SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-5562
HOME BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0884714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3901 West Broad Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
804-358-8431
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the Registrant's classes of Common
Stock as of November 7, 1996:
Class
Class A Common Stock
$.3125 Par Value 8,060,660 Shares
Class B Common Stock
$.3125 Par Value 8,992,910 Shares
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HOME BENEFICIAL CORPORATION
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet at
September 30, 1996 and December 31, 1995..............................4
Consolidated Condensed Statement of Income for the nine months and
three months ended September 30, 1996 and 1995 .......................5
Consolidated Condensed Statement of Cash Flows
for the nine months ended September 30, 1996 and 1995.................6
Notes to Consolidated Condensed Financial Statements .................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................8
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K ............................ 9
SIGNATURES ...........................................................10
<PAGE>
PART I. FINANCIAL INFORMATION
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
<S> <C>
ASSETS
Investments
Securities available-for-sale at fair value
Fixed maturities (Amortized value: 1996, $758,060,653
1995, $737,152,838) $ 776,844,465 $ 795,741,956
Equities (Cost: 1996, $9,589,733; 1995, $8,944,983) 32,955,331 29,475,901
Mortgage loans on real estate 369,505,154 339,773,729
Policy loans 54,937,676 54,480,175
Short-term investments 13,731,655 41,072,441
Other 6,314,287 6,242,886
------------------ ------------------
Total investments 1,254,288,568 1,266,787,088
Cash and cash equivalents 3,635,599 3,086,602
Receivables 24,045,673 23,006,240
Deferred policy acquisition costs 101,120,811 99,246,423
Other assets 9,435,891 11,228,471
------------------ ------------------
$ 1,392,526,542 $ 1,403,354,824
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and accruals
Future policy benefits and claims $ 680,854,458 $ 672,301,481
Unearned premiums 26,754,242 26,248,702
Other policy claims and benefits payable 10,726,130 10,819,728
------------------ ------------------
Total policy liabilities and accruals 718,334,830 709,369,911
Other policyholder funds 73,584,153 71,450,993
Other liabilities 70,710,308 80,446,342
------------------ ------------------
Total liabilities 862,629,291 861,267,246
Stockholders' Equity
Capital stock
Class A common stock, voting, $.3125 par value,
12,800,000 shares authorized; 8,060,660 issued
at September 30, 1996 and 8,446,200 issued
at December 31, 1995 2,518,956 2,639,438
Class B common stock, non-voting, $.3125 par value,
19,200,000 shares authorized; 8,992,910 issued
at September 30, 1996 and at December 31, 1995 2,810,284 2,810,284
------------------ ------------------
Total capital stock 5,329,240 5,449,722
Unrealized gains on securities available-for-sale
less related deferred income taxes 28,399,410 48,161,757
Retained earnings 496,168,601 488,476,099
------------------ ------------------
Total stockholders' equity 529,897,251 542,087,578
------------------ ------------------
$ 1,392,526,542 $ 1,403,354,824
================= ===================
</TABLE>
See accompanying notes.
4
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C>
Revenues
Premiums $29,091,032 $28,413,634 $87,526,548 $85,753,749
Net investment income 22,705,225 22,188,336 67,146,487 66,009,163
Realized investment (losses) gains (42,032) (100,147) 21,142 (50,168)
------------ ------------ ----------- ------------
Total revenues 51,754,225 50,501,823 154,694,177 151,712,744
Benefits, claims and expenses
Benefits and claims 23,651,952 22,354,794 70,840,295 69,668,560
Underwriting, acquisition
and insurance expenses 12,658,840 14,297,737 40,597,075 39,878,669
------------ ------------ ----------- ------------
Total benefits, claims and expenses 36,310,792 36,652,531 111,437,370 109,547,229
------------ ------------ ----------- ------------
Income before income taxes 15,443,433 13,849,292 43,256,807 42,165,515
Income taxes 6,000,000 4,450,000 15,200,000 14,300,000
------------ ------------ ----------- ------------
Net income $9,443,433 $9,399,292 $28,056,807 $27,865,515
============ ============ =========== ============
Net income per share of common stock
(Average shares outstanding:
1996-17,308,284; 1995-17,559,073) $ .55 $ .54 $1.62 $1.59
------------ ------------ ----------- ------------
Dividends per share $ .22 $ .21 $ .65 $ .62
------------ ------------ ----------- ------------
</TABLE>
See accompanying notes.
