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, 1995
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 $222,767,216 as of March 8,
1996.
Number of shares outstanding of each of the Registrant's classes of common
stock as of March 8, 1996:
Class Shares
Class A Common Stock
$.3125 Par Value 8,317,827
Class B Common Stock
$.3125 Par Value 8,992,910
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, 1995.
<PAGE>
TABLE OF CONTENTS
PART I
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<CAPTION>
PAGE
<S> <C>
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 .............. 20
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ................................................. 21
SIGNATURES ........................................................... 29
</TABLE>
<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 1995.
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 235 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 1995:
Premiums
Jurisdiction (In 000's)
Delaware $ 2,596
District of Columbia 2,802
Maryland 15,210
North Carolina 10,058
Tennessee 22,084
Virginia 40,012
West Virginia 1,194
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. The total amount of life
insurance in force at December 31, 1995 reinsured by the Life Company
<PAGE>
with other companies aggregated $85 million representing less than 1% of
the Life Company's life insurance in force on that date. 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. 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 56% of life insurance in force for 1995. 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.
Accident and health insurance premiums accounted for less than 8% of
premium income for 1995. 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 1995.
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 1995
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.
The following table shows investments of the Life Company at December 31,
1995. Fixed maturities (bonds, notes and redeemable preferred stocks)
and equity securities (nonredeemable preferred and common stocks) are
stated at fair value; mortgage loans on real estate are stated at cost
adjusted where appropriate for amortization of premium or discount;
<PAGE>
short-term investments are at cost; and policy loans are stated at unpaid
balances.
<TABLE>
<CAPTION>
Asset Value
Amount Percent
(000's) of Total
<S> <C> <C>
Fixed Maturities:
Bonds and notes:
United States government and govern-
ment agencies and authorities $ 36,123 2.9%
States, municipalities and political
subdivisions 369,590 29.2
Foreign government 23,954 1.9
Public utilities 274,965 21.7
All other corporate 91,110 7.2
Total fixed maturities 795,742 62.9
Equity Securities 29,476 2.3
Mortgage loans 339,774 26.9
Policy loans 54,480 4.3
Short-term investments 39,620 3.1
Other 5,610 .5
$1,264,702 100.0%
</TABLE>
There were no principal and interest payments past due on fixed
maturities at December 31, 1995.
The Life Company's mortgage portfolio consists of approximately 2,400
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,
1995 the aggregate carrying value of mortgage loans was $339,773,729,
broken down by category as follows:
Residential $167,751,726
Commercial 172,022,003
Commercial loans include loans on apartments, shopping centers, office
buildings and warehouses. Generally, commercial loans range from
$250,000 to $4,500,000 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.
The Life Company's mortgage lending business is heavily concentrated in
the states of Virginia and North Carolina. At December 31, 1995,
approximately 77% of the Life Company's mortgages, constituting approxi-
mately 75% 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
<PAGE>
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 one real estate parcel acquired through foreclosure with a carrying
value in the financial statements of $670,000. 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, 1995.
Except as indicated below, there were no mortgage loans otherwise not
performing in accordance with the contractual terms.
At December 31, 1995, 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal $1,800,8011 $373,751 $67,955 $2,242,507
Percent of total
mortgage loans .53% .11% .02% .66%
</TABLE>
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,
1995 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 1986-1995, the Life Company experienced only six
foreclosures on real estate loans, one in each of the years 1986, 1989,
1990 and 1995, two in 1992, none in 1993 and 1994. The total of the
unpaid principal balances of loans in these six foreclosures was approxi-
mately $1.7 million. The Life Company disposed of five properties
acquired in pre-1994 foreclosure proceedings without a net 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,
14 and 15 of the 1995 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 18 of the 1995
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 18 of the 1995 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 in the states in which it is
licensed. The American Council of Life Insurance in its "1995 Fact
Book", estimates that there were 1,770 life insurance companies doing
business in the United States at the beginning of 1995.
According to figures reported in the October 1995 issue of Best's Review,
Life/Health Edition, calculated on a statutory accounting basis, the Life
Company ranks in the top 12% of all life insurance companies in the
United States based on total admitted assets as of December 31, 1994.
<PAGE>
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 61 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 1996 to 2005; all of the longer term leases being for
district office purposes. The maximum annual rent paid under any lease
is $28,776. The annualized rent under all leases in effect on December
31, 1995 was approximately $750,000.
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, 1995.
<PAGE>
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Incorporated herein by reference from the 1995 Annual Report to
Stockholders, page 22.
ITEM 6. Selected Consolidated Financial Data
Incorporated herein by reference from the 1995 Annual Report to
Stockholders, page 23.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated herein by reference from the 1995 Annual Report to
Stockholders, pages 20 and 21.
ITEM 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Corporation at December 31, 1995
and 1994 and for each of the three years in the period ended December 31,
1995 and the independent auditor's report thereon and the Corporation's
unaudited quarterly financial data for the two year period ended December
31, 1995 are incorporated herein by reference from the 1995 Annual Report
to Stockholders, pages 6 through 19 and 22.
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 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 50 Director of the Corporation and the Life
Company and Community Volunteer
H. D. Garnett 53 Vice President (since 1979), Controller
(since 1974) and a director of the
Corporation and the Life Company
W. G. Hancock 45 Counsel (since 1984) and a director of
the Corporation and the Life Company
G. T. Richardson 43 Vice President (since 1983) and a director
of the Corporation and the Life Company
L. W. Richardson 76 Retired Vice President and a director of
the Corporation and the Life Company
J. M. Wiltshire, Jr. 70 Secretary (since 1994) and a director of the
Corporation and the Life Company
R. W. Wiltshire 74 Chairman of the Board (since 1983) and a
director of the Corporation and the Life
Company
R. W. Wiltshire, Jr. 50 President (since 1988) and Chief Executive
Officer (since 1992) and a director of
the Corporation and the Life Company
W. B. Wiltshire 47 Vice President (since 1983) and a director
of the Corporation and the Life Company
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. Messrs. R. W. Wiltshire and L. W.
Richardson have served as directors of the Corporation since its
organization in 1970.
<PAGE>
All of the above persons serve one year terms as both executive officers
and directors, or in the case of L. W. Richardson and Mrs. Collins, as
directors only, which expire April 2, 1996. There are no executive
officers of the Corporation who are not directors.
(c) Not applicable.
