Such liabilities are calculated by the use of assumptions as to mortality
rates, interest rates, withdrawal rates and expense rates in effect at
the time the gross premiums were calculated. Liabilities on paid-up
policies include a liability for future maintenance expenses which the
Life Company expects to incur. See Revenues, Benefits, Claims and
Expenses, Note 1 of the Notes to Consolidated Financial Statements, which
is incorporated herein by reference from pages 11 and 12 of the 1994
Annual Report to Stockholders, for additional information relating to the
Life Company's reserves.
The investment of the Life Company's funds and assets is determined by an
Investment Committee. Generally, investments made must meet requirements
established by the applicable investment statutes of the Commonwealth of
Virginia governing the nature and quality of investments which may be
made by life insurance companies.
<PAGE>
The following table shows investments of the Life Company at December 31,
1994. Fixed maturities (bonds, notes and redeemable preferred stocks)
and equity securities (nonredeemable preferred and common stocks) are
stated at their estimated fair value; mortgage loans on real estate are
stated at cost adjusted where appropriate for amortization of premium or
discount; short-term investments are at cost; and policy loans are stated
at unpaid balances.
Asset Value
Amount Percent
(000's) of Total
Fixed Maturities:
Bonds and notes:
United States government and govern-
ment agencies and authorities $ 29,679 2.6%
States, municipalities and political
subdivisions 284,437 24.8
Foreign government 25,317 2.2
Public utilities 242,799 21.2
All other corporate 109,745 9.6
Total fixed maturities 691,977 60.4
Equity Securities $ 24,230 2.1
Mortgage loans 338,458 29.6
Policy loans 53,426 4.7
Short-term investments 31,880 2.8
Other 5,168 .4
$1,145,139 100.0%
There were no principal and interest payments past due on fixed
maturities at December 31, 1994.
The Life Company's mortgage portfolio consists of approximately 2400
conventional first mortgages on a wide range of residential and
commercial properties located primarily in those Mid-Atlantic states in
which the Life Company conducts its insurance business. At December 31,
1994 the aggregate carrying value of mortgage loans was $338,458,261,
broken down by category as follows:
Residential $168,476,605
Commercial 169,981,656
Commercial loans include loans on apartments, shopping centers, office
buildings and warehouses. Generally, commercial loans range from
$250,000 to $3,500,000 in principal amount. The Life Company also makes
some mortgage loans to churches. Every property is inspected by a staff
underwriter prior to the issuance of a loan commitment. On commercial
loans of more than $250,000, the property is inspected every two years
after the loan is closed as long as the balance exceeds $250,000.
<PAGE>
The Life Company's mortgage lending business is heavily concentrated in
the states of Virginia and North Carolina. At December 31, 1994,
approximately 76% of the Life Company's mortgages, constituting approxi-
mately 74% of the total book value of the Life Company's mortgage port-
folio, were on residential or commercial properties located in the State
of Virginia. Additionally, at the same date approximately 14% of the
Life Company's mortgages, constituting approximately 12% of the total
book value of the Life Company's mortgage portfolio, were on properties
in North Carolina. The relatively high percentage of mortgage loans made
in these two states reflects the geographical concentration of the Life
Company's insurance business activities in the same two states. Although
the Life Company's mortgage loan portfolio is heavily concentrated in
Virginia and North Carolina, the economies of those states are
diversified, and the Life Company does not believe its mortgage loan
portfolio reflects undue risk from the large percentage of its loans
originated in those two states.
Although the economic downturn during 1990 and 1991 was characterized
by troubled real estate loans in the portfolios of many financial
institutions operating in the Life Company's market, the Life Company's
mortgage loan portfolio has not reflected the widely-publicized
experience of other financial institutions. The Life Company presently
holds two real estate parcels acquired through foreclosure with a
carrying value in the financial statements of $650,000. Mortgage loans
whose terms have been restructured over the past five years are
immaterial, and no mortgage loans were in foreclosure proceedings at
December 31, 1994. Except as indicated below, there were no mortgage
loans otherwise not performing in accordance with the contractual terms.
At December 31, 1994, the aging schedule for delinquent mortgage loans in
terms of past due days was as follows:
Past due days
30-60 60-90 Over 90 Total
Principal $5,547,6691 $1,863,551 $ -0- $7,411,220
Percent of total
mortgage loans 1.6% .6% - 2.2%
130-60 days past due includes a substantial amount of loan payments that
have been received by the Life Company's brokers after their December,
1994 cut-off reporting date to the Life Company. These amounts will be
included in their next remittance report.
The Life Company believes the quality of its loan portfolio is
attributable to its relatively stringent underwriting standards which
have been in force for many years. At the present time, and for a number
of years, the Life Company's lending policies have restricted mortgage
loans to a maximum loan to value ratio of 75%, based on the lower of cost
or appraisal, except for purchase money mortgages and insured or
guaranteed mortgages. The Life Company's policy is to place mortgage
loans on non-accrual status where any mortgage payment is 90 days or more
past due.
During the period 1986-1994, the Life Company experienced only five
foreclosures on real estate loans, one in each of the years 1986, 1989
and 1990, two in 1992 and none in 1993 and 1994. The total of the unpaid
principal balances of loans in these five foreclosures was $986,477. The
Life Company disposed of three properties acquired in foreclosure
proceedings prior to 1994 without loss. The Corporation does not provide
a provision for loan losses in its financial statements. Based upon the
de minimis loss experience of the mortgage loan portfolio over many years
and the continuing satisfactory performance of its portfolio, the
Corporation's management does not feel that a provision is required.
<PAGE>
See Investment Operations, Note 2 of Notes to Consolidated Financial
Statements, which is incorporated herein by reference from pages 12, 13,
and 14 of the 1994 Annual Report to Stockholders, and Schedule I included
in Part IV elsewhere herein, for additional information concerning the
Corporation's consolidated investment portfolio.
The Life Company, in common with other insurance companies, is subject to
regulation and supervision in each of the states in which it does
business. Such regulation is primarily for the benefit of the policy-
holders of the Life Company rather than the stockholders. Although the
extent of such regulation varies from state to state, in general, the
insurance laws of the respective states delegate broad administrative
powers to supervisory agencies. These powers relate to the granting and
revocation of licenses to transact business, the licensing of agents, the
approval of the forms of policies used, reserve requirements, and the
type and concentration of investments permitted. In addition, the
supervisory agencies have power over the form and content of required
financial statements and reports, including requirements regarding
accounting practices to be employed in the presentation of such
statements and reports. Certain of the required accounting practices
vary from generally accepted accounting principles. See Notes 1 and 7 of
the Notes to Consolidated Financial Statements, which Notes are
incorporated herein by reference from pages 11, 12 and 17 of the 1994
Annual Report to Stockholders.
Several jurisdictions in which the Life Company does business including
its domiciliary state of Virginia, have enacted legislation providing for
specific regulation of the relationship between licensed insurers and
their holding companies and among affiliated members of a holding company
group. These statutes vary in substance from state to state, but
generally speaking, vest administrative control in the insurance
regulatory authority. Among the provisions found in these statutes are
provisions for the filing of registration statements by insurers which
are members of a holding company group, provisions that the holding
company will be subject to reporting requirements and to visitation by
the insurance regulatory authorities, standards as to transactions
between insurers and their holding companies or between members of a
holding company group, and control over the payment of extraordinary
dividends. See Stockholders' Equity and Restrictions, Note 7 of the
Notes to Consolidated Financial Statements, which is incorporated herein
by reference from page 17 of the 1994 Annual Report to Stockholders for
additional information concerning transactions between the Life Company
and its affiliates.
The life insurance business is intensely competitive and the Life
Company competes with many other companies, both stock and mutual, in the
states in which it is licensed. The American Council of Life Insurance
in its "1994 Fact Book", estimates that of the 1,886 life insurance
companies doing business in the United States at mid-year 1993, 1,777
were stock companies.
<PAGE>
According to figures reported in the September 1994 issue of Best's
Review, Life/Health Edition, calculated on a statutory accounting basis,
the Life Company ranks in the top 11% of all life insurance companies in
the United States based on total admitted assets as of December 31, 1993.
No material portion of the business of the Life Company is dependent
upon a single customer or a very few customers. The group life insurance
sold by the Life Company consists largely of reinsurance participations
described on page 4.
The Corporation's only industry segment is the business of the Life
Company, and its operations have contributed over 98% of the total
consolidated revenues and income before income taxes for each of the past
three years.
Neither the Corporation nor any of its subsidiaries engage in material
operations outside of the United States, or derives material business
from customers outside the United States.
ITEM 2. Properties
The principal office of the Corporation is located at 3901 West Broad
Street, Richmond, Virginia 23230, which also serves as the home office
premises of the Life Company. The home office building, which contains
approximately 110,000 square feet of office space, was originally
completed in 1950 with a 30,000 square foot addition completed in 1990.
The building is used solely for company purposes.
The Life Company presently leases space for 54 district and detached
offices in Delaware, Maryland, the District of Columbia, West Virginia,
Virginia, Tennessee and North Carolina. The termination dates on these
leases range from 1995 to 2003; all of the longer term leases being for
district office purposes. The maximum annual rent paid under any lease
is $28,775. The annualized rent under all leases in effect on December
31, 1994 was approximately $760,000.
ITEM 3. Legal Proceedings
As of the date of this report, neither the Corporation nor any of its
subsidiaries was a party to any material pending legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Corporation's security holders
during the fourth quarter of its fiscal year ended December 31, 1994.
<PAGE>
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Incorporated herein by reference from the 1994 Annual Report to
Stockholders, page 21.
ITEM 6. Selected Consolidated Financial Data
Incorporated herein by reference from the 1994 Annual Report to
Stockholders, page 22.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated herein by reference from the 1994 Annual Report to
Stockholders, pages 19 and 20.
ITEM 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Corporation at December 31, 1994
and 1993 and for each of the three years in the period ended December 31,
1994 and the auditor's report thereon and the Corporation's unaudited
quarterly financial data for the two year period ended December 31, 1994
are incorporated herein by reference from the 1994 Annual Report to
Stockholders, pages 6 through 18 and 21.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures
None.
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) and (b) The following table gives the name and age of each of the
directors (all of whom, except C. M. Glenn, Jr., L. W. Richardson, and
Dianne N. Collins are executive officers of the Corporation and the Life
Company) and their positions and offices with the Corporation and the
Life Company and the dates first elected to those positions with the
Corporation.
Position and Offices with the Corporation
and the Life Company and Date Elected to
Name Age Corporation Officer Position
Dianne N. Collins 49 Director of the Life Company and the
Corporation and Community Volunteer
H. D. Garnett 52 Vice President (since 1979), Controller
(since 1974) and a director of the
Corporation and the Life Company
C. M. Glenn, Jr. 78 Retired Vice President-Treasurer and a
director of the Corporation and the
Life Company
W. G. Hancock 44 Counsel (since 1984) and a director of
the Corporation and the Life Company
G. T. Richardson 42 Vice President (since 1983) and a director
of the Corporation and the Life Company
L. W. Richardson 75 Retired Vice President and a director of
the Corporation and the Life Company
J. M. Wiltshire, Jr. 69 Vice President (since 1972), Counsel
(since 1982), Secretary (since 1994)
and a director of the Corporation
and the Life Company
R. W. Wiltshire 73 Chairman of the Board (since 1983) and a
director of the Corporation and the Life
Company
R. W. Wiltshire, Jr. 49 President (since 1988), Chief Executive
Officer (since 1992) and a director of
the Corporation and the Life Company
W. B. Wiltshire 46 Vice President (since 1983) and a director
of the Corporation and the Life Company
<PAGE>
Mrs. Collins was first elected to the Board of Directors of the
Corporation on February 15, 1994, Messrs. Garnett, Hancock, G. T.
Richardson, and W. B. Wiltshire were first elected to the Board in 1983,
and Messrs. R. W. Wiltshire, Jr. and J. M. Wiltshire, Jr. were first
elected to the Board in 1976 and 1971, respectively, all to fill then
existing vacancies on the Board. The remaining persons named in the
foregoing table have served as directors of the Corporation since its
organization in 1970.
All of the above persons serve one year terms as both executive officers
and directors, or in the case of Messrs. Glenn and Richardson and Mrs.
Collins, as directors only, which expire April 4, 1995. There are no
executive officers of the Corporation who are not directors.
(c) Not applicable.
(d) C. M. Glenn, Jr. is the uncle of W. G. Hancock. L. W. Richardson is
the father of G. T. Richardson and the first cousin of R. W. Wiltshire.