5
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
<S> <C>
OPERATING ACTIVITIES
Net income $ 28,056,807 $ 27,865,515
Adjustments to reconcile net income to net cash
provided by operating activities 6,781,946 7,795,530
----------------- ----------------
Net cash provided by operating activities 34,838,753 35,661,045
INVESTING ACTIVITIES
Proceeds from sales or maturities of investments
Fixed maturities available-for-sale 120,512,416 90,484,132
Mortgage loans on real estate 28,987,475 25,093,951
Short-term investments - net 27,340,786 0
Other 13,595,549 10,307,278
----------------- ----------------
Total proceeds 190,436,226 125,885,361
----------------- ----------------
Costs of investments acquired
Fixed maturities available-for-sale 135,469,472 109,668,604
Mortgage loans on real estate 58,493,447 17,996,335
Short-term investments -- net 0 13,408,915
Other 12,411,436 9,094,108
----------------- ----------------
Total costs 206,374,355 150,167,962
----------------- ----------------
Net cash used in investing activities (15,938,129) (24,282,601)
FINANCING ACTIVITIES
Dividends paid (11,251,979) (10,889,748)
Purchase of Class A Common Stock (9,232,808) (2,843,750)
Other 2,133,160 3,183,366
Net cash used in financing activities (18,351,627) (10,550,132)
Net increase in cash and cash equivalents 548,997 828,312
Cash and cash equivalents at beginning of year 3,086,602 1,726,812
----------------- ----------------
Cash and cash equivalents at end of period $ 3,635,599 $ 2,555,124
================= =================
Supplemental disclosure of cash flow information
Income tax payments $13,800,000 $14,700,000
----------------- ----------------
</TABLE>
See accompanying notes.
6
<PAGE>
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation - In the opinion of management, the accompanying
unaudited interim consolidated condensed financial statements of the
Corporation contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
September 30, 1996 and December 31, 1995, and the results of operations and
cash flows for the three months and nine months ended September 30, 1996
and 1995. The consolidated condensed financial statements include the
accounts of the Corporation, its principal subsidiary, Home Beneficial Life
Insurance Company (the Life Company), and its other subsidiaries. All
significant intercompany accounts and transactions are eliminated.
The accompanying financial statements should be read in conjunction with
the financial statements and notes thereto included in the Corporation's
1995 Annual Report to Stockholders.
2. During the first nine months of 1996, the Corporation purchased 385,540
shares of its Class A Common Stock at a cost of $9.2 million.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Corporation is primarily engaged in the life insurance business which
historically has provided a positive cash flow. By statute, the Life
Company is required to invest in quality securities which provide ample
protection for its policyholders. Policy liabilities of the Life Company
are predominately long term in nature and are supported primarily by long
term fixed maturity investments and mortgage loans on real estate.
Assets totaled $1.4 billion at September 30, 1996 with investment assets
totalling $1.3 billion. The Corporation's fixed maturity and equity
securities portfolio is classified in the balance sheet as
available-for-sale and carried at fair value. At September 30, 1996 the
fair value of these securities exceeded their cost by $42 million. At
September 30, 1996 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.
The Life Company continually matches the investment portfolio to the cash
flow demands of the types of insurance being written and maintains adequate
cash and short term investments to meet cash requirements for policy loans
and voluntary policy terminations, as well as investment commitments.
Policy loans account for less than 5% of total cash and invested assets.
As disclosed in the Notes to Consolidated Financial Statements as of
December 31, 1995, $145 million of consolidated stockholders' equity
represents net assets of the Life Company that cannot be transferred in the
form of dividends, loans or advances to the Corporation. However, this
poses no liquidity concerns to the Corporation as it has sufficient cash
flow to meet its operational requirements.
Results of Operations
Net income for the first nine months of 1996 was $28,056,807 compared to
$27,865,515 for the same period in 1995. Realized investment gains were
insignificant for the two periods.
Individual life insurance sales for 1996 increased by 4.8% and amounted to
$739 million compared to $704 million for the first nine months of 1995.
Net investment income, excluding realized investment gains and losses,
increased 1.7% compared to an increase of 4.3% for the 1995 period. Growth
in investment income continued to decline as a result of average yields on
newly acquired mortgages and fixed income securities being below the
Corporation's portfolio yield rate. Benefits and expenses for 1996 were
above 1995 results due to increased individual insurance policy
terminations.
8
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS: Exhibit 27 - Financial Data Schedule is filed as a part
of this Quarterly Report on page 11.
(b) No reports on Form 8-K were filed during the period covered by
this report.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Home Beneficial Corporation
(Registrant)
Date: November 7, 1996 R. W. Wiltshire, Jr.
----------------------- ---------------------
President and
Chief Executive Officer
Date: November 7, 1996 Hugh D. Garnett
----------------------- ----------------
Vice President and Controller
10
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Exhibits
(Item 6(a))
Sequential
Page Number
EXHIBITS
27 - Financial Data Schedule 12
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted
from the current quarter's Form 10-Q and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 776,844,465
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 32,955,331
<MORTGAGE> 369,505,154
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,254,288,568
<CASH> 3,635,599
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 101,120,811
<TOTAL-ASSETS> 1,392,526,542
<POLICY-LOSSES> 680,854,458
<UNEARNED-PREMIUMS> 26,754,242
<POLICY-OTHER> 10,726,130
<POLICY-HOLDER-FUNDS> 73,584,153
<NOTES-PAYABLE> 0
0
0
<COMMON> 5,329,240
<OTHER-SE> 524,568,011
<TOTAL-LIABILITY-AND-EQUITY> 1,392,526,542
87,526,548
<INVESTMENT-INCOME> 67,146,487
<INVESTMENT-GAINS> 21,142
<OTHER-INCOME> 0
<BENEFITS> 70,840,295
<UNDERWRITING-AMORTIZATION> 12,989,009
<UNDERWRITING-OTHER> 27,608,066
<INCOME-PRETAX> 43,256,807
<INCOME-TAX> 15,200,000
<INCOME-CONTINUING> 28,056,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,056,807
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