(d) 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. W. G. Hancock has
been a partner of the law firm of Mays & Valentine 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. L. W.
Richardson retired on December 31, 1987, having served in the office
shown for more than five years immediately prior to his retirement. J.
M. Wiltshire, Jr. retired as an employee and salaried officer of the
Corporation and the Life Company on December 31, 1995, having served as
Vice President and Counsel for more than five years immediately prior to
his retirement. He was elected Secretary of the Corporation and Life
Company effective January 18, 1994 and continues to serve in that
capacity. Effective April 7, 1992, R. W. Wiltshire, Jr. was elected
Chief Executive Officer of the Corporation and the Life Company 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.
(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 1995.
<PAGE>
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, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal Annual All Other
Position (1) Year Compensation-Salary (2) Compensation(3)
<S> <C> <C> <C>
R. W. Wiltshire, Jr. 1995 $160,112 $4,803
President and Chief 1994 139,312 4,179
Executive Officer 1993 118,512 3,555
J. M. Wiltshire, Jr. 1995 139,934 4,198
Vice President, 1994 132,134 3,964
Secretary and 1993 125,434 3,763
Counsel (4)
W. B. Wiltshire 1995 130,284 3,909
Vice President 1994 117,294 3,519
1993 105,403 3,162
G. T. Richardson 1995 128,597 3,858
Vice President 1994 117,074 3,512
1993 105,174 --
H. D. Garnett 1995 126,922 3,808
Vice President and 1994 119,122 3,574
Controller 1993 112,422 3,373
</TABLE>
(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 December 31, 1995, J. M. Wiltshire, Jr. retired from active
service as an employee and salaried officer of the Corporation and
the Life Company
(c) Not applicable
(d) Not applicable
<PAGE>
(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 two months of service. 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 for the year 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, other than J. M.
Wiltshire, Jr. are as follows: R. W. Wiltshire, Jr. - $94,110, W. B.
Wiltshire - $89,542, G. T. Richardson - $98,658, and H. D. Garnett -
$73,672. The benefits as shown are estimated on the basis that the per-
sons named will continue to receive, until the end of the calendar year
in which they reach age 65, salaries at the same rates in effect during
1995 and will then retire and elect a single life rather than a joint and
survivor annuity form of payment. J. M. Wiltshire, Jr. retired as an
employee and salaried officer of the Corporation and the Life Company
effective December 31, 1995 and receives an annual benefit of $33,936
<PAGE>
under the Plan based upon his election of a joint and survivor annuity.
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, 1995
(without interest to be credited thereafter) for each of them are as
follows: R. W. Wiltshire, Jr. - $29,823, W. B. Wiltshire - $30,551, G.
T. Richardson - $27,641, and H. D. Garnett - $27,641. J. M. Wiltshire,
Jr. retired as of December 31, 1995 with a spending account credit
balance of $32,733.
The Corporation is self insured with respect to benefits under the
postretirement medical benefits plan.
(g) Compensation of Directors
All directors of the Corporation (other than Messrs. L. W. Richardson, R.
W. Wiltshire, J. M. Wiltshire, Jr., and Hancock and Mrs. Collins) are
salaried executive officers. Messrs. L. W. Richardson, R. W. Wiltshire
and J. M. Wiltshire, Jr. have retired as salaried executive officers of
the Corporation and the Life Company on December 31, 1987, September 6,
1993, and December 31, 1995, respectively. In consideration of their
past services to the Corporation and the Life Company, the Corporation
agreed to pay L. W. Richardson (more than 42 years of continuous service)
$30,000 per year, R. W. Wiltshire (more than 47 years of continuous
service) $90,000 per year and J. M. Wiltshire, Jr. (more than 27 years of
continuous service) $25,000 per year, in addition to their respective
<PAGE>
annual benefits of $34,109, $55,002 and $33,936 under the Corporation's
pension plan. The Corporation's agreements with each of them 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. L. W. Richardson also is a participant in the pre-
1993 retiree program under the Corporation's postretirement medical
benefits plan. R. W. Wiltshire is a participant in the post-1992 retiree
program under the plan and has a spending account credit balance as of
December 31, 1995, after payment of premiums subsequent to his
retirement, of $40,264. (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 1995, including
amounts for legal services provided by Mr. Hancock, did not exceed 5% of
the firm's gross revenues for its last fiscal year. C. M. Glenn, Jr. a
director of the Corporation and the Life Company until his death on April
9, 1995, served as a Consultant to the Corporation and its subsidiaries
after his retirement for which he received $10,000 during 1995 in
addition to his normal retirement benefits under the Corporation's
pension and postretirement medical benefits plan. Under the terms of the
contract, Mr. Glenn agreed to perform such services of a consulting and
advisory nature as were requested of him from time to time by the
Chairman of the Board of the Corporation. 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
(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., W. B. Wiltshire, G. T. Richardson and Garnett are
salaried executive officers of the Corporation. Messrs. R. W. Wiltshire
and J. M. Wiltshire, Jr. have retired as employees of the Corporation and
now serve as unsalaried executive officers in the capacities of Chairman
of the Board and Secretary, respectively. L. W. Richardson is a retired
executive officer 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.
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) and (b) As of March 8, 1996, 5,267,275 shares of Class A Common Stock
of the Corporation, constituting 63.3% of the 8,317,827 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 (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
<PAGE>
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.
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 8, 1996, the Trustees under the 1984 Voting Trust
beneficially owned, directly or indirectly, voting trust certificates
evidencing an aggregate of 1,288,270 shares of Class A Common Stock
subject thereto, as well as another 465,753 shares of Class A Common
Stock that are not subject to the 1984 Voting Trust.