R. W. Wiltshire is the father of R. W. Wiltshire, Jr. and W. B. Wiltshire
and the first cousin of J. M. Wiltshire, Jr.
(e)(1) Except as set forth below, each of the persons named in (a) and
(b) above has been principally employed by the Corporation and the Life
Company in the present position for more than the past five years.
Dianne N. Collins has been a Trustee of the 1984 Voting Trust described
in Item 12 below since January 4, 1994 and a volunteer in the Richmond,
Virginia community for more than the past five years. C. M. Glenn, Jr.
and L. W. Richardson retired at the end of 1986 and 1987, respectively,
each having served in the office shown for more than five years
immediately prior to his retirement. W. G. Hancock has been a partner of
the law firm of Mays & Valentine, Richmond, Virginia since 1981
specializing in real estate and mortgage lending, insurance company
regulation and general business matters. He was designated as Counsel to
the Corporation and the Life Company effective June 13, 1984. J. M.
Wiltshire, Jr. was elected to the additional office of Secretary of the
Corporation and Life Company effective January 18, 1994. Effective April
7, 1992, R. W. Wiltshire, Jr. was elected Chief Executive Officer of the
Life Company and the Corporation to succeed R. W. Wiltshire who had
served in that office for more than five years immediately prior thereto.
Prior to his election as Chief Executive Officer, R. W. Wiltshire, Jr.
was responsible for the general management of the operations of the
Corporation and the Life Company. R. W. Wiltshire retired as an employee
and salaried officer of the Corporation and the Life Company effective
September 6, 1993.
(e)(2) Not applicable.
(f) Not applicable.
(g) Not applicable.
<PAGE>
(h) The Corporation's directors and executive officers are required to
file reports with the Securities and Exchange Commission (the
"Commission") concerning their initial ownership of shares of the
Corporation's Class A and Class B Common Stock and any subsequent changes
in that ownership, and the Corporation traditionally has assisted its
directors and executive officers in the filing of these reports. In
making these reports, the Corporation has relied on written
representations of its directors and executive officers and copies of the
reports that they have filed with the Commission. The Corporation
believes that these filing requirements were satisfied in 1994.
ITEM 11. Executive Compensation
(a) and (b) Summary Compensation Table
The following Summary Compensation Table sets forth certain information
concerning cash compensation paid to or contributed for the benefit of
the five individuals named below for services rendered to the Corporation
and its subsidiaries as executive officers during each of the three years
in the period ended December 31, 1994.
SUMMARY COMPENSATION TABLE
Name and Principal Annual All Other
Position (1) Year Compensation-Salary (2) Compensation(3)
R. W. Wiltshire, Jr. 1994 $139,312 $4,179
President and Chief 1993 118,512 3,555
Executive Officer(4) 1992 108,528 2,171
J. M. Wiltshire, Jr. 1994 132,134 3,964
Vice President, 1993 125,434 3,763
Secretary and 1992 121,201 2,424
Counsel
H. D. Garnett 1994 119,122 3,574
Vice President and 1993 112,422 3,373
Controller 1992 107,937 2,159
W. B. Wiltshire 1994 117,294 3,519
Vice President 1993 105,403 3,162
1992 99,986 2,000
G. T. Richardson 1994 117,074 3,512
Vice President 1993 105,174 --
1992 98,991 1,980
(1) Offices shown are of both the Corporation and the Life Company.
(2) The amounts shown include employee contributions to the Thrift Plan.
(3) All of the amounts shown reflect matching contributions by the
Corporation and the Life Company to the Thrift Plan. The Thrift Plan is
a defined contribution plan available to substantially all salaried
employees. Participants may make thrift contributions to the plan in any
whole percentage of 2-14% of their compensation, and the Corporation and
the Life Company will make a matching contribution to the plan in an
amount equal to three-fourths of the first 4% of each eligible employee's
compensation so contributed for the year. All matching amounts shown for
each executive officer are fully vested. Benefits under the Thrift Plan
are payable at death, retirement or other termination of employment (or
at January of the calendar year of age 70 1/2, if earlier).
(4) Effective April 7, 1992, R. W. Wiltshire, Jr. was elected Chief
Executive Officer of the Corporation and the Life Company.
<PAGE>
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Pension and Postretirement Medical Benefits Plans
The Corporation's Retirement Plan, a defined benefit pension plan,
covers substantially all employees of the Corporation and the Life
Company with the requisite length of service, which was reduced from six
months to two months of service commencing January 1, 1995. The Plan
provides a retirement annuity, payable by the Life Company as the insurer
under the Plan, to each employee who is credited with five years of
service, who attains his normal retirement age (which is age 65 or, if
the employee becomes a participant at or after age 60, his fifth
anniversary of becoming a participant) while employed by the Corporation
or the Life Company, or who is totally and permanently disabled while an
employee. The retirement annuity is earned in the form of a single life
annuity for the life of the employee, commencing at the employee's normal
retirement age, and is equal to the sum of retirement annuity credits
earned by the employee for each calendar year he is credited with a year
of service. Retirement annuity benefits under the plan can be paid as
early as age 55 if the employee retires with at least ten years of
service (or at disability retirement, if earlier) and must be paid
starting in January of the calendar year the employee reaches age 70 1/2,
even though he has not then retired. The annuity is payable monthly and
is subject to actuarial reduction in the event the employee commences to
receive his retirement annuity prior to his normal retirement age (other
than as a result of disability retirement) or receives his retirement
annuity in a joint and survivor rather than a single life annuity form of
payment. A survivor annuity benefit is provided to the employee's spouse
in certain cases if the employee dies before his retirement annuity
payments begin.
The annual annuity credit for years after 1988 is equal to 2% of the
first $10,000 of the employee's compensation for the year, plus 2.5% of
the employee's compensation for the year in excess of $10,000. Once an
employee is credited with 35 years of service, whether before or after
1989, the annual annuity credit after 1988 becomes 2.5% of the employee's
compensation for the year. Prior to 1989, several different benefit
formulas were applied, and employees who were participants before 1989
will retain their annuity credits as determined through December 31, 1988
based on those earlier formulas. Covered compensation for purposes of
the Plan is aggregate cash compensation up to $150,000 per year for years
after 1993 ($200,000 per year for 1992 and 1993), as adjusted from time
to time under the Internal Revenue Code of 1986, as amended, which in the
case of each executive officer is identical to the amount shown as salary
in the Summary Compensation Table appearing in Item 11(a) and (b).
The estimated annual benefits payable under the Plan for each of the
individuals listed in the Summary Compensation Table are as follows: R.
W. Wiltshire, Jr. - $85,790, J. M. Wiltshire, Jr. - $44,552, , H. D.
Garnett - $71,137, W. B. Wiltshire - $83,372, and G. T. Richardson -
$92,032. The benefits as shown are estimated on the basis that the
persons named will continue to receive, until the end of the calendar
year in which they reach age 65 or, if already age 65, until the end of
the current calendar year, salaries at the same rates in effect during
1994 and will then retire and elect a single life rather than a joint and
survivor annuity form of payment.
<PAGE>
Amounts payable under the Plan are not subject to deduction for social
security benefits under the Federal Social Security Act.
In addition to the Corporation's defined benefit pension plan, the
Corporation has a postretirement medical benefits plan consisting of
defined benefit medical coverage for pre-1993 retirees and defined
contribution medical coverage for post-1992 retirees who were active
employees on December 31, 1992. The pre-1993 retiree program covers all
employees who had retired under the Corporation's pension plan as of
December 31, 1992. The post-1992 retiree program covers all full time
active employees as of December 31, 1992 who retire under the
Corporation's pension plan thereafter. Employees who joined the
Corporation after December 31, 1992 are not eligible for participation in
either program under the postretirement medical benefits plan.
The pre-1993 retiree program reimburses its participants for actual
covered costs subject to specified deductibles and coinsurance. The pre-
1993 retiree program is contributory and participant contribution
requirements may be increased from time to time and benefits may be
modified or terminated by the Corporation. The post-1992 retiree program
is noncontributory and reimburses its participants for the cost of health
insurance and other health care coverage premiums up to a maximum benefit
amount (stated in terms of health care spending credits) determined in
accordance with the plan based on years of service as of December 31,
1992. The unused maximum benefit amount, initially determined as of
December 31, 1992, is increased thereafter only for interest from January
1, 1993 until it is fully expended.
All current salaried executive officers of the Corporation, upon their
retirement, will be covered under the post-1992 retiree program. The
spending account credit balances determined as of December 31, 1994
(without interest to be credited thereafter) for each of them are as
follows: R. W. Wiltshire, Jr. - $28,058, J. M. Wiltshire, Jr. - $30,796,
H. D. Garnett - $26,005, W. B. Wiltshire - $28,743 and G. T. Richardson
-$26,005.
The Corporation is self insured with respect to benefits under the
postretirement medical benefits plan.
<PAGE>
(g) Compensation of Directors
All directors of the Corporation (other than Messrs. Glenn, L. W.
Richardson, R. W. Wiltshire, Hancock and Mrs. Collins) are salaried
executive officers. Messrs. Glenn, L. W. Richardson and R. W. Wiltshire
have retired as salaried executive officers of the Corporation and the
Life Company. Upon his retirement on December 31, 1986 after more than
48 years of service, Mr. Glenn was asked to serve at the pleasure of the
Board of Directors as a Consultant to the Corporation and its
subsidiaries for which he receives $30,000 per year in addition to his
normal retirement benefit of $26,495 under the Corporation's Retirement
Plan. Under the terms of the contract, Mr. Glenn has agreed to perform
such services of a consulting and advisory nature as may be requested of
him from time to time by the Chairman of the Board of the Corporation.
Messrs. Richardson and Wiltshire retired on December 31, 1987, and
September 6, 1993, respectively, and in consideration of their past
services to the Corporation and the Life Company over a continuous period
of more than 42 years in the case of Mr. Richardson and 47 years in the
case of Mr. Wiltshire, the Corporation agreed to pay Mr. Richardson
$30,000 per year and Mr. Wiltshire $90,000 per year in addition to their
respective pension benefits of $34,109 and $55,002 under the Retirement
Plan. The Corporation's agreements with each of Messrs. Glenn,
Richardson and Wiltshire provide that they will not compete with the
Corporation or its subsidiaries, directly or indirectly, on a full time
or a part time or on a consulting or advisory basis. Messrs. Glenn and
Richardson also are participants in the pre-1993 retiree program under
the Corporation's postretirement medical benefits plan. Mr. Wiltshire is
a participant in the post-1992 retiree program under the plan and has a
spending account credit balance as of December 31, 1994, after
reimbursement to him of premiums paid subsequent to his retirement, of
$42,591. (See "Pension and Postretirement Medical Benefits Plan" in Item
11(f)). Mr. Hancock is a partner in the law firm of Mays & Valentine.
The amount of legal fees paid to that firm by the Corporation and its
subsidiaries and affiliates in 1994, including amounts for legal services
provided by Mr. Hancock, did not exceed 5% of the firm's gross revenues
for its last fiscal year. No director of the Corporation receives any
additional compensation in the form of directors' fees or otherwise for
attendance at meetings of the Board or committees thereof, or other
services performed solely in his or her capacity as a director.
(h) Employment Contracts and Termination of Employment and Change-in-
Control Arrangements
(1) Not applicable
(2) Not applicable
(i) Not applicable
<PAGE>
(j) Board of Director Interlocks and Insider Participation
The Corporation has no formal compensation committee, and all final
decisions as to executive officer compensation are made by the entire
Board of Directors. All members of the Board of Directors, except Mrs.
Collins, are present or retired officers of the Corporation. Messrs. R.