The following table shows as of March 8, 1996, 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
<TABLE>
<CAPTION>
Amount
Title of Beneficially Percent of
Name of Director Class Owned(1) Class(2)
<S> <C> <C> <C>
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) *
W. G. Hancock Class A 89,560 (7)(8)(9) 1.08
Class B 4 *
G. T. Richardson Class A 652,464 (3)(5)(10) 7.84
Class B 10,274 *
L. W. Richardson Class A 262,161 (3)(5)(7)(10)(11) 3.15
Class B 89,179 (7)(11) *
J. M. Wiltshire, Jr. Class A - -
Class B 6,000 *
R. W. Wiltshire Class A 788,752 (3)(5)(7)(12) 9.48
Class B 660 (12) *
R. W. Wiltshire, Jr. Class A 37,110 (3)(5)(12) *
Class B 32,679 (7)(12) *
W. B. Wiltshire Class A 36,950 (5)(12) *
Class B 21,786 (7)(12) *
</TABLE>
5% Class A Stockholders
(Other Than Directors and Trustees)
<TABLE>
<CAPTION>
Amount
Name and Address of Beneficially Percent of
5% Class A Stockholder Owned (1) Class
<S> <C> <C>
Dixie Company 2,561,336 (5)(13) 30.79
Richmond, Virginia
Estate of Mary Morton Parsons 1,174,427 (5)(14) 14.12
Richmond, Virginia
Estate of George L. Richardson 599,680 (5)(10) 7.21
Richmond, Virginia
</TABLE>
(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) 5,267,275 shares of Class A Common Stock constituting 63.3% of the
8,317,827 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.
(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
<PAGE>
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; G. T. Richardson - 427,110; L. W. Richardson - 250,708; R. W.
Wiltshire - 586,276; R. W. Wiltshire, Jr. - 10,640; W. B. Wiltshire -
10,492; Dixie Company - 2,423,800; Estate of Mary Morton Parsons -
1,174,427; and Estate of George L. Richardson - 404,600.
(6) All of the Class B shares shown for Mr. Garnett are owned jointly
with his wife.
(7) Includes an aggregate of 6,240 shares of Class A (of which 2,696
shares are evidenced by voting trust certificates of the 1984 Voting
Trust) and 12,710 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.
(8) The ownership shown for Mr. Hancock excludes 188,800 shares of Class
A Common Stock held in trust for the benefit of his mother, with
remainder to her issue, in which Mr. Hancock has a vested one-third
beneficial interest subject to partial divestment upon any further
children of his mother.
(9) 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.
(10) 195,080 shares of Class A Common Stock and voting trust certificates
for 404,600 shares of Class A Common Stock are held by the Estate of
George L. Richardson and an inter-vivos trust created by George L.
Richardson prior to his death. The co-executors of the estate and
co-trustees of the trust are his grandsons, G. T. Richardson and
Miles Corbett Wright, III who share voting and investment power over
all of the foregoing shares. L. W. Richardson and his sister, who
are the children of George L. Richardson, have a vested two-thirds
present interest and a vested one-third remainder interest in the
assets of the estate and trust. The ownership shown includes all
such shares for G. T. Richardson and excludes all such shares for L.
W. Richardson. Such shares are also included in the table for the
Estate of George L. Richardson.
(11) 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.
(12) 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 his children. In addition, R. W. Wiltshire has a
life estate in voting trust certificates evidencing 450,524 shares of
Class A Common Stock subject to the 1984 Voting Trust, with remainder
to his children. R. W. Wiltshire, Jr. and W. B. Wiltshire have
vested one-fourth beneficial interests in all of the foregoing
<PAGE>
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 voting trust certificates for 17,528 Class A
shares and 123,308 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 voting trust certificates evidencing 8,764 Class A shares
held by him for his own benefit and 26,445 Class B shares held by him
as custodian for his minor children and, in the case of W. B.
Wiltshire, for voting trust certificates evidencing 8,764 Class A
shares held by him for his own benefit and 17,630 Class B shares held
by him as custodian for his minor children.
(13) 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).
(14) Clinton Webb and NationsBank, N.A. are the co-executors of the Estate
of Mary Morton Parsons.
As of March 8, 1996, executive officers and directors of the
Corporation as a group beneficially owned 1,880,533 shares or 22.61% 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 170,446 shares or 1.9% 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.
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 1995, and is expected to serve in the
same capacity in 1996. The amount of legal fees paid to that firm by the
Corporation and its subsidiaries and affiliates for 1995 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 22 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 19
Consolidated Balance Sheets at December 31, 1995 and 1994 6-7
Consolidated Statement of Income for each of the three
years in the period ended December 31, 1995 8
Consolidated Statement of Retained Earnings for each of
the three years in the period ended December 31, 1995 9
Consolidated Statement of Cash Flows for each of the
three years in the period ended December 31, 1995 10
Notes to Consolidated Financial Statements 11-18
Supplementary information--
Quarterly financial information (unaudited) 22
Financial Statement Schedules:
I - Summary of investments - other than investments
in related parties at December 31, 1995
(Consolidated) 24
II - Condensed Financial Information of Registrant
(Parent Company):
Balance Sheet at December 31, 1995 and 1994 25
Statement of Income for each of the three years
in the period ended December 31, 1995 26
Statement of Cash Flows for each of the three
years in the period ended December 31, 1995 27
IV - Reinsurance for each of the three years in the
period ended December 31, 1995 (Consolidated) 28
</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, 1995, 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 9, 1996, included
in the 1995 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 9, 1996
<PAGE>
Schedule I
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
At December 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D
Amount at
which shown in
Type of Investment Cost Value balance sheet
<S> <C> <C> <C>
Fixed maturities securities
available-for-sale:
Bonds and notes:
United States Government
and government agencies
and authorities $ 31,224,017 $ 36,123,390 $ 36,123,390
States, municipalities
& political subdivisions 350,176,819 369,590,209 369,590,209
Foreign governments 22,223,930 23,954,168 23,954,168
Public utilities 254,862,308 274,964,686 274,964,686
All other corporate 84,556,098 90,027,628 90,027,628
Redeemable preferred stocks 1,000,000 1,081,875 1,081,875
Total 744,043,172 $ 795,741,956 795,741,956
Equity securities
available-for-sale:
Common stocks:
Public utilities 994,878 $ 3,333,454 3,333,454
Banks, trust and insurance
companies 584,960 5,834,233 5,834,233
Industrial, miscellaneous
and other 6,584,869 19,724,000 19,724,000
Nonredeemable preferred
stocks 473,221 584,214 584,214
Total equity securities 8,637,928 $ 29,475,901 29,475,901
Mortgage loans on real estate 339,773,729 339,773,729
Policy loans 54,480,175 54,480,175
Other long-term investments 6,242,886 6,242,886
Short-term investments 41,072,441 41,072,441
Total investments $1,194,250,331 $1,266,787,088
</TABLE>
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31, 1995 and 1994
1995 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,473,572 $ 1,015,332
Investment in subsidiaries, at equity 535,622,022 460,497,094
Other assets 5,224,219 5,370,053
$542,319,813 $466,882,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ 232,235 $ 112,545
Stockholders' equity (*)
Capital stock:
Class A Common Stock, voting, $.3125 par
value 12,800,000 shares authorized;
8,446,200 issued at December 31, 1995
and 8,476,576 issued at December 31, 1994 2,639,438 2,648,930
Class B Common Stock, non-voting,
$.3125 par value, 19,200,000 shares
authorized; 8,992,910 issued at
December 31, 1995 and 9,087,534
issued at December 31, 1994 2,810,284 2,839,854
Total capital stock 5,449,722 5,488,784
Unrealized gains (losses) on available-
for-sale securities of subsidiaries
less deferred income taxes 48,161,757 (6,652,336)
Retained earnings 488,476,099 467,933,486
Total stockholders' equity 542,087,578 466,769,934
$542,319,813 $466,882,479
</TABLE>
(*) See Notes 6 and 7 to Consolidated Financial Statements
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Dividends from subsidiaries $17,440,000 $22,304,000 $29,216,000
Other investment income 1,043,107 971,392 1,005,362
Total Revenues 18,483,107 23,275,392 30,221,362
Expenses:
Operating and administrative 727,989 821,074 915,949
Income before income taxes and
equity in undistributed income
of subsidiaries 17,755,118 22,454,318 29,305,413
Income taxes - current 125,000 75,000 50,000
Income before equity in
undistributed income of
subsidiaries 17,630,118 22,379,318 29,255,413
Equity in undistributed income
of subsidiaries 20,269,144 13,816,658 13,359,040
Net income $37,899,262 $36,195,976 $42,614,453
</TABLE>
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents (*)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Activities:
Net income $ 37,899,262 $ 36,195,976 $ 42,614,453
Adjustments to reconcile net
income to net cash provided
from operating activities:
Undistributed net income
of subsidiaries (20,269,144) (13,816,658) (13,359,040)
Other 223,833 333,274 92,878
Net cash provided by
operating activities 17,853,951 22,712,592 29,348,291
Investing activities:
Additional investment
in subsidiary - (1,500,000) -
Net cash used in
investing activities - (1,500,000) -
Financing activities:
Purchase of Common Stock (2,843,750) (7,675,184) (14,142,511)
Cash dividends to stockholders (14,551,961) (14,102,572) (14,014,459)
Net cash used in financing
activities (17,395,711) (21,777,756) (28,156,970)
Increase (Decrease) in cash and
cash equivalents 458,240 (565,164) 1,191,321
Cash and cash equivalents,
beginning of year 1,015,332 1,580,496 389,175
Cash and cash equivalents,
end of year $ 1,473,572 $ 1,015,332 $ 1,580,496
</TABLE>
(*) Short-term investments, which consist of investments with maturities of
30 days or less, are considered cash equivalents
<PAGE>
Schedule IV
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
REINSURANCE
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
1995:
Life insurance
in force $4,773,994,073 $84,854,014 $6,036,809,369 $10,725,949,428 56.3%
Premiums:
Life insurance $87,709,070 $391,887 $18,110,328 $105,427,511 17.2%
Accident and
health insurance 7,755,414 151 863,934 8,619,197 10.0
Total premiums $95,464,484 $392,038 $18,974,262 $114,046,708 16.6%
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%
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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, 3/19/96
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, 3/19/96
L. W. Richardson
Retired Vice President and Director, 3/19/96
R. W. Wiltshire, Jr.
President, Chief Executive Officer and Director, 3/19/96
J. M. Wiltshire, Jr.
Secretary and Director, 3/19/96
W. B. Wiltshire
Vice President and Director, 3/19/96
H. D. Garnett
Vice President, Controller and Director, 3/19/96
G. T. Richardson
Vice President and Director, 3/19/96
W. G. Hancock
Counsel and Director, 3/19/96
Dianne N. Collins
Director, 3/19/96
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Exhibits
(Items 14(c))
Sequential
Page Number
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
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 agreement with
L. W. Richardson, a Director 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. Supplemental Compensation
Agreement with J. M. Wiltshire, Jr., a Director and Secretary of
the Corporation, incorporated herein by reference from September
30, 1995 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 1995 Annual Report to Stockholders
is not deemed filed as part of this report 32-55
16 - Letter reference change in certifying accountant - Not applicable -
18 - Letter reference change in accounting principles - Not applicable -
21 - Subsidiaries of the Registrant 31
22 - Published report regarding matters submitted to vote of security
holders - Not applicable -
23 - Consents of experts and counsel 23
24 - Power of Attorney - Not applicable -
27 - Financial Data Schedule 56
28 - Information from reports furnished to state insurance regulatory
authorities - Not applicable -
99 - Additional exhibits - Not applicable -
</TABLE>
<PAGE>
Exhibit 22
HOME BENEFICIAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
AT DECEMBER 31, 1995
Jurisdiction Percentage of
Under Which Voting Securities
Name of Subsidiaries* Organized Owned
Home Beneficial Life Insurance Company Virginia 100%
HBC Development Corporation Virginia 100%
*Business name of the subsidiaries is the same.
<PAGE>
1995 ANNUAL REPORT
HOME BENEFICIAL CORPORATION
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Life insurance in force (In 000's) $ 10,725,949 $ 10,223,828
Total assets 1,403,354,824 1,288,826,060
Stockholders' equity 542,087,578 466,769,934
Total revenues 202,086,781 200,930,852
Net income 37,899,262 36,195,976
Per share
Net income $ 2.16 $ 2.04
Dividends paid .83 .795
Book value 31.08 26.58
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<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........................... 19
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................ 20
Quarterly Financial Information and Market and
Dividend Information..................................................... 22
Record of Growth of Insurance and Selected Consolidated Financial Data...... 23
Directors and Officers...................................................... 24
</TABLE>
2
<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 2, 1996 at 10:00 a.m. at the Corporation's Home Office,
3901 West Broad Street, Richmond, Virginia 23230.
[HOME BENEFICIAL LOGO] HOME BENEFICIAL CORPORATION
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
3
<PAGE>
A MESSAGE TO OUR STOCKHOLDERS
The year 1995 was the most exciting year the Company has experienced during this
decade. Many of the men and women from different departments in our Home Office
began to see the fruits of their labor pay huge dividends when the sales force
enthusiastically accepted the new accounting system on which they had worked so
hard for so long. The fear expressed by our agents, due to the heavy reliance on
a handheld computer for their livelihood, soon vanished after their initial
training and within a few weeks of use on the job. Since the year began, many of
our sales personnel have visited us in the Home Office and to our knowledge, no
one has expressed a willingness to return to our old systems.