W. Wiltshire, Jr., J. M. Wiltshire, Jr., Garnett, W. B. Wiltshire, and
G. T. Richardson are salaried executive officers of the Corporation. R.
W. Wiltshire has retired as an employee of the Corporation and now serves
as an unsalaried executive officer in the capacity of Chairman of the
Board. Messrs. Glenn and L. W. Richardson are retired executive officers
of the Corporation. Mr. Hancock is an unsalaried executive officer of
the Corporation and a partner in the law firm of Mays & Valentine which
is general counsel to the Corporation.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) and (b) As of March 10, 1995, 5,401,024 shares of Class A Common
Stock of the Corporation, constituting 63.7% of the 8,476,576 shares then
outstanding, were held by trustees under a voting trust agreement dated
as of May 1, 1984, which, by virtue of a voting trust extension agreement
dated as of May 1, 1987, continues in force until May 11, 1997 (1984
Voting Trust). The Voting Trustees, each of whom is a director of the
Corporation and the Life Company are R. W. Wiltshire, L. W. Richardson,
R. W. Wiltshire, Jr., G. T. Richardson, and Dianne N. Collins (as the
current successor to M. D. Nunnally, Jr. one of the original Voting
Trustees, who died several years ago) (together, the Trustees). Their
mailing address is 3901 West Broad Street, Richmond, Virginia 23230. The
Trustees are given exclusive voting power of the Class A Common Stock
subject to the 1984 Voting Trust, but must vote or execute consents in
accordance with the instructions of the holders of voting trust
certificates with respect to any action submitted to a vote of the
holders of Class A Common Stock as to which a majority of the Trustees
then in office favor an affirmative vote, where such action, if
approved by the holders of Class A Common Stock in accordance with and to
the extent required by law and the Corporation's Articles of
Incorporation, would result in: (a) the increase or decrease of the
authorized number of shares of Class A Common Stock; (b) an exchange,
reclassification, or cancellation of all or part of the shares of Class
A Common Stock; (c) an exchange, or right of exchange, of all or any part
of the shares of another class into the shares of Class A Common Stock;
(d) any change that may be adverse to the designations, preferences,
limitations, voting rights or relative to other rights of any nature of
the shares of Class A Common Stock; (e) any change of the shares of Class
A Common Stock into a different number of shares of the same class or
into the same or a different number of shares, either with or without par
value, of other classes of stock; (f) the creation of a new class of
stock, or change of a class with subordinate and inferior rights into a
class having rights and preferences prior and superior to shares of Class
A Common Stock, or any increase of the rights and preferences of any
class having rights and preferences prior or superior to shares of Class
A Common Stock; (g) any limitation or denial of preemptive rights of
shares of Class A Common Stock; (h) the sale, lease, exchange, mortgage,
pledge or other disposition of all, or substantially all, the property
and assets of the Corporation; (i) the merger or consolidation of the
Corporation with or into any other corporation, or of any other
corporation with or into the Corporation; or (j) the dissolution of the
Corporation. If a majority of the Trustees shall oppose any such matter,
the Trustees need not solicit, obtain or follow directions from the
holders of the voting trust certificates, and such majority of Trustees
opposing any such proposal are authorized and empowered to vote all the
shares of Class A Common Stock held by the Trustees under the 1984 Voting
Trust against such proposal. A majority vote of the Trustees controls
actions to be taken by them; they may vote in person or by proxy to
another Trustee with or without direction how to vote. They may vote for
themselves as directors and officers of the Corporation and fix their
compensation provided it be commensurate with the duties and
responsibilities of the office or position held. They may name successor
trustees in event of death, resignation, removal from the Commonwealth of
Virginia or incapacity of any Trustee. They receive no compensation for
their services as Trustees. In the event that by virtue of a stock
dividend, stock split, reclassification of stock or subscription, the
Trustees receive further Class A Common Stock, it is to be held by them
subject to all of the provisions of the 1984 Voting Trust. In the event
that as a result of any merger, consolidation, sale of assets or
property, exchange or other cause, the shares of Class A Common Stock of
the Corporation held by the Trustees should be converted into and become
shares of another corporation, the 1984 Voting Trust shall be terminated
automatically unless the amount of voting stock in such other corporation
received as a result of the conversion would thereafter represent more
than one-third of the issued and outstanding voting stock of such other
corporation if it has no class of stock registered under the Securities
Exchange Act of 1934, or more than one-twentieth of the issued and
outstanding voting stock of such other corporation if it has a class of
stock so registered, in either of which cases the 1984 Voting Trust shall
continue in force according to its terms.
<PAGE>
Class B Common Stock, which has no vote on most matters, is publicly
traded in the over-the-counter market and is not subject to the 1984
Voting Trust.
Due to the substantial number of shares of Class A Common Stock held
subject to the 1984 Voting Trust, the Trustees individually and
collectively may be deemed to be "control persons" of the Corporation
under rules and regulations of the Securities and Exchange Commission.
As of March 10, 1995, the Trustees under the 1984 Voting Trust
beneficially owned, directly or indirectly, voting trust certificates
evidencing an aggregate of 827,646 shares of Class A Common Stock subject
thereto, as well as another 270,673 shares of Class A Common Stock that
are not subject to the 1984 Voting Trust.
The following table shows as of March 10, 1995, the beneficial owner-
ship of all Class A and Class B Common Stock by each director of the
Corporation, and the beneficial ownership of the Corporation's Class A
Common Stock by any other person or entity known to the Corporation to
own more than 5% of the outstanding shares of such class. The
Corporation has no executive officers who are not directors. The amounts
shown for Class A Common Stock include beneficial ownership evidenced by
voting trust certificates of the 1984 Voting Trust, but exclude Class A
shares held by the Trustees thereunder.
<PAGE>
Directors
Amount
Title of Beneficially Percent of
Name of Director Class Owned(1) Class(2)
Dianne N. Collins Class A 13,536(3)(4)(5) *
Class B 7,264(4) *
H. D. Garnett Class A - -
Class B 2,600 (6) *
C. M. Glenn, Jr. Class A 327,826 (5)(7)(8)(9) 3.87
Class B 80,711 (7)(8)(9) *
W. G. Hancock Class A 89,560 (9)(10)(11) 1.06
Class B 4 *
G. T. Richardson Class A 52,784 (3)(5) *
Class B 10,274 *
L. W. Richardson Class A 262,161 (3)(5)(9)(12) 3.09
Class B 89,179 (9)(12) *
J. M. Wiltshire, Jr. Class A - -
Class B 6,000 *
R. W. Wiltshire Class A 741,492 (3)(5)(9)(13) 8.75
Class B 47,920 (13) *
R. W. Wiltshire, Jr. Class A 28,346 (3)(5)(13) *
Class B 41,443 (9)(13) *
W. B. Wiltshire Class A 28,186 (5)(13) *
Class B 30,550 (9)(13) *
5% Class A Stockholders
(Other Than Directors and Trustees)
Amount
Name and Address of Beneficially Percent of
5% Class A Stockholder Owned (1) Class
Dixie Company 2,561,336 (5)(14) 30.22
Richmond, Virginia
Doris G. Hancock 449,574 (8)(15) 5.30
Richmond, Virginia
Estate of Mary Morton Parsons 1,174,427 (5)(16) 13.85
Richmond, Virginia
George L. Richardson 599,680 (5) 7.07
Richmond, Virginia
(1) Beneficial ownership has been determined in accordance with Rule 13d-
3 under the Securities Exchange Act of 1934.
(2) Where an asterisk is shown, the percentage is less than 1%.
(3) 5,401,024 shares of Class A Common Stock constituting 63.7% of the
8,476,576 shares outstanding are held by R. W. Wiltshire, L. W.
Richardson, R. W. Wiltshire, Jr., G. T. Richardson and Dianne N.
Collins, as Trustees under the 1984 Voting Trust.
(4) All of the voting trust certificates for Class A shares and the Class
B shares are held of record by Dixie Company and may be acquired by
Mrs. Collins pursuant to her power to revoke an inter vivos trust.
Such voting trust certificates are also included in the table for
Dixie Company.
<PAGE>
(5) Some portion or all of the Class A shares shown for each of the
indicated directors or stockholders are subject to the 1984 Voting
Trust, and their beneficial ownership as to those shares is evidenced
by voting trust certificates that have been issued to them
thereunder. The number of Class A shares deposited in the 1984
Voting Trust by each of them is as follows: Dianne N. Collins -
13,536; C. M. Glenn, Jr. - 150,164; G. T. Richardson - 22,510; L. W.
Richardson - 250,708; R. W. Wiltshire - 539,016; R. W. Wiltshire, Jr.
- 1,876; W. B. Wiltshire - 1,728; Dixie Company - 2,423,800; Estate
of Mary Morton Parsons - 1,174,427; and George L. Richardson -
404,600.
(6) All of the Class B shares shown for Mr. Garnett are owned jointly
with his wife.
(7) Includes 165,520 shares of Class A (of which 90,000 shares are
evidenced by voting trust certificates of the 1984 Voting Trust) and
23,280 shares of Class B Common Stock held in trust by Crestar Bank
as trustee for the benefit of Mr. Glenn during his lifetime, with
remainder to his issue.
(8) Includes 80,822 shares of Class A and, in the case of Mr. Glenn,
3,644 shares of Class B Common Stock, held by Mr. Glenn and his
sister, Doris G. Hancock, and another sister, as trustees under the
will of Hazel C. Glenn for the benefit of his daughter.
(9) Includes an aggregate of 7,560 shares of Class A (of which 2,696
shares are evidenced by voting trust certificates of the 1984 Voting
Trust) and 12,750 shares of Class B Common Stock held by directors as
trustees or custodians for the benefit of children (that are not
described in other footnotes to this table), or by their wives, and
with respect to which beneficial ownership is or will be disclaimed
by individual directors in ownership reports filed with the
Securities and Exchange Commission.
(10) The ownership shown for Mr. Hancock excludes 188,800 shares of Class
A Common Stock held in trust by Crestar Bank for the benefit of his
mother, Doris G. Hancock, with remainder to Mrs. Hancock's issue, in
which Mr. Hancock has a vested one-third beneficial interest subject
to partial divestment upon any further children of Mrs. Hancock.
(11) Includes 2,400 shares of Class A Common Stock held by Mr. Hancock and
his brother and sister as trustees under inter vivos trusts created
by their mother for the benefit of her six grandchildren, three of
whom are children of Mr. Hancock.
(12) Includes 25,538 shares of Class A Common Stock evidenced by voting
trust certificates of the 1984 Voting Trust and 36,912 shares of
Class B Common Stock held by Mr. Richardson, as trustee with sole
voting and shared investment power, for the benefit of a member of
his immediate family.
(13) 141,804 shares of Class A Common Stock, voting trust certificates for
94,976 shares of Class A Common Stock subject to the 1984 Voting
Trust and 660 shares of Class B Common Stock are held by the Estate
of Essie Lee Wiltshire for the life of R. W. Wiltshire with a vested
remainder interest in the children of R. W. Wiltshire. R. W.
Wiltshire is the sole executor of the Estate of Essie Lee Wiltshire.
During the life of R. W. Wiltshire the income from the foregoing
shares is paid to the children of R. W. Wiltshire. In addition, R.
W. Wiltshire has a life estate in voting trust certificates
evidencing 403,264 shares of Class A Common Stock subject to the 1984
Voting Trust and 47,260 shares of Class B Common Stock, with
remainder to the children of R. W. Wiltshire. R. W. Wiltshire, Jr.
and W. B. Wiltshire have vested one-fourth beneficial interests in
all the foregoing shares, subject to partial divestment upon any
further children of R. W. Wiltshire. The ownership shown includes
such shares for R. W. Wiltshire and excludes all such shares for R.
W. Wiltshire, Jr. and W. B. Wiltshire. Both R. W. Wiltshire, Jr. and
W. B. Wiltshire also have the same vested one-fourth remainder
interests subject to partial divestment in another 140,836 shares of
Class B Common Stock in which various children and grandchildren of
R. W. Wiltshire residing in other households have an interest for his
life. The ownership shown for R. W. Wiltshire, R. W. Wiltshire, Jr.
and W. B. Wiltshire does not reflect any of such shares, except in
the case of R. W. Wiltshire, Jr. for 26,445 shares held by him as
custodian for his minor children and another 8,764 shares held for
his own benefit and in the case of W. B. Wiltshire for 17,630 shares
held by him as custodian for his minor children and another 8,764
shares held for his own benefit.
<PAGE>
(14) Dixie Company is the nominee of Jefferson National Bank which holds
137,536 Class A shares and voting trust certificates for another
2,423,800 Class A shares in a number of fiduciary accounts that it
administers (including voting trust certificates for 13,536 Class A
shares previously reported in the table for Mrs. Collins).
(15) Includes 188,800 shares of Class A Common Stock held in trust by
Crestar Bank as trustee for the benefit of Mrs. Hancock during her
lifetime with remainder to her issue. Also includes 18,205 Class A
shares held by Mrs. Hancock's husband.
(16) Clinton Webb and NationsBank of Virginia, N.A. are the co-executors
of the Estate of Mary Morton Parsons.
As of March 10, 1995, executive officers and directors of the
Corporation as a group beneficially owned 1,543,891 shares or 18.2% of
the Class A (including beneficial ownership evidenced by voting trust
certificates of, but exclusive of shares held by the Trustees under, the
1984 Voting Trust) and 315,945 shares or 3.5% of the Class B Common Stock
of the Corporation, respectively.
(c) The Corporation has no knowledge of any contractual arrangement which
may at a subsequent date result in a change of control of the
Corporation, except that the 1984 Voting Trust is scheduled to expire on
May 11, 1997. Upon its expiration, the shares of Class A Common Stock of
the Corporation now held by the Trustees under the 1984 Voting Trust will
be held by persons presently holding voting trust certificates
representing those shares.
<PAGE>
ITEM 13. Certain Relationships and Related Transactions
(a) Not applicable.
(b) W. G. Hancock is a partner in the law firm of Mays & Valentine which
provided legal services as general counsel to the Corporation and its
subsidiaries and affiliates during 1994, and is expected to serve in the
same capacity in 1995. The amount of legal fees paid to that firm by the
Corporation and its subsidiaries and affiliates for 1994 did not exceed
5% of the firm's gross revenues for its last full fiscal year.
(c) Not applicable.
(d) Not applicable.
<PAGE>
Part IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. Financial Statements and Financial Statement Schedules
The financial statements and financial statement schedules listed in
the accompanying Index to Financial Statements and Financial
Statement Schedules on page 23 are filed as part of this annual
report.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits are filed
as part of this annual report.
(b) Reports on Form 8-K
None
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Financial Statements
and Financial Statement Schedules
(Item 14(a))
<TABLE>
<CAPTION>
Annual
Form Report to
10-K Stockholders
<S> <C> <C>
Consolidated Financial Statements:
Report of Ernst & Young LLP, Independent Auditors 18
Consolidated Balance Sheet at December 31, 1994 and 1993 6-7
Consolidated Statement of Income for each of the three
years in the period ended December 31, 1994 8
Consolidated Statement of Retained Earnings for each of
the three years in the period ended December 31, 1994 9
Consolidated Statement of Cash Flows for each of the
three years in the period ended December 31, 1994 10
Notes to Consolidated Financial Statements 11-17
Supplementary information--
Quarterly financial information (unaudited) 21
Financial Statement Schedules:
I - Summary of investments - other than investments
in related parties at December 31, 1994
(Consolidated) 25
II - Condensed Financial Information of Registrant
(Parent Company):
Balance Sheet at December 31, 1994 and 1993 26
Statement of Income for each of the three years
in the period ended December 31, 1994 27
Statement of Cash Flows for each of the three
years in the period ended December 31, 1994 28
IV - Reinsurance for each of the three years in the
period ended December 31, 1994 (Consolidated) 29
</TABLE>
All other schedules are omitted since the required information is not
present, or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
The consolidated financial statements and supplementary information listed in
the above index, which are included in the Annual Report to Stockholders for
Home Beneficial Corporation for the year ended December 31, 1994, are
incorporated herein by reference.
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report(Form 10-K)
of Home Beneficial Corporation of our report dated February 10, 1995,
included in the 1994 Annual Report to Stockholders of Home Beneficial
Corporation.
Our audits also included the financial statement schedules of Home Beneficial
Corporation listed in Item 14(a). These schedules are the responsibility of
the Corporation's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Richmond, Virginia
February 10, 1995
<PAGE>
<TABLE>
Schedule I
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
At December 31, 1994
<S>
<C> <C> <C> <C>
Column A Column B Column C Column D
Amount at
which shown in
Type of Investment Cost Value balance sheet
Fixed maturities securities available-for-sale:
Bonds and notes:
United States Government
and government agencies
and authorities $ 28,659,884 $ 29,678,807 $ 29,678,807
States, municipalities
& political subdivisions 302,051,360 284,436,727 284,436,727
Foreign governments 26,343,642 25,317,338 25,317,338
Public utilities 250,900,747 241,829,335 241,829,335
All other corporate 109,350,262 109,745,273 109,745,273
Redeemable preferred stocks 1,000,000 969,375 969,375
Total 718,305,895 $691,976,855 691,976,855
Equity securities available-for-sale:
Common stocks:
Public utilities 1,715,043 $ 3,552,394 3,552,394
Banks, trust and insurance
companies 668,900 5,239,702 5,239,702
Industrial, miscellaneous
and other 6,662,725 14,771,313 14,771,313
Nonredeemable preferred
stocks 681,477 666,440 666,440
Total equity securities 9,728,145 $24,229,849 24,229,849
Mortgage loans on real estate 338,458,261 338,458,261
Policy loans 53,425,676 53,425,676
Other long-term investments 6,167,002 6,167,002
Short-term investments 32,459,616 32,459,616
Total investments $1,158,544,595 $1,146,717,259
</TABLE>
<PAGE>
<TABLE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31, 1994 and 1993
<S>
<C> <C> <C>
1994 1993
ASSETS
Cash and cash equivalents $ 1,015,332 $ 1,580,496
Investment in subsidiaries, at equity 460,497,094 466,132,836
Other assets 5,370,053 5,628,327
$466,882,479 $473,341,659
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ 112,545 $ 79,267
Stockholders' equity (*)
Capital stock:
Class A Common Stock, voting, $.3125 par
value 12,800,000 shares authorized;
8,476,576 issued at December 31, 1994
and December 31, 1993 2,648,930 2,648,930
Class B Common Stock, non-voting,
$.3125 par value, 19,200,000 shares
authorized; 9,087,534 issued at
December 31, 1994 and 9,462,482
issued at December 31, 1993 2,839,854 2,957,025
Total capital stock 5,488,784 5,605,955
Unrealized (losses) gains on available-
for-sale securities of subsidiaries
less deferred income taxes (6,652,336) 14,258,342
Retained earnings 467,933,486 453,398,095
Total stockholders' equity 466,769,934 473,262,392
$466,882,479 $473,341,659
</TABLE>
(*) See Notes 6 and 7 to Consolidated Financial Statements
<PAGE>
<TABLE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME
Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
<S> <C> <C> <C>
Revenues:
Dividends from subsidiaries $22,304,000 $29,216,000 $14,944,000
Other investment income 971,392 1,005,362 944,528
Total Revenues 23,275,392 30,221,362 15,888,528
Expenses:
Operating and administrative 821,074 915,949 877,593
Income before income taxes and
equity in undistributed income
of subsidiaries 22,454,318 29,305,413 15,010,935
Income taxes - current 75,000 50,000 25,000
Income before equity in
undistributed income of
subsidiaries 22,379,318 29,255,413 14,985,935
Equity in undistributed income
of subsidiaries 13,816,658 13,359,040 2,047,551
Net income $36,195,976 $42,614,453 $17,033,486
</TABLE>
<PAGE>
<TABLE> Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years Ended December 31, 1994, 1993 and 1992
Increase (Decrease) in Cash and Cash Equivalents (*)
<S> <C> <C> <C>
1994 1993 1992
Operating Activities:
Net income $ 36,195,976 $ 42,614,453 $ 17,033,486
Adjustments to reconcile net
income to net cash provided
from operating activities:
Undistributed net income
of subsidiaries (13,816,658) (13,359,040) (2,047,551)
Dividends paid by subsidiary
declared prior year - - 3,584,000
Other 333,274 92,878 13,801
Net cash provided by
operating activities 22,712,592 29,348,291 18,583,736
Investing activities:
Additional investment
in subsidiary (1,500,000) - -
Net cash used in
investing activities (1,500,000) - -
Financing activities:
Purchase of Common Stock (7,675,184) (14,142,511) (4,252,500)
Cash dividends to stockholders (14,102,572) (14,014,459) (14,152,261)
Net cash used in financing
activities (21,777,756) (28,156,970) (18,404,761)
(Decrease) Increase in cash and
cash equivalents (565,164) 1,191,321 178,975
Cash and cash equivalents,
beginning of year 1,580,496 389,175 210,200
Cash and cash equivalents,
end of year $ 1,015,332 $ 1,580,496 $ 389,175
</TABLE>
(*) Short-term investments, which consist of investments with maturities of
30 days or less, are considered cash equivalents
<PAGE>
<TABLE>
Schedule IV
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
REINSURANCE
Years Ended December 31, 1994, 1993 and 1992
<S>
<C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
% of
Ceded Assumed amount
Gross to other from other Net assumed
amount companies companies amount to net
1994:
Life insurance
in force $4,641,841,621 $ 96,625,275 $5,678,611,343 $10,223,827,689 55.5%
Premiums:
Life insurance $88,367,544 $468,895 $19,057,921 $106,956,570 17.8%
Accident and
health insurance 8,371,165 - 743,687 9,114,852 8.2
Total premiums $96,738,709 $468,895 $19,801,608 $116,071,422 17.1%
1993:
Life insurance
in force $4,622,917,075 $101,565,145 $5,467,245,347 $9,988,597,277 54.7%
Premiums:
Life insurance $88,754,881 $452,023 $18,788,760 $107,091,618 17.5%
Accident and
health insurance 8,482,576 2,916 797,843 9,277,503 8.6
Total premiums $97,237,457 $454,939 $19,586,603 $116,369,121 16.8%
1992:
Life insurance
in force $4,640,207,175 $ 99,371,137 $5,250,622,272 $9,791,458,310 53.6%
Premiums:
Life insurance $88,409,010 $383,224 $19,624,622 $107,650,408 18.2%
Accident and
health insurance 9,284,564 2,713 1,014,008 10,295,859 9.8
Total premiums $97,693,574 $385,937 $20,638,630 $117,946,267 17.5%
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934 the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HOME BENEFICIAL CORPORATION
Registrant
By: H. D. Garnett
Vice President and Controller, 3/21/95
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
R. W. Wiltshire
Chairman of the Board and Director, 3/21/95
C. M. Glenn, Jr.
Retired Vice President, Treasurer and Director, 3/21/95
L. W. Richardson
Retired Vice President and Director, 3/21/95
R. W. Wiltshire, Jr.
President, Chief Executive Officer and Director, 3/21/95
J. M. Wiltshire, Jr.
Vice President, Counsel, Secretary and Director, 3/21/95
W. B. Wiltshire
Vice President and Director, 3/21/95
H. D. Garnett
Vice President, Controller and Director, 3/21/95
G. T. Richardson
Vice President and Director, 3/21/95
W. G. Hancock
Counsel and Director, 3/21/95
Dianne N. Collins
Director, 3/21/95
<PAGE>
<TABLE>
HOME BENEFICIAL CORPORATION
Index to Exhibits
(Items 14(c))
<S>
<C> <C> <C>
Sequential
Page
Number
EXHIBITS
2 - Plan of acquisition, reorganization, arrangement, liquidation or
succession - Not applicable -
3(i) - Restated Articles of Incorporation (incorporated herein by
reference from December 31, 1993 Form 10-K -
(ii)- Bylaws incorporated herein by reference from December 31, 1992
Form 10-K -
4 - Instruments defining the rights of security holders, including
indentures - See Article III of the Restated Articles of Incorporation
incorporated herein by reference from December 31, 1993 Form 10-K -
9 - Voting Trust Agreement dated May 1, 1984, effective May 31, 1984, and
Voting Trust Extension Agreement dated May 1, 1987, effective May 11,
1987 incorporated herein by reference from December 31, 1992 Form 10-K -
10 - Material Contracts - Consulting and compensation agreements with C. M.