This technology developed within the Company helped make us more productive
during 1995, but it was the efforts of our Managers, Staff Managers and Agents
that produced the outstanding results we had for the year. Our Agents' bulletin,
the scorecard used to measure controllable premium increase for each agent, set
an all time record for the Company. Individual sales for the year increased by
18% to $938.2 million and first year individual premiums advanced by 16%. As we
have stated many times in previous reports, it is our sales personnel that gives
us the competitive advantage in the market in which we operate and their
dedication to each prospect and policyholder served during the year created this
fine record.
Because of the desire within our industry to diversify or consolidate, regional
companies such as Home Beneficial have become more unique. By operating in only
six states of the country and maintaining one distribution system, management
has been able to concentrate its efforts on serving a broad market of customers
in an income range that represents 60% of American households. That strategy has
served us well both operationally and financially. By delivering our products in
a concentrated territory through one distribution system we have been relieved
of many layers of bureaucracy and have had better control of general insurance
expenses, which has resulted in delivering adequate profit margins.
The achievements that have been accomplished by the use of this strategy are
evident as you read this report. They also have not gone unnoticed by others. A.
M. Best Company acknowledged during the year the Life Company's excellent
earnings performance, its strong capitalization and the good performance of its
investment portfolio by assigning the Life Company to its highest rating
category at A+ Superior. Moody's Investors Service included the Corporation in
its "Dividend Achiever" status for increasing per share dividends to
shareholders each year for the past 32 years; a dividend record which placed the
Corporation in the top 3% of over 10,000 United States companies publicly
traded. Ward Financial Group, an investment banking firm specializing in the
insurance industry, named the Life Company to its 1995 Ward's 50 benchmark group
for achieving outstanding financial results in the areas of safety, consistency
and performance over a five year period. The 50 companies selected by Ward were
picked from a universe which included some 2,000 life/health insurers. In an
environment of constant change, investors, policyholders and regulators become
concerned about a company's solvency and ability to perform. It is reassuring to
everyone when outside authorities of this stature award Home Beneficial with
such high marks.
Net income for the Corporation was $37,899,262 or $2.16 per share compared to
1994 results of $36,195,976 or $2.04 per share. On a per share basis, earnings
advanced for 1995 by 5.9%. Realized investment gains during 1995 versus losses
the previous year had no effect on per share amounts for either period,
resulting in earnings from operations being identical to net income per share.
Total assets ended the year at $1.4 billion, an increase of 8.9% over the
previous year. Stockholders' equity rose in 1995 to $542.1 million
4
<PAGE>
from $466.8 million, an increase of $75.3 million. On a per share basis,
stockholders' equity at the end of 1995 was $31.08 versus $26.58 at year-end
1994, a gain of 16.9%. Much of the gain in stockholders' equity and total assets
was due to the strong bond markets during 1995 which lowered interest rates
considerably, thus increasing the value of the Company's bond portfolio. While
market value accounting does not effect the income statement of the Corporation,
it does create more volatility within the categories of Invested Assets and
Stockholders' Equity on the Consolidated Balance Sheet.
The Corporation's dividend to stockholders was raised to a quarterly rate of
$.21 per share, increasing the amount paid during 1995 to $.83. Each year since
becoming a public company, stockholders have participated in the long term
growth achieved by Home Beneficial Corporation or its predecessor, Home
Beneficial Life, whose history of paying dividends without interruption dates
back 89 years.
Considerable progress was made during 1995 in our efforts to better serve both
present and future policyholders; however, as we begin the second half of this
decade, our biggest challenge is to use technology in an economical way that
will continue to increase our efficiency in the delivery of our products while
at the same time improve customer service. The 1990's will continue to be a time
for all of us to save and invest for our families' future, and the companies
that provide competitive financial products, backed by superior service, should
prosper. Our goal is to be one of those companies.
Home Beneficial remains one of the strongest insurance companies in the United
States. For many years it has provided products and services with virtually no
risk of loss to policyholders. At the same time, we have been mindful of our
ultimate responsibility to our stockholders. As we plan for the future, it is
with the realization that policyholders, employees and stockholders alike, must
be the beneficiaries of the Company's success.
[PHOTO]
R. W. Wiltshire, Jr.
Only by satisfying the needs of each of these groups will the Company be
assured of a bright future. We hope, as you read our report, the successes
highlighted throughout these pages will be credited to the many men and women at
Home Beneficial that dedicate themselves to their job each day.
Thank you for your interest and investment in Home Beneficial Corporation.
/s/ R. W. WILTSHIRE
R. W. Wiltshire
Chairman of the Board
/s/ R. W. WILTSHIRE, JR.
R. W. Wiltshire, Jr.
President and
Chief Executive Officer
5
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
INVESTMENTS -- Note 2
Securities available-for-sale at fair value
Fixed maturities (amortized cost: 1995, $744,043,172;
1994, $718,305,895) $ 795,741,956 $ 691,976,855
Equities (cost: 1995, $8,637,928; 1994, $9,728,145)..................... 29,475,901 24,229,849
Mortgage loans on real estate.............................................. 339,773,729 338,458,261
Policy loans............................................................... 54,480,175 53,425,676
Short-term investments..................................................... 41,072,441 32,459,616
Other...................................................................... 6,242,886 6,167,002
Total investments....................................................... 1,266,787,088 1,146,717,259
CASH......................................................................... 3,086,602 1,726,812
ACCRUED INVESTMENT INCOME.................................................... 17,412,378 16,958,594
RECEIVABLES -- uncollected premiums.......................................... 5,593,862 5,232,370
DEFERRED POLICY ACQUISITION COSTS............................................ 99,246,423 96,246,153
PROPERTY AND EQUIPMENT, AT COST
(less accumulated depreciation: 1995, $7,413,136;
1994, $6,598,531)......................................................... 6,904,462 7,627,921
DEFERRED CHARGES AND OTHER ASSETS............................................ 4,324,009 14,316,951
$1,403,354,824 $1,288,826,060
</TABLE>
See accompanying notes.
6
<PAGE>
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 and 1993
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). The preparation of financial statements of the Life
Company requires management to make estimates and assumptions that affect
amounts reported herein. Such estimates and assumptions could change in the
future as more information becomes known. 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 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. 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>
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 1995. 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 1/2% to 5 3/4%. 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 tax benefit) was charged
against stockholders' equity at December 31, 1994. As a result of declining
interest rates during 1995, a $33.6 million net unrealized gain (net of
deferred income taxes) was credited to stockholders' equity at December 31,
1995. 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,
1995:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
1995 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US government
corporations and agencies $ 31,224,017 $ 4,936,711 $ 37,338 $ 36,123,390
Obligations of states and political
subdivisions 350,176,819 20,058,784 645,394 369,590,209
Debt securities issued by foreign
governments 22,223,930 1,758,642 28,404 23,954,168
Corporate securities 340,418,406 26,572,230 916,447 366,074,189
Total fixed maturities 744,043,172 53,326,367 1,627,583 795,741,956
Equity securities 8,637,928 20,837,973 -- 29,475,901
Total $752,681,100 $74,164,340 $1,627,583 $825,217,857
</TABLE>
12
The following is a summary of available-for-sale securities at December 31,
1994:
<TABLE>
<CAPTION>
Cost or 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 fixed maturities 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>
The amortized cost and estimated fair value of fixed maturities, by
contractual maturity, and equities available-for-sale at December 31, 1995,
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>
1995
COST OR ESTIMATED
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 26,792,311 $ 27,168,864
Due after one year through five years 184,165,499 193,628,720
Due after five years through ten years 482,852,735 517,996,841
Due after ten years 39,173,185 42,901,191
732,983,730 781,695,616
US government mortgage backed securities 11,059,442 14,046,340
Equities 8,637,928 29,475,901
Total $752,681,100 $825,217,857
</TABLE>
The carrying amounts and fair values of the Corporation's investments in
mortgage loans on real estate and policy loans were as follows at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
<S> <C> <C> <C> <C>
Commercial mortgages $172,022,003 $186,619,325 $169,981,656 $170,169,251
Residential mortgages 167,751,726 176,661,907 168,476,605 156,615,617
$339,773,729 $363,281,232 $338,458,261 $326,784,868
Policy loans $ 54,480,175 $ 55,019,313 $ 53,425,676 $ 48,546,135
</TABLE>
13
<PAGE>
Details of net investment income for the three years ended December 31, 1995
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Fixed maturities $55,384,820 $54,057,136 $ 48,541,194
Equity securities 875,463 1,037,639 975,218
Mortgage loans on real estate 28,648,021 28,277,362 33,667,861
Short-term investments 3,065,480 1,672,379 3,596,291
Realized investment gains (losses) 71,434 (42,592) 10,802,968
Other 4,441,141 4,169,001 3,305,772
Total investment income 92,486,359 89,170,925 100,889,304
Investment expenses (4,446,286) (4,311,495) (4,014,980)
Net investment income $88,040,073 $84,859,430 $ 96,874,324
</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, 1995
are summarized below:
<TABLE>
<CAPTION>
Investment Gains (Losses)
Change in
Realized Unrealized Net
<S> <C> <C> <C>
1995
Fixed maturities available-for-sale $(1,639,864) $ 50,677,824(2) $ 49,037,960
Equity securities available-for-sale 1,611,925 4,136,269(1) 5,748,194
Other 99,373 -- 99,373
$ 71,434 $ 54,814,093 $ 54,885,527
(1)Net of $2,200,000 deferred income taxes.
(2)Net of $27,350,000 deferred income taxes
on available-for-sale fixed maturities at
December 31, 1995.
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.
</TABLE>
Proceeds from the sales of available-for-sale securities during 1995 were
$80,736,518 and gross investment gains and gross investment losses of $91,822
and $1,925,911 were realized on those sales, respectively. 1994 proceeds from
the sales of available-for-sale securities were $214,588,898 and gross
investment gains and gross 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. All proceeds were from calls and maturities.
As of December 31, 1995 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 75% 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.
14
<PAGE>
No investment in any person or affiliates of the Corporation exceeded ten
percent of stockholders' equity at December 31, 1995.
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, 1995. 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 1995, 1994 and 1993. 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. As of December 31, 1995 and 1994, annuity contracts issued by
Home Beneficial Life Insurance Company covered benefit obligations of
$60,043,866 and $59,490,779, respectively, for employees for service prior to
1989 and for all retirees. The following table sets forth the plan's status
for employees for service subsequent to 1988 as of the indicated actuarial
valuation dates:
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $15,803,378 $13,939,163
Nonvested 1,234,045 839,064
Total accumulated benefit obligations $17,037,423 $14,778,227
Plan assets at fair value (held in a Deposit Administration
Contract issued by Home Beneficial Life Insurance Company to
the Plan) $15,456,682 $12,607,732
Projected benefit obligation $24,326,621 $19,810,835
Unrecognized net transition asset $ 1,253,989 $ 1,462,888
</TABLE>
The pension liabilities and reserves are included in future policy benefits
which are held by the Life Company and are supported by the general
investments of the Life Company.
The weighted-average discount rate used in determining the actuarial present
value of the above projected benefit obligations was 7% for both 1995 and
1994. The rate of increase used for future compensation was 4 1/2% for both
1995 and 1994.
The components of net pension expense for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost -- benefits earned $1,914,743 $2,091,022 $2,051,748
Interest cost on projected benefit obligation 1,370,692 1,264,171 1,261,051
Net amortization and deferral (208,899) (184,114) (177,033)
Net pension expense $3,076,536 $3,171,079 $3,135,766
</TABLE>
15
<PAGE>
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 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, was a charge
against income in 1992 of $29,444,884 (after related income taxes of
$15,200,000).
The following is an analysis of the Corporation's accrued postretirement
benefit obligation for postretirement medical and life insurance benefit
plans which is included in other liabilities in the consolidated balance
sheet at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Retirees $36,226,923 $37,274,485
Fully eligible active plan participants 11,591,077 10,549,421
Other active plan participants 6,481,518 5,367,253
Accumulated postretirement benefit obligation 54,299,518 53,191,159
Unrecognized net gain 1,624,916 3,615,624
Accrued postretirement benefit obligation $55,924,434 $56,806,783
</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, 1995
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 14 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, 1995 by $2,481,077, and the net periodic postretirement benefit
cost for 1995 by $200,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% for both 1995 and 1994.