Glenn, Jr. and L. W. Richardson who are present Directors of the
Corporation incorporated herein by reference from December 31, 1992
Form 10-K. Supplemental Compensation Agreement with R. W. Wiltshire,
Chairman of the Board of Directors of the Corporation incorporated
herein by reference from September 30, 1993 Form 10-Q -
11 - Statement reference computation of per share earnings - Not applicable -
12 - Statement reference computation of ratios - Not applicable -
13 - Annual Report to Security Holders
With the exception of the information incorporated by reference into
Items 1, 5, 6, 7 and 8 of this Form 10-K, the 1994 Annual Report to
Stockholders is not deemed filed as part of this report 32-54
16 - Letter reference change in certifying accountant - Not applicable -
18 - Letter reference change in accounting principles - Not applicable -
21 - Subsidiaries of the Registrant incorporated herein by reference from
December 31, 1989 Form 10-K -
22 - Published report regarding matters submitted to vote of security holders
- Not applicable -
23 - Consents of experts and counsel
24
24 - Power of Attorney - Not applicable -
27 - Financial Data Schedule
55
28 - Information from reports furnished to state insurance regulatory
authorities - Not applicable -
99 - Additional exhibits - Not applicable -
<PAGE>
</TABLE>
<TABLE>
<S>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
ARTICLE 7 of Regulation S-X
Type Ex-27
Description Article 27 FDS for 10-K
Article 7
Period - Type 12 mons
Fiscal year-end Dec 31 1994
Period-end Dec 31 1994
<C> <C>
Debt held for sale 691,976,855
Debt carrying value 0
Debt market value 0
Equities 24,229,849
Mortgage 338,458,261
Real estate 0
Total invest 1,146,717,259
Cash 1,726,812
Recover reinsure 0
Deferred acquisition 96,246,153
Total assets 1,288,826,060
Policy losses 660,081,842
Unearned premiums 25,658,167
Policy other 11,004,362
Policyholder funds 65,821,085
Notes payable 0
Preferred mandatory 0
Preferred 0
Common 5,488,784
Other SE 461,281,150
Total liability & Equity 1,288,826,060
Premiums 116,071,422
Investment income 84,902,022
Investment gains (42,592)
Other income 0
Benefits 91,098,014
Underwriting amortization 13,221,175
Underwriting - Other 41,015,687
Income - Pretax 55,595,576
Income tax 19,400,000
Income - Continuing 36,195,976
Discontinued 0
Extraordinary 0
Changes 0
Net income 36,195,976
EPS - Primary 2.04
EPS - Diluted 2.04
Reserve Open 0
Provision - Current 0
Provision - Prior 0
Payments - Current 0
Payments - Prior 0
Reserve Close 0
</TABLE>
<PAGE>
<PAGE>
1994 ANNUAL REPORT
HOME BENEFICIAL CORPORATION
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Life insurance in force (In 000's) $ 10,223,828 $ 9,988,596
Total assets $1,288,826,060 $1,280,233,898
Net operating income before realized investment
gains (losses), net of
income taxes $ 36,238,568 $ 35,911,485
Realized investment (losses) gains, before income
taxes $ (42,592) $ 10,802,968
Net income $ 36,195,976 $ 42,614,453
Per Share
Net operating income before realized investment
gains (losses), net of
income taxes $ 2.04 $ 1.98
Realized investment (losses) gains, net
of income taxes $ 0 $ .37
Net income $ 2.04 $ 2.35
Dividends paid $ .795 $ .775
Book value $ 26.58 $ 26.38
</TABLE>
<PAGE>
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Financial Highlights................................................................. 1
The Business of Home Beneficial Corporation.......................................... 3
A Message to Our Stockholders........................................................ 4
Consolidated Financial Statements.................................................... 6
Notes to Consolidated Financial Statements........................................... 11
Report of Ernst & Young LLP, Independent Auditors.................................... 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................... 19
Quarterly Financial Information and Market and
Dividend Information.............................................................. 21
Record of Growth of Insurance and Selected Consolidated Financial Data............... 22
Directors and Officers............................................................... 23
</TABLE>
2
<PAGE>
<PAGE>
THE BUSINESS OF HOME BENEFICIAL CORPORATION
Home Beneficial Corporation is a holding company domiciled in the state of
Virginia with one principal operating subsidiary, Home Beneficial Life Insurance
Company (the Life Company), which is engaged in the life and accident and health
insurance business. The Life Company sells group life insurance and
substantially all the forms of ordinary insurance, including universal life,
whole life, term, and annuities, together with accidental death and disability
riders. The Life Company's business is concentrated in six Mid-Atlantic states
and the District of Columbia and its policies are marketed through its own sales
force of approximately 1150 full time personnel.
ANNUAL MEETING
The Annual Meeting of the stockholders of Home Beneficial Corporation will be
held on Tuesday, April 4, 1995 at 10:00 a.m. at the Corporation's Home Office,
3901 West Broad Street, Richmond, Virginia 23230.
(logo) HOME BENEFICIAL CORPORATION
<TABLE>
<S> <C>
HOME OFFICE TRANSFER AGENT AND REGISTRAR
3901 West Broad Street First Union National Bank of North Carolina
P.O. Box 27572 Shareholders Services Group -- 1154
Richmond, Virginia 23261 230 S. Tryon Street -- 10th Floor
Charlotte, North Carolina 28288-1154
</TABLE>
3
<PAGE>
<PAGE>
A MESSAGE
TO OUR STOCKHOLDERS
or the life insurance industry, 1994 was an especially trying year as
consumers and regulators shifted their attention away from the financial
solvency and soundness of companies to issues relating to market conduct.
Insurers continued working diligently trying to allocate resources between
maintaining a financially sound company with a solid public image while at the
same time contending with economic uncertainty, regulatory pressures, consumer
preferences and growing competition. The word "change" seems to be the best word
to describe our industry and one that will be with us for many more years.
F
Your Company entered the year with high expectations of improvement over the
previous year, concentrating our efforts on the final installation of our field
accounting system and increasing investment income, excluding realized
investment gains (losses), as the year progressed. Our efforts were directed to
these areas because if we are to grow, it will come from the technology
developed in our field accounting system along with increasing our investment
income. Sales practices and policyholder services have always separated the
leading companies in our industry from the rest. Without our new system, your
Company could not maintain a leadership position in those areas.
We are pleased to report that in October the final conversion was made to our
new system. The success we enjoyed did not happen by coincidence but, on the
contrary, was a reflection of the team work, planning and hard work done during
the year by a lot of people. We are grateful to our agency force and all of our
home office personnel who backed them up. The credit for the success we
highlight in this 1994 report goes to them.
The Corporation's net operating income was $36,238,568 or $2.04 per share
compared to
1993 results of $35,911,485 or $1.98 per share. On a per share basis, operating
income for 1994 improved by 3%. Net income of $36.2 million trailed 1993 results
of $42.6 mil-
lion due to realized investment gains in our securities portfolio during 1993.
Per share dividends paid to stockholders for the year totaled $.795 compared to
$.775 the previous year. The Corporation and its predecessor, Home Beneficial
Life Insurance Company, have paid dividends each year without interruption since
1906 with the amount increasing every year since 1963.
The Life Company celebrated its 95th anniversary in 1994 and for the first time
in its history, life insurance in force rose above the $10 billion mark, ending
the year at a record $10.2 billion. Total assets of $1.3 billion along with
total investments under management also reached an all time high. Net investment
income in the fourth quarter, excluding realized investment gains (losses),
moved ahead of 1993 fourth quarter, resulting in the first increase in quarterly
comparison during the year. We were very pleased to have attained our goal of a
quarterly increase during the 1994 year.
In January, 1994, the Corporation adopted Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." This
Standard permits bonds to be valued in the balance sheet at amortized value or
market value or a combination of both. We chose to carry our entire bond
portfolio at market value in order to give us as much flexibility as possible in
managing this account. While this did not affect our income statement, it did
affect stockholders' equity. As interest rates go up bond prices go down and
vice versa. A major investment firm stated, and I quote, "While there were many
cross currents affecting the insurance group, sharply rising interest rates
represented the most important factor, as the bond markets suffered their worst
setback in over six decades." In over 60 years you might have thought the
Financial Accounting Standards Board could have chosen a better year for
the final adoption of this Standard. Your Company lost $.97 per share in book
value due to
4
<PAGE>
<PAGE>
BOARD OF DIRECTORS Standing, left to right: W. B. Wiltshire; J. M. Wiltshire,
Jr.; Dianne N. Collins; W. G. Hancock; H. D. Garnett; G. T. Richardson. Seated,
Left to Right: L. W. Richardson; R. W. Wiltshire; R. W. Wiltshire, Jr.; C. M.
Glenn, Jr.
the adoption of Standard 115. We are pleased to report that in spite of that
$.97 adjustment, book value per share for the Corporation increased to $26.58.
During 1994, two outside authorities in the insurance field recognized the
Corporation for its outstanding achievements. A. M. Best Company assigned Home
Beneficial Life Insurance Company to its highest category of Superior, which
category includes less than 15% of the 1566 life/health insurers evaluated. The
Company was assigned the rating of A+ Superior. Ward Financial Group, an
investment banking firm specializing in the insurance industry, completed its
in-depth analysis of the life/health industry in 1994. Based upon that analysis,
your Company was named to the 1994 Ward's 50 benchmark group for achieving
outstanding financial results in the areas of safety, consistency and
performance over the past five years. While Ward's did not rank the 50 companies
numerically, their universe included some 2000 life/health insurers.
In conclusion, as we look to the years ahead, many of the issues and challenges
we faced in
1994 will still exist. We have always depended on technology for productivity
improvements in the home office. That will not change; it will only happen more
quickly and involve our field personnel more directly. Your management is very
conscious of its responsibilities to you, our stockholders, and at the same
time, we realize that the Company's success will depend on quality sales
production and service through a well trained agency organization. Therefore, we
will continue investing for the future, in personnel, training and technology in
order to give our sales force the tools needed to maintain a leadership position
in the communities we serve.
R. W. Wiltshire
Chairman of the Board
R. W. Wiltshire, Jr.
President and
Chief Executive Officer
5
<PAGE>
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
INVESTMENTS -- Note 2
Securities available-for-sale at fair value
Fixed maturities (1994 amortized cost: $718,305,895) $ 691,976,855 $ --
Equities (cost: 1994, $9,728,145; 1993, $6,922,789)..................... 24,229,849 27,281,131
Fixed maturities, at amortized cost (1993 approximate
fair value: $737,966,196)............................................... -- 705,683,386
Mortgage loans on real estate.............................................. 338,458,261 316,371,747
Policy loans............................................................... 53,425,676 52,738,134
Short-term investments..................................................... 32,459,616 35,506,190
Other...................................................................... 6,167,002 6,360,115
Total investments....................................................... 1,146,717,259 1,143,940,703
CASH......................................................................... 1,726,812 6,039,294
ACCRUED INVESTMENT INCOME.................................................... 16,958,594 16,688,448
RECEIVABLES -- uncollected premiums.......................................... 5,232,370 5,065,577
DEFERRED POLICY ACQUISITION COSTS............................................ 96,246,153 96,368,346
PROPERTY AND EQUIPMENT, AT COST
(less accumulated depreciation: 1994, $6,598,531;
1993, $6,160,296).......................................................... 7,627,921 8,264,073
DEFERRED CHARGES AND OTHER ASSETS............................................ 14,316,951 3,867,457
$1,288,826,060 $1,280,233,898
</TABLE>
See accompanying notes.
6
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
LIABILITIES
Policy liabilities and accruals -- Note 1
Future policy benefits.................................................. $ 660,081,842 $ 649,964,396
Unearned premiums....................................................... 25,658,167 25,934,028
Policy claims and benefits payable...................................... 11,004,362 10,160,984
Total policy liabilities and accruals................................. 696,744,371 686,059,408
Other policyholder funds................................................... 65,821,085 61,246,483
Income taxes -- Notes 2 and 5.............................................. 420,269 2,632,769
Other liabilities.......................................................... 59,070,401 57,032,846
Total liabilities..................................................... 822,056,126 806,971,506
COMMITMENTS AND CONTINGENT LIABILITIES -- Note 3
STOCKHOLDERS' EQUITY -- Notes 2, 6 and 7
Capital stock
Class A Common Stock, Voting, $.3125 par value, 12,800,000
shares authorized; 8,476,576 issued at December 31, 1994 and
December 31, 1993..................................................... 2,648,930 2,648,930
Class B Common Stock, Non-Voting, $.3125 par value,
19,200,000 shares authorized; 9,087,534 issued at December 31, 1994
and 9,462,482 issued at December 31, 1993............................. 2,839,854 2,957,025
Total capital stock................................................... 5,488,784 5,605,955
Unrealized (losses) gains on securities less deferred
income taxes............................................................ (6,652,336) 14,258,342
Retained earnings.......................................................... 467,933,486 453,398,095
Total stockholders' equity............................................ 466,769,934 473,262,392
$1,288,826,060 $1,280,233,898
</TABLE>
7
<PAGE>
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
REVENUES
Premiums...................................................... $116,071,422 $116,369,121 $117,946,267
Net investment income -- Note 2............................... 84,859,430 96,874,324 93,583,108
Total revenues........................................... 200,930,852 213,243,445 211,529,375
BENEFITS, CLAIMS AND EXPENSES
Benefits and claims........................................... 91,098,014 94,609,539 88,416,743
Underwriting, acquisition and insurance expenses:
Amortization of deferred policy acquisition
costs.................................................... 13,221,175 14,191,104 17,379,387
Commissions and related sales expenses..................... 11,277,898 10,758,965 7,646,474
General, administrative and other.......................... 29,737,789 29,769,384 29,358,401
Total benefits, claims and expenses...................... 145,334,876 149,328,992 142,801,005
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...................... 55,595,976 63,914,453 68,728,370
INCOME TAXES -- Note 5
Current....................................................... 18,475,000 24,650,000 21,825,000
Deferred...................................................... 925,000 (3,350,000) 425,000
Total income taxes....................................... 19,400,000 21,300,000 22,250,000
Income Before Cumulative Effect of Change in Accounting
Principle..................................................... 36,195,976 42,614,453 46,478,370
Cumulative Effect of Change in Accounting for Postretirement
Medical Benefits -- Note 4.................................... -- -- (29,444,884)
NET INCOME...................................................... $ 36,195,976 $ 42,614,453 $ 17,033,486
</TABLE>
<TABLE>
<S> <C> <C> <C>
NET INCOME PER SHARE OF COMMON STOCK
(Average shares outstanding:
1994, 17,757,315; 1993, 18,126,135; and 1992,
18,600,224) -- Notes 4 and 6
Income Before Cumulative Effect of Change in Accounting
Principle.................................................. $2.04 $2.35 $2.50
Cumulative Effect of Change in Accounting for Postretirement
Medical Benefits........................................... -- -- (1.58)
Net Income...................................................... $2.04 $2.35 $ .92
</TABLE>
See accompanying notes.
8
<PAGE>
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year.................................... $453,398,095 $438,756,912 $436,513,105
Additions (deductions)
Net income.................................................... 36,195,976 42,614,453 17,033,486
Dividends declared to stockholders (per share:
1994, $.795; 1993, $.775; 1992, $.57) (14,102,572) (14,014,459) (10,596,241)
Purchase and retirement of Class A and Class B
Common Stock -- Note 6..................................... (7,558,013) (13,958,811) (4,193,438)
Balance at end of year.......................................... $467,933,486 $453,398,095 $438,756,912
</TABLE>
See accompanying notes.
9
<PAGE>
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Increase (decrease) in cash
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating Activities
Net income.................................................... $ 36,195,976 $ 42,614,453 $ 17,033,486
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization.............................. 1,386,584 1,260,484 1,155,903
Amortization of discount and premium on
investments, net......................................... (933,633) (1,627,782) (2,387,396)
Increase in policy liabilities and accruals................ 10,684,963 13,876,769 10,403,969
Decrease in income tax liability........................... (900,000) (3,200,000) (17,110,000)
Policy acquisition costs deferred.......................... (13,098,982) (14,741,170) (21,814,363)
Amortization of deferred policy acquisition costs.......... 13,221,175 14,191,104 17,379,387
Cumulative effect of accounting change..................... -- -- 44,644,884
Realized investment losses (gains)......................... 42,592 (10,802,968) (2,857,454)
Other...................................................... 1,555,893 904,443 (3,371,660)
Net cash provided by operating activities................ 48,154,568 42,475,333 43,076,756
Investing Activities
Proceeds from sales, calls or maturities of investments
Securities available-for-sale.............................. 259,204,236 -- --
Fixed maturities, at amortized cost........................ -- 138,353,688 80,226,637
Mortgage loans on real estate.............................. 44,355,677 121,053,918 163,348,543
Policy loans............................................... 10,607,709 10,173,381 10,187,598
Short term investments, net................................ 3,046,574 54,896,290 --
Other...................................................... -- 3,600,772 2,801,011
Total proceeds........................................... 317,214,196 328,078,049 256,563,789
Costs of investments acquired
Securities available-for-sale.............................. 273,055,083 -- --
Fixed maturities, at amortized cost........................ -- 273,007,658 177,434,305
Mortgage loans on real estate.............................. 66,406,835 54,762,575 56,330,146
Short term investments, net................................ -- -- 38,739,935
Policy loans............................................... 11,295,251 10,837,781 11,502,287
Property and equipment and other........................... 1,720,923 7,354,663 1,597,951
Total costs.............................................. 352,478,092 345,962,677 285,604,624
Net cash used in investing activities................. (35,263,896) (17,884,628) (29,040,835)
Financing Activities
Dividends paid................................................ (14,102,572) (14,014,459) (14,152,261)
Purchase of Class A and Class B Common Stock.................. (7,675,184) (14,142,511) (4,252,500)
Other......................................................... 4,574,602 6,260,146 5,139,732
Net cash used in financing activities.................... (17,203,154) (21,896,824) (13,265,029)
Net (decrease) increase in cash................................. (4,312,482) 2,693,881 770,892
Cash at beginning of year....................................... 6,039,294 3,345,413 2,574,521
Cash at end of year............................................. $ 1,726,812 $ 6,039,294 $ 3,345,413
</TABLE>
<TABLE>
<S> <C> <C> <C>
Supplemental disclosure of cash flow information
Income tax payments........................................... $20,300,000 $24,500,000 $24,160,000
</TABLE>
See accompanying notes.
10
<PAGE>
<PAGE>
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation -- The consolidated 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 Corporation is
engaged predominantly in the life and accident and health insurance business.
Basis of Presentation -- The accompanying consolidated financial statements
have been prepared on the basis of generally accepted accounting principles
(GAAP), which reflect certain major adjustments to the Life Company's
financial statements as filed with insurance regulatory authorities
(statutory basis). See Note 7.
Investments -- The Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" as of January 1, 1994. As a result of the implementation
of SFAS No. 115, the Corporation's entire fixed maturity (bonds and
redeemable preferred stocks) and equity (non-redeemable preferred and common
stocks) securities were classified as available-for-sale. Accordingly, these
securities are reported at estimated fair value at December 31, 1994 with
related unrealized gains and losses (net of deferred taxes) reported as a
separate component of stockholders' equity. Prior to adoption of SFAS No.
115, fixed maturities were carried at amortized cost and equities were
reported at estimated fair values. Mortgage loans on real estate are reported
at cost, adjusted where appropriate for amortization of premium or discount.
Short-term investments are reported at cost and policy loans are reported at
unpaid balances. Realized investment gains and losses are included as a
component of net investment income and unrealized investment gains and losses
applicable to fixed maturity and equity securities, less related deferred
income taxes, are included as a separate component of stockholders' equity.
The cost of investments sold is generally determined under the specific
identification method.
Fair Value Disclosures -- The following methods and assumptions were used by
the Corporation in estimating its fair value disclosure for financial
investments: The carrying amounts of cash and short-term investments reported
in the balance sheet approximate their fair values. Fair values for fixed
maturity securities (including redeemable preferred stocks) are based on
quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality, and maturity of the
investments. Fair values for available-for-sale fixed maturities are
recognized in the balance sheet in accordance with SFAS No. 115. The fair
values for equity securities are based on quoted market prices and are
recognized in the balance sheet. The fair values for mortgage loans and
policy loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations. Fair values for the Corporation's liabilities
under investment-type insurance contracts (included with policy liabilities
and accruals in the balance sheet) approximate recorded values.
Revenues, Benefits, Claims, and Expenses
Traditional Life Insurance Products -- Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits and
consist principally of whole life and limited-payment life insurance
policies. Premiums are recognized as revenues when due. Liabilities for
policy benefits and expenses for traditional life insurance policies are
computed using a net level premium method including assumptions as to
investment yields, mortality, withdrawals, and other assumptions which were
appropriate at the time the policies were issued based on the Company's
experience
11
<PAGE>
<PAGE>
modified as necessary to reflect anticipated trends and to include provisions
for possible unfavorable deviations. Investment yield assumptions are graded
and range from 9% to 3% and the weighted average assumed investment yield was
approximately 4 1/2% for 1994. Unearned premiums include certain deferred
profits on limited-payment policies which are being recognized in income over
the estimated lives of the policies.
Interest-Sensitive Insurance Products -- Premiums for interest-sensitive
policies are recorded in a policyholder account as a liability. Premium
revenue is recognized as amounts are assessed against the policyholder
account for mortality coverage and policy administration. Surrender benefits
reduce the account value. Policy benefits and claims that are charged to
expense include interest credited to policyholder accounts and benefit claims
incurred in excess of the account balances. Interest credit rates for
interest-sensitive insurance products range from 6 1/4% to 5 1/4%. A
liability equal to the current value of the policyholder accounts is included
in other policyholder funds in the balance sheet.
Deferred Policy Acquisition Costs -- The costs of acquiring new business,
principally commissions and certain policy underwriting and issue costs,
which generally vary with and are primarily related to the production of new
business have been deferred to the extent such costs are deemed recoverable
from future premiums. Costs deferred related to traditional life insurance
are being amortized over the premium paying period of the related policies
using assumptions consistent with those used in computing future policy
benefits. Costs deferred related to interest-sensitive policies are being
amortized over the lives of the policies, in relation to the present value of
estimated gross profits from mortality, investment and expense margins.
Income Taxes -- Income taxes have been provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes". Under that
method, deferred tax assets and liabilities are determined based on the
difference between their financial reporting and their tax bases and are
measured using the enacted tax rates.
Accounting Change -- The Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" as of January 1, 1994. SFAS No. 115 requires
that investments in all debt securities and equity securities with readily
determinable fair values be classified into one of three categories:
held-to-maturity, trading or available-for-sale. Debt securities that a
corporation does not have the positive intent or ability to hold to maturity
and all marketable equity securities are classified as available-for-sale or
trading and are carried at fair value. Unrealized gains and losses on
securities classified as available-for-sale are carried as a separate
component of stockholders' equity. Unrealized gains and losses on securities
classified as trading are reported in earnings. On adoption of SFAS No. 115,
the Corporation classified its entire fixed maturity and equity securities
portfolio as available-for-sale. The Corporation believes that it has the
ability to hold all fixed income investments until maturity; however,
securities may be sold to take advantage of investment opportunities
generated by changing interest rates, prepayments, or income tax
considerations, as part of the Corporation's asset/liability strategy, or for
other similar factors. In accordance with SFAS No. 115, prior-period
financial statements have not been restated to reflect the change in
accounting principle. The cumulative effect as of January 1, 1994 of adopting
SFAS No. 115 increased stockholders' equity by $21 million (net of deferred
income taxes) to reflect the net unrealized gains on securities previously
carried at amortized cost. Due to rising interest rates during 1994, a $17
million net unrealized loss (net of deferred income taxes) was charged
against stockholders' equity at December 31, 1994. There was no effect on net
income as a result of the adoption of SFAS No. 115.
2. INVESTMENT OPERATIONS
The following is a summary of available-for-sale securities at December 31,
1994:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
1994 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US government
corporations and agencies $ 28,659,884 $ 1,543,642 $ 524,719 $ 29,678,807
Obligations of states and political
subdivisions 302,051,360 1,407,623 19,022,256 284,436,727
Debt securities issued by foreign
governments 26,343,642 46,220 1,072,524 25,317,338
Corporate securities 361,251,009 4,172,933 12,879,959 352,543,983
Total debt securities 718,305,895 7,170,418 33,499,458 691,976,855
Equity securities 9,728,145 14,546,906 45,202 24,229,849
Total $728,034,040 $21,717,324 $33,544,660 $716,206,704
</TABLE>
12
<PAGE>
<PAGE>
The following is a summary of fixed maturities held as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1993 Cost Gains Losses Value
<S> <C> <C> <C> <C>
US Treasury securities and obligations of
US government corporations and
agencies $ 26,851,211 $ 5,339,258 $ 104,060 $ 32,086,409
Obligations of states and political
subdivisions 249,926,041 14,077,275 3,825,618 260,177,698
Debt securities issued by foreign
governments 24,818,059 1,592,771 100,454 26,310,376
Corporate securities 404,088,075 21,200,388 5,896,750 419,391,713
Total $705,683,386 $42,209,692 $9,926,882 $737,966,196
</TABLE>
The amortized cost and estimated fair value of fixed maturities, by
contractual maturity, and equities available-for-sale at December 31, 1994,
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>
1994
ESTIMATED
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 29,367,651 $ 29,610,610
Due after one year through five years 147,584,529 147,517,115
Due after five years through ten years 482,641,789 456,516,118
Due after ten years 44,769,672 43,049,128
704,363,641 676,692,971
US government mortgage backed securities 13,942,254 15,283,884
Equities 9,728,145 24,229,849
Total $728,034,040 $716,206,704
</TABLE>
The carrying amounts and fair values of the Corporation's investments in
mortgage loans and policy loans were as follows at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
1994 1993
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
<S> <C> <C> <C> <C>
Commercial Mortgages $169,981,656 $170,169,251 $144,399,440 $160,149,343
Residential Mortgages 168,476,605 156,615,617 171,972,307 187,226,892
$338,458,261 $326,784,868 $316,371,747 $347,376,235
Policy Loans $ 53,425,676 $ 48,546,135 $ 52,738,134 $ 53,515,890
</TABLE>
13
<PAGE>
<PAGE>
Details of net investment income follow:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Fixed maturities $54,057,136 $48,541,194 $44,811,324
Equity securities 1,037,639 975,218 1,098,826
Mortgage loans on real estate 28,277,362 33,667,861 42,680,116
Short-term investments 1,672,379 3,596,291 3,031,855
Realized investment (losses) gains (42,592) 10,802,968 2,857,454
Other 4,169,001 3,305,772 3,070,378
Total investment income 89,170,925 100,889,304 97,549,953
Investment expenses (4,311,495) (4,014,980) (3,966,845)
Net investment income $84,859,430 $96,874,324 $93,583,108
</TABLE>
Realized investment gains (losses) and unrealized investment gains (losses)
representing the change in difference between fair value and cost
(principally amortized cost for fixed maturities) on fixed maturities, equity
securities and other investments for the three years ended December 31, 1994
are summarized below:
<TABLE>
<CAPTION>
Investment Gains (Losses)
Change in
Realized Unrealized Net
<S> <C> <C> <C>
1994
Fixed maturities available-for-sale $(5,894,439) $(49,386,850)(2) $(55,281,289)
Equity securities available-for-sale 5,865,050 (3,806,638)(1) 2,058,412
Other (13,203) -- (13,203)
$ (42,592) $(53,193,488) $(53,236,080)
(1)Net of $2,050,000, deferred income tax
benefit.