Postretirement benefits expense was $1.6 million and $3.5 million for 1995
and 1994, respectively. This expense primarily represents interest expense on
the accumulated postretirement benefit obligation and claims cost.
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.
16
<PAGE>
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, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation $ 16,866,585 $17,272,194
Policy liabilities 16,614,264 16,214,063
Unrealized investment losses on available-for-sale
securities -- 4,168,788
Other -- net 2,295,855 2,015,859
35,776,704 39,670,904
Deferred tax liabilities:
Deferred policy acquisition expenses 27,194,092 26,659,281
Discount on fixed maturities 2,939,646 2,706,629
Unrealized investment gain on available-for-sale
securities 25,373,255 --
Other -- net 1,057,211 1,242,494
56,564,204 30,608,404
Net deferred tax (liability) asset $(20,787,500) $ 9,062,500
</TABLE>
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>
1995 1994 1993
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 $20,320,000 35.0% $19,450,000 35.0% $22,400,000 35.0%
Deduct tax effect of:
Investment income
not taxable (450,000) (.8) (500,000) (.9) (775,000) (1.2)
Other 280,000 .5 450,000 .8 (325,000) (.5)
(170,000) (.3) (50,000) (.1) (1,100,000) (1.7)
Provision for income taxes $20,150,000 34.7% $19,400,000 34.9% $21,300,000 33.3%
</TABLE>
6. CAPITAL STOCK
The Corporation purchased 30,376 shares of its Class A and 94,624 shares of
its Class B Common Stock in 1995 at a cost of $2,843,750. The cost was
allocated to reduce Class A and Class B Common Stock par value by $9,492 and
$29,570, respectively, and retained earnings by $2,804,688.
In 1994 the Corporation purchased 374,948 shares of its Class B Common Stock
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.
17
<PAGE>
7. STOCKHOLDERS' EQUITY AND RESTRICTIONS
Consolidated stockholders' equity at December 31, 1995 includes $145,000,000
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, 1995 the maximum amount available under this provision without
prior approval approximated $38,000,000. 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 before realized capital
gains or losses of the Life Company was $29,356,705, $27,048,483 and
$28,769,694 for the years ended 1995, 1994 and 1993, respectively; and
stockholder's equity (capital and surplus) as of December 31, 1995, 1994 and
1993 was $343,196,949, $328,342,208 and $325,866,987, respectively.
18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Home Beneficial Corporation
We have audited the accompanying consolidated balance sheets of Home Beneficial
Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Corporation
changed its method of accounting for investments in debt and equity securities
in 1994.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
February 9, 1996
19
<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 the
Corporation has both the positive intent and ability to hold-to-maturity are
carried at amortized cost. Debt securities that the 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 carried at fair
value. Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of stockholders' equity.
Unrealized holding 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 and 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, 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 tax
benefit) was charged against stockholders' equity at December 31, 1994. As a
result of declining interest rates during 1995, a $33.6 million net unrealized
gain (net of deferred income taxes) was credited to stockholders' equity at
December 31, 1995.
Assets totaled $1.4 billion at December 31, 1995 with investment assets
totalling $1.3 billion or 90% of total assets. Both total assets and invested
assets increased over 1994; however, the growth in assets in 1995 benefited from
increases in the carrying value of fixed maturities in accordance with the
requirements of SFAS No. 115. At December 31, 1995 there were no principal and
interest payments past due on fixed maturities and over 99% of the mortgage
loans on real estate were current for both principal and interest. The
Corporation is not aware of any potential problem loans, and there are no
mortgage loans whose terms were restructured during 1995.
Cash and invested assets for 1995 exceeded total liabilities by 47%. 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 $1
million for 1995 and account for less than 5% of total cash and invested assets.
As disclosed in the Notes to Consolidated Financial Statements at 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.
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 adopted the provisions of SFAS No. 114 as
of January 1, 1995. Adoption of this Standard did not have a significant effect
on the financial condition or results of operations of the Corporation.
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 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 exceeds the
authorized control level of the RBC requirement.
20
<PAGE>
RESULTS OF OPERATIONS
Individual life insurance sales for 1995 increased 18% over 1994 results, which
were down 1%. A significant part of the 1995 sales increase occurred during the
last half of 1995. Premiums decreased 2% compared to a decrease of approximately
1% for both 1994 and 1993. Premium growth for 1995 was affected by a decline in
premiums recognized from participation in a large group reinsurance contract.
Premium growth for 1994 and 1993 was affected by reduced individual life
insurance sales. Net investment income, excluding realized investment gains and
losses, increased 3.6% compared to decreases of 1.4% and 5.1% for 1994 and 1993,
respectively. The improvement for 1995 resulted from growth in invested assets.
Net investment income for 1994 and 1993 was affected by the downward trend
experienced in portfolio interest rates during 1993 and 1992. In addition, the
Corporation used $34 million of internally generated funds between April 1991
and July 1994 to repurchase 1.5 million shares of its common stock. Realized
investment gains and losses for 1995 and 1994 were insignificant. Realized
investment gains amounted to $10.8 million for 1993, and resulted from calls and
maturities of fixed maturities. Benefits and claims increased 2% compared to a
decrease of 4% for 1994 and an increase of 7% for 1993. Individual mortality
costs contributed to the changes in each of the years. General expenses declined
9% from 1994 results. The decline is attributable to increased expense deferral
related to increased individual sales and an improvement in employee health plan
costs.
See "A Message to Our Stockholders" for further discussion and analysis of
financial condition and results of operations.
21
<PAGE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1995
Premium income $ 28,806,763 $ 28,533,352 $ 28,413,634 $ 28,292,959
Net investment income 21,856,392 22,014,414 22,088,189 22,081,078
Income before income
taxes 13,664,730 14,651,493 13,849,292 15,883,747
Net income 9,464,730 9,001,493 9,399,292 10,033,747
Net income per share .54 .51 .54 .57
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
</TABLE>
MARKET AND DIVIDEND INFORMATION
The Corporation's Class B Non-Voting Common Stock trades on The Nasdaq Stock
Market 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, 1995 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.