(2)Net of $9,225,000 deferred income tax
benefit on available-for-sale fixed
maturities at December 31, 1994.
1993
Fixed maturities $ 7,898,182 $ 2,048,149 $ 9,946,331
Equity securities 2,904,686 (1,636,487)(1) 1,268,199
Other 100 -- 100
$10,802,968 $ 411,662 $ 11,214,630
(1)Net of $725,000, deferred income tax
benefit.
1992
Fixed maturities $ 2,387,462 $ (4,070,822) $ (1,683,360)
Equity securities 469,877 1,323,466(1) 1,793,343
Other 115 -- 115
$ 2,857,454 $ (2,747,356) $ 110,098
(1)Net of $650,000 deferred income taxes.
</TABLE>
Proceeds from the sales of available-for-sale securities during 1994 were
$214,588,898 and gross realized investment gains and gross realized
investment losses of $9,186,184 and $10,199,263 were realized on those sales,
respectively. There were no sales of fixed maturities in 1993 and 1992. All
proceeds were from calls and maturities.
As of December 31, 1994 approximately 49% of the mortgage loans on real
estate were on single family homes and 51% were on commercial properties such
as apartments, shopping centers, office buildings and warehouses.
Approximately 74% and 12%, respectively, of the mortgage loans are on
properties geographically dispersed throughout Virginia and North Carolina.
The Corporation manages the credit risk on its mortgage loan portfolio by,
among other items, generally restricting loan to collateral value ratios to a
maximum of 75% at the time the loan is made, limiting the total amount of
loans outstanding by individual borrower and monitoring the type of loans and
extent of geographic concentration within the region in which the Life
Company operates.
No investment in any person or affiliates of the Corporation exceeded ten
percent of stockholders' equity at December 31, 1994.
14
<PAGE>
<PAGE>
3. REINSURANCE
Future policy benefits and claims are stated after deducting benefits
applicable to life insurance reinsured by other companies. The contingent
liability for such deducted benefits was less than 1% of future policy
benefits at December 31, 1994. Premiums related to such reinsurance are
insignificant.
The Life Company participates in several group life insurance programs as a
reinsurer and also assumes reinsurance on a facultative (individual risk)
basis from two other life insurance companies. Life insurance assumed relates
principally to group life and represented approximately 17% of premium income
for both 1994 and 1993 and 18% for 1992. Claims incurred under these group
life insurance programs approximate the related premium income, and no
significant assets or liabilities are required in the balance sheet.
4. PENSION PLAN AND HEALTH AND LIFE INSURANCE BENEFITS
A noncontributory defined benefit pension plan covers substantially all
employees. The benefits are based on years of service and the employee's
compensation. The pension liabilities and reserves are included in future
policy benefits and held by the Life Company. No separate portfolio of
related plan assets is maintained. The following table sets forth the plan's
status as of the indicated actuarial valuation dates:
<TABLE>
<CAPTION>
December 31
1994 1993
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $73,357,708 $70,236,026
Nonvested 911,298 871,087
Total accumulated benefit obligations $74,269,006 $71,107,113
Projected benefit obligation $79,301,614 $76,779,672
Unrecognized net transition asset $ 4,956,906 $ 5,665,037
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the above projected benefit obligations was 7% for both 1994 and
1993. The rate of increase used for future compensation was 4 1/2% for both
1994 and 1993. The unrecognized net gain or loss on the projected benefit
obligation was a gain of $3,357,825 at December 31, 1994 and a loss of
$3,105,631 at December 31, 1993.
The components of net pension expense for 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost -- benefits earned $2,091,022 $2,051,748 $1,961,296
Interest cost on projected benefit obligation 5,056,685 5,044,206 4,989,612
Net amortization and deferral (708,131) (708,131) (708,331)
Net pension expense $6,439,576 $6,387,823 $6,242,577
</TABLE>
In addition to the Corporation's defined benefit pension plan, the
Corporation has two postretirement plans -- a medical plan (consisting of
defined benefit medical coverage for pre-1993 retirees and defined
contribution medical coverage for post-1992 retirees who were active
employees on December 31, 1992) and a life insurance plan. The pre-1993
retiree medical benefits program covers all employees who had retired under
the Corporation's pension plan as of December 31, 1992. The post-1992 retiree
medical benefits program covers all employees who were full time active at
December 31, 1992 and who retire under the Corporation's pension plan after
December 31, 1992. Employees who joined the Corporation after December 31,
1992 are not eligible for participation in either program under the
postretirement medical benefits plan. The postretirement life insurance
benefits plan covers all employees who retire under the Corporation's pension
plan.
The pre-1993 retiree medical benefits program reimburses its participants for
actual covered costs subject to specified deductibles and coinsurance. The
pre-1993 retiree program is contributory and participant contribution
requirements
15
<PAGE>
<PAGE>
may be increased from time to time and benefits may be modified or terminated
by the Corporation. The post-1992 retiree medical benefits program is
noncontributory and reimburses its participants for the cost of health
insurance and other health care coverage premiums up to a maximum benefit
amount determined in accordance with the plan based on years of service as of
December 31, 1992. A participant's unused maximum benefit amount for
post-1992 retirees determined as of December 31, 1992, is increased for
interest only from January 1, 1993 until it is fully expended. The
Corporation is self insured with respect to benefits under both the medical
and life insurance benefit plans.
Effective January 1, 1992, the Corporation adopted SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions." The cumulative
effect of this accounting change for years prior to 1992, which is shown
separately in the statement of income for 1992, was a charge of $29,444,884
(after related income taxes of $15,200,000). Excluding the cumulative effect,
this change decreased net income for 1992 by $850,000.
The following is an analysis of the Corporation's accumulated postretirement
benefit obligation for postretirement medical and life insurance benefit
plans as reflected in the consolidated balance sheet at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Retirees $40,890,109 $40,127,381
Fully eligible active plan participants 10,549,421 9,588,889
Other active plan participants 5,367,253 5,526,141
Total $56,806,783 $55,242,411
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) at January 1, 1994
for the medical plan is 15% for participants under age 65, and 10.4% for
participants over age 65. The trend rate for both groups is assumed to
decrease gradually to 5 1/2% over approximately 17 years and remain at that
level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rate by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
December 31, 1994 by $2,599,183, and the net periodic postretirement benefit
cost for 1994 by $200,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% for both 1994 and 1993.
Postretirement benefits expense was $3.5 million and $4 million for 1994 and
1993, respectively. This expense primarily represents interest expense on the
accumulated postretirement benefit obligation.
5. FEDERAL INCOME TAXES
Under the tax law in effect prior to 1984, $78,000,000 has been accumulated
in a "Policyholders' Surplus Account" which has not been subject to taxation.
Amounts, if any, distributed to stockholders from the account or exceeding
prescribed balance limitations will become taxable at the then current
federal income tax rates. Under the present circumstances, the Corporation
does not anticipate such account becoming taxable and no provision has been
made for the related deferred income taxes of $27,300,000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Corporation's deferred tax liabilities and assets as of
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation $17,272,194 $16,836,828
Policy liabilities 16,214,063 16,623,005
Unrealized investment losses on available-for-sale
securities 4,168,788 --
Other -- net 2,015,859 3,650,852
39,670,904 37,110,685
Deferred tax liabilities:
Deferred policy acquisition expenses 26,659,281 27,578,411
Discount on fixed maturities 2,706,629 2,401,946
Unrealized investment gain on equity securities -- 7,110,810
Other -- net 1,242,494 1,307,018
30,608,404 38,398,185
Net deferred tax asset (liability) $ 9,062,500 $(1,287,500)
</TABLE>
16
<PAGE>
<PAGE>
The Corporation is required to establish a valuation allowance for any
portion of the deferred tax asset that management believes will not be
realized. In the opinion of management, it is more likely than not that the
Corporation will realize the benefit of the net deferred tax asset, and
therefore, no such valuation allowance has been established.
The provision for income taxes differs from amounts computed by applying the
statutory tax rate to income before income taxes, and these differences arise
from the following:
<TABLE>
<CAPTION>
1994 1993 1992
PERCENT OF Percent of Percent of
PRE-TAX Pre-Tax Pre-Tax
AMOUNT INCOME Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Tax computed at the
prevailing statutory rate $19,450,000 35.0% $22,400,000 35.0% $23,350,000 34.0%
Deduct tax effect of:
Special Life Company
deductions (500,000) (.9) (775,000) (1.2) (685,000) (1.0)
Other 450,000 .8 (325,000) (.5) (415,000) (.6)
(50,000) (.1) (1,100,000) (1.7) (1,100,000) (1.6)
Provision for income taxes $19,400,000 34.9% $21,300,000 33.3% $22,250,000 32.4%
</TABLE>
6. CAPITAL STOCK
The Corporation purchased 374,948 shares of its Class B Common Stock in 1994
at a cost of $7,675,184. The cost was allocated to reduce Class B Common
Stock par value and retained earnings by $117,171 and $7,558,013,
respectively.
During 1993 the Corporation purchased 587,838 shares of its Class B Common
Stock at a cost of $14,142,511. The cost was allocated to reduce Class B
Common Stock par value and retained earnings by $183,700 and $13,958,811,
respectively.
In 1992 the Corporation purchased 189,000 shares of its Class B Common Stock
at a cost of $4,252,500. The cost was allocated to reduce Class B Common
Stock par value and retained earnings by $59,062 and $4,193,438,
respectively.
7. STOCKHOLDERS' EQUITY AND RESTRICTIONS
Consolidated stockholders' equity at December 31, 1994 includes $139,500,000
representing GAAP adjustments and minimum statutory capital and surplus
requirements of the Life Company that cannot be transferred in the form of
dividends, loans or advances to the Corporation.
In addition, the Corporation and the Life Company are subject to the
provisions of the Insurance Holding Company Act of the State of Virginia,
which governs transactions between the Corporation and the Life Company. The
Act, among other things, (1) requires that transactions among affiliates be
fair and reasonable, and (2) assures maintenance of reasonable statutory
capital and surplus in relation to the insurer's outstanding liabilities and
its other financial needs. Also the Act requires the prior approval of the
State Corporation Commission for transactions among affiliates that exceed
three percent of the insurer's admitted assets or twenty-five percent of the
insurer's statutory capital and surplus, whichever is the lesser, and, at
December 31, 1994 the maximum amount available under this provision without
prior approval approximated $37,000,000. The payment of dividends in any one
year by the Life Company without approval by the State Corporation Commission
is limited to the lesser of (1) ten percent of the insurer's prior year end
statutory capital and surplus, or (2) prior year statutory net gain from
operations before realized capital gains or losses.
On a statutory basis, the net gain from operations of the Life Company was
$27,048,483, $28,769,694 and $26,349,212 for the years ended 1994, 1993 and
1992, respectively; and stockholder's equity (capital and surplus) as of
December 31, 1994, 1993 and 1992 was $328,342,208, $325,866,987 and
$327,212,773, respectively.
17
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Home Beneficial Corporation
We have audited the accompanying consolidated balance sheet of Home Beneficial
Corporation as of December 31, 1994 and 1993, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Corporation'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 consolidated financial position of Home Beneficial
Corporation at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 4 to the consolidated financial statements, the
Corporation changed its method of accounting for investments in debt and equity
securities and postretirement benefits other than pensions in 1994 and 1992,
respectively.
(Ernst & Young LLP sig)
Richmond, Virginia
February 10, 1995
18
<PAGE>
<PAGE>
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.
In May 1993 the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years beginning
after December 15, 1993. Under the new rules, debt securities that a corporation
has both the positive intent and ability to hold-to-maturity are carried at
amortized cost. Debt securities that a corporation does not have the positive
intent or ability to hold-to-maturity and all marketable equity securities are
classified as available-for-sale or trading are carried at fair value.
Unrealized gains and losses on securities classified as available-for-sale are
carried as a separate component of stockholders' equity. Unrealized gains and
losses on securities classified as trading are reported in earnings. The
Corporation adopted the provisions of SFAS No. 115 as of January 1, 1994. As a
result of adopting SFAS No. 115, the Corporation placed its entire fixed
maturity and equity securities portfolio in the available-for-sale
classification. The Corporation believes it has the ability to hold all fixed
income investments until maturity; however, securities may be sold to take
advantage of investment opportunities generated by changing interest rates,
prepayments or income tax considerations, as a part of the Corporation's
asset/liability strategy, or for similar factors. In accordance with SFAS No.
115, prior period financial statements have not been restated to reflect the
change in accounting principle. The cumulative effect as of January 1, 1994 of
adopting SFAS No. 115 increased stockholders' equity by $21 million (net of
deferred income taxes) to reflect the net unrealized gains on securities
previously carried at amortized cost. Due to rising interest rates during 1994,
a $17 million net unrealized loss (net of deferred income taxes) was charged
against stockholders' equity at December 31, 1994. There was no effect on net
income as a result of the adoption of SFAS No. 115.
Assets totaled $1.3 billion at December 31, 1994 with investment assets
totalling $1.2 billion or 89% of total assets. Both, total assets and invested
assets, increased over 1993; however, the growth in assets in 1994 was affected
by the reduction in carrying value of debt securities in accordance with the
required adoption of SFAS 115 and the use of $7.7 million of internally
generated funds to acquire 374,948 shares of the Corporation's common stock
during 1994. At December 31, 1994 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. There are no mortgage loans whose
terms have been restructured.
Cash and invested assets for 1994 exceeded total liabilities by 40%. 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 increased less
than $1 million for 1994 and accounted 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.
In May 1993, the FASB issued 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 will be required to comply with SFAS No.
114 beginning in 1995. Management does not anticipate this Standard to have any
significant effect.
Effective December 31, 1993, the National Association of Insurance Commissioners
adopted Risk-Based Capital (RBC) requirements for life/health insurance
companies to evaluate the adequacy of statutory capital and surplus in relation
to investment and insurance risks such as asset quality, mortality and
morbidity, asset and liability matching, and other business
19
<PAGE>
<PAGE>
factors. The RBC formula will be used by states as an early warning tool to
identify companies that potentially are inadequately capitalized for the purpose
of initiating regulatory action. The Life Company's statutory adjusted capital
is 30 times the authorized control level RBC requirement.
RESULTS OF OPERATIONS
Premiums decreased less than 1% for 1994 compared to a decrease of 1.3% for 1993
and an increase of 14% for 1992. The decline in premium income for both 1994 and
1993 is due primarily to reduced individual sales. The majority of the premium
increase in 1992 resulted from increased participation in a group reinsurance
contract. Net investment income, excluding realized investment gains and losses,
decreased 1.4% compared to decreases of 5.1% and 3.3% for 1993 and 1992,
respectively. Investment income has been affected by the downward trend
experienced in portfolio interest rates during 1993 and 1992. In addition, the
Corporation has used $34 million of internally generated funds to repurchase
over 1.5 million shares of its common stock since March 1991. Realized
investment gains amounted to $10.8 million and $2.9 million, respectively, for
1993 and 1992. These gains resulted principally from calls and maturities of
fixed maturities. Realized investment gains and losses for 1994 were
insignificant. Benefits and claims decreased 4% compared to increases of 7% and
16%, respectively, for 1993 and 1992. Individual mortality costs contributed to
the changes for 1994 and 1993. The increase for 1992 resulted from increased
participation in a group reinsurance contract.
See "A Message to Our Stockholders" for further discussion and analysis of
financial condition and results of operations.
20
<PAGE>
<PAGE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1994
Premium income $ 28,812,257 $ 28,360,063 $ 29,045,487 $ 29,853,615
Net investment income 21,044,266 21,165,271 21,098,994 21,550,899
Income before income
taxes 13,508,882 14,388,247 13,135,979 14,562,868
Net income 9,308,882 8,638,247 8,985,979 9,262,868
Net income per share .52 .48 .51 .53
1993
Premium income $ 29,125,783 $ 28,642,455 $ 28,960,706 $ 29,640,177
Net investment income 24,884,917 25,505,119 23,852,186 22,632,102
Income before income
taxes 17,029,491 17,673,931 14,416,080 14,794,951
Net income 11,379,491 11,923,931 9,341,080 9,969,951
Net income per share .61 .66 .52 .56
</TABLE>
MARKET AND DIVIDEND INFORMATION
The Corporation's Class B Non-Voting Common Stock is traded in the
over-the-counter (OTC) market and is quoted on the National Association of
Securities Dealers Automated Quotations (NASDAQ) under the Symbol HBENB. The
Corporation's Class A Voting Stock is not publicly traded, but is entitled to
the same cash dividend as Class B Non-Voting Common Stock. The approximate
number of record holders of the Corporation's common stock at December 31, 1994
was 2,000.
The following table gives the high and low prices of the Corporation's Class B
Non-Voting Common Stock and the cash dividends paid per share for each quarter
in the past two years.
<TABLE>
<CAPTION>
High Low Dividend
<S> <C> <C> <C>
1993
First Quarter $26 1/2 $24 $ .19
Second Quarter 25 23 1/2 .195
Third Quarter 26 1/4 23 .195
Fourth Quarter 24 21 1/2 .195
1994
First Quarter $23 $20 $ .195
Second Quarter 21 1/2 20 .20
Third Quarter 22 20 1/4 .20
Fourth Quarter 21 1/2 19 1/2 .20
</TABLE>
21
<PAGE>
<PAGE>
RECORD OF GROWTH OF INSURANCE
<TABLE>
<CAPTION>
FIVE YEARS ENDED DECEMBER 31 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
ollars
in
sands)
Insurance in force at end of period
Direct Sales
Permanent................................. $3,487,732 $3,475,846 $3,493,455 $3,443,609 $3,355,675
Term...................................... 1,061,649 1,046,115 1,048,076 775,688 726,634
Total................................... 4,549,381 4,521,961 4,541,531 4,219,297 4,082,309
Group........................................ 5,674,447 5,466,635 5,249,927 2,328,608 2,546,885
Total................................... 10,223,828 $9,988,596 $9,791,458 $6,547,905 $6,629,194
New insurance written
Direct Sales
Permanent................................. $ 598,301 $ 600,158 $ 642,629 $ 659,425 $ 605,617
Term...................................... 192,227 196,247 359,406 191,217 142,733
Total................................... 790,528 796,405 1,002,035 850,642 748,350
Group........................................ 225,565 258,174 3,215,242 1,015 31,937
Total..................................... $1,016,093 $1,054,579 $4,217,277 $ 851,657 $ 780,287
Premium income
Life and annuity............................. 106,957 $ 107,091 $ 107,650 $ 93,720 $ 93,043
Accident and health.......................... 9,114 9,278 10,296 9,773 9,184
Total................................. $ 116,071 $ 116,369 $ 117,946 $ 103,493 $ 102,227
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FIVE YEARS ENDED DECEMBER 31 1994 1993 1992 1991
<S> <C> <C> <C> <C>
Premium income........................... $ 116,071,422 $ 116,369,121 $ 117,946,267 $ 103,492,622
Net investment income(1)................. 84,859,430 96,874,324 93,583,108 93,913,440
Net income before accounting change...... 36,195,976 42,614,453 46,478,370 47,361,885
Accounting change(2)..................... -- -- (29,444,884) --
Net income(1)............................ 36,195,976 42,614,453 17,033,486 47,361,885
Net income per share(1)(2)
Before accounting change............... 2.04 2.35 2.50 2.51
Accounting change...................... -- -- (1.58) --
Net................................. 2.04 2.35 .92 2.51
Dividends paid per share................. .795 .775 .76 .69
Investments(3)........................... 1,146,717,259 1,143,940,703 1,116,410,112 1,080,540,431
Total assets............................. 1,288,826,060 1,280,233,898 1,248,432,740 1,205,296,739
Total liabilities........................ 822,056,126 806,971,506 787,991,344 748,363,554
Stockholders' equity..................... 466,769,934 473,262,392 460,441,396 456,933,185
Book value per share..................... 26.58 26.38 24.85 24.41
<CAPTION>
FIVE YEARS ENDED DECEMBER 31 1990
<S> <C>
Premium income........................... $ 102,226,755
Net investment income(1)................. 136,837,263
Net income before accounting change...... 66,618,365
Accounting change(2)..................... --
Net income(1)............................ 66,618,365
Net income per share(1)(2)
Before accounting change............... 3.29
Accounting change...................... --
Net................................. 3.29
Dividends paid per share................. .645
Investments(3)........................... 1,045,050,282
Total assets............................. 1,159,842,734
Total liabilities........................ 729,716,372
Stockholders' equity..................... 430,126,362
Book value per share..................... 22.52
</TABLE>
(1) Net investment income for 1990 includes realized investment gains of
$43,853,598 which resulted primarily from the sale of the Corporation's
interest in a major regional shopping center. Net income for 1990 includes
$28,453,598 ($1.40 per share) of net realized investment gains. Realized
investment gains and losses for 1991 and 1994 were insignificant. Realized
gains were $10,802,968 and $2,857,454 in 1993 and 1992, respectively. The
Corporation adopted Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes" in 1990. Adoption of this standard resulted in
an increase in previously provided deferred income taxes of $8,000,000 ($.39
per share) which was included in income tax expense for the year ended
December 31, 1990.
(2) The Corporation adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" in 1992. Adoption of this Standard was recognized as an accounting
change. See Note 4 of Notes to Consolidated Financial Statements.
(3) The Corporation adopted Statement of Financial Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" as of January 1,
1994. Adoption of SFAS No. 115 resulted in a $26.3 million decrease in the
carrying value of debt securities at December 31, 1994. In accordance with
SFAS No. 115, prior period financial statement balances were not restated.
See Note 1 of Notes to Consolidated Financial Statements.
22
R. W. WILTSHIRE
Chairman of the Board
C. M. GLENN, JR.
Retired Vice President and Treasurer
L. W. RICHARDSON
Retired Vice President
R. W. WILTSHIRE, JR.
President and
Chief Executive Officer
J. M. WILTSHIRE, JR.
Vice President, Secretary and Counsel
W. B. WILTSHIRE, CLU
Vice President
H. D. GARNETT, CPA
Vice President and Controller
G. T. RICHARDSON
Vice President
W. G. HANCOCK
Counsel
Partner, Mays & Valentine
DIANNE N. COLLINS
Community Volunteer
Officers of Home Beneficial Corporation and/or
Home Beneficial Life Insurance Company
R. W. WILTSHIRE
Chairman of the Board
*R. W. WILTSHIRE, JR.
President and
Chief Executive Officer
H. S. BOURNE
Vice President
*J. M. WILTSHIRE, JR.
Vice President, Secretary and
Counsel[ciix]
*W. B. WILTSHIRE, CLU
Vice President[ciix]
*H. D. GARNETT, CPA
Vice President and Controller[ciix]
*G. T. RICHARDSON
Vice President
W. T. MACE
Vice President
C. P. PARRISH, FLMI
Vice President
E. L. JOHNSON, III, FSA
Vice President andChief Actuary
*B. P. BOYD
Vice President andAsst. Secretary
A. O. BENNETT, FLMI
Vice President
K. H. BOGGS, Jr.
Vice President
*D. M. WESTERHOUSE, JR., CPA
Treasurer
*W. F. COLLINS, FLMI
Auditor
H. H. NASH, FSA
Actuary
W. C. HANCOCK, M.D.
Medical Director
R. L. STILES
Asst. Vice President
R. I. KEMPTON
Asst. Vice President
R. G. GILLISPIE, FLMI
Asst. Vice President
A. N. FASTIGE
Asst. Vice President
W. A. SIMMONS
Asst. Vice President
R. L. STEVENS
Asst. Vice President
J. P. WINN
Asst. Vice President
C. L. MARSH, CFA, CPA, FLMI
Asst. Vice President
R. R. POSA, FSA
Asst. Actuary
H. C. HUTCHERSON
Asst. Actuary
G. T. NUCKOLLS, JR.
Asst. Secretary
H. J. SMITH
Asst. Secretary
J.S. Stewart, FLMI
Asst. Secretary
C. J. Jackson
Asst. Secretary
*W. G. HANCOCK
Counsel
*Officers of both the Corporation and the Life Company. Others are
officers of the Life Company.
MAYS & VALENTINE, General Counsel