High Low Dividend
1995
First Quarter $20 3/4 $19 $ .20
Second Quarter 21 3/4 19 .21
Third Quarter 24 20 1/4 .21
Fourth Quarter 25 1/2 22 3/4 .21
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
22
<PAGE>
RECORD OF GROWTH OF INSURANCE
<TABLE>
<CAPTION>
FIVE YEARS ENDED DECEMBER 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Insurance in force at end of period
Direct Sales
Permanent................................. $ 3,588,841 $ 3,487,732 $3,475,846 $3,493,455 $3,443,609
Term...................................... 1,107,583 1,061,649 1,046,115 1,048,076 775,688
Total................................... 4,696,424 4,549,381 4,521,961 4,541,531 4,219,297
Group........................................ 6,029,525 5,674,447 5,466,635 5,249,927 2,328,608
Total................................... $10,725,949 $10,223,828 $9,988,596 $9,791,458 $6,547,905
New insurance written
Direct Sales
Permanent................................. $ 707,779 $ 598,301 $ 600,158 $ 642,629 $ 659,425
Term...................................... 230,416 192,227 196,247 359,406 191,217
Total................................... 938,195 790,528 796,405 1,002,035 850,642
Group........................................ 372,247 225,565 258,174 3,215,242 1,015
Total..................................... $ 1,310,442 $ 1,016,093 $1,054,579 $4,217,277 $ 851,657
Premium income
Life and annuity............................. $ 105,428 $ 106,957 $ 107,091 $ 107,650 $ 93,720
Accident and health.......................... 8,619 9,114 9,278 10,296 9,773
Total................................. $ 114,047 $ 116,071 $ 116,369 $ 117,946 $ 103,493
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FIVE YEARS ENDED DECEMBER 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Premium income........................... $ 114,046,708 $ 116,071,422 $ 116,369,121 $ 117,946,267 $ 103,492,622
Net investment income(1)................. 88,040,073 84,859,430 96,874,324 93,583,108 93,913,440
Net income before accounting change...... 37,899,262 36,195,976 42,614,453 46,478,370 47,361,885
Accounting change(2)..................... -- -- -- (29,444,884) --
Net income(1)............................ 37,899,262 36,195,976 42,614,453 17,033,486 47,361,885
Net income per share(1)(2)
Before accounting change............... 2.16 2.04 2.35 2.50 2.51
Accounting change...................... -- -- -- (1.58) --
Net................................. 2.16 2.04 2.35 .92 2.51
Dividends paid per share................. .83 .795 .775 .76 .69
Investments(3)........................... 1,266,787,088 1,146,717,259 1,143,940,703 1,116,410,112 1,080,540,431
Total assets............................. 1,403,354,824 1,288,826,060 1,280,233,898 1,248,432,740 1,205,296,739
Total liabilities........................ 861,267,246 822,056,126 806,971,506 787,991,344 748,363,554
Stockholders' equity..................... 542,087,578 466,769,934 473,262,392 460,441,396 456,933,185
Book value per share..................... 31.08 26.58 26.38 24.85 24.41
</TABLE>
(1) Realized investment gains and losses for 1991, 1994 and 1995 were
insignificant. Realized gains were $10,802,968 and $2,857,454 in 1993 and
1992, respectively.
(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 and increased the
carrying value $51.7 million at December 31, 1995. In accordance with SFAS
No. 115, prior period financial statement balances were not restated. See
Note 1 of Notes to Consolidated Financial Statements.
23
<PAGE>
DIRECTORS
R. W. WILTSHIRE H. D. GARNETT, CPA
Chairman of the Board Vice President and Controller
L. W. RICHARDSON G. T. RICHARDSON
Retired Vice President Vice President
R. W. WILTSHIRE, JR. W. G. HANCOCK
President and Counsel
Chief Executive Officer Partner, Mays & Valentine
J. M. WILTSHIRE, JR. DIANNE N. COLLINS
Secretary Community Volunteer
W. B. WILTSHIRE, CLU
Vice President
OFFICERS OF HOME BENEFICIAL CORPORATION AND/OR
HOME BENEFICIAL LIFE INSURANCE COMPANY
*R. W. WILTSHIRE W. C. HANCOCK, M.D.
Chairman of the Board Medical Director
*R. W. WILTSHIRE, JR. R. L. STILES
President and Asst. Vice President
Chief Executive Officer
R. I. KEMPTON
H. S. BOURNE Asst. Vice President
Vice President
R. G. GILLISPIE, FLMI
*J. M. WILTSHIRE, JR. Asst. Vice President
Secretary
A. N. FASTIGE
*W. B. WILTSHIRE, CLU Asst. Vice President
Vice President
W. A. SIMMONS
*H. D. GARNETT, CPA Asst. Vice President
Vice President and Controller
R. L. STEVENS
*G. T. RICHARDSON Asst. Vice President
Vice President
J. P. WINN
W. T. MACE Asst. Vice President
Vice President
C. L. MARSH, CFA, CPA, FLMI
C. P. PARRISH, FLMI Asst. Vice President
Vice President
J. B. SHEPPARD
E. L. JOHNSON, III, FSA Asst. Vice President
Vice President and
Chief Actuary R. R. POSA, FSA
Asst. Actuary
*B. P. BOYD
Vice President and H. C. HUTCHERSON, FSA
Asst. Secretary Asst. Actuary
A. O. BENNETT, FLMI G. T. NUCKOLLS, JR.
Vice President Asst. Secretary
K. H. BOGGS, Jr. H. J. SMITH
Vice President Asst. Secretary
*D. M. WESTERHOUSE, JR., CPA J.S. STEWART, FLMI
Treasurer Asst. Secretary
*W. F. COLLINS, FLMI C. J. JACKSON
Auditor Asst. Secretary
H. H. NASH, FSA *W. G. HANCOCK
Actuary Counsel
*Officers of both the Corporation and the Life Company. Others are officers of
the Life Company only.
MAYS & VALENTINE, General Counsel
24
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 795,741,956
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 29,475,901
<MORTGAGE> 339,773,729
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,266,787,088
<CASH> 3,086,602
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 99,246,423
<TOTAL-ASSETS> 1,403,354,824
<POLICY-LOSSES> 672,301,481
<UNEARNED-PREMIUMS> 26,248,702
<POLICY-OTHER> 10,819,728
<POLICY-HOLDER-FUNDS> 71,450,993
<NOTES-PAYABLE> 0
0
0
<COMMON> 5,449,722
<OTHER-SE> 536,637,856
<TOTAL-LIABILITY-AND-EQUITY> 1,403,354,824
114,046,708
<INVESTMENT-INCOME> 87,968,639
<INVESTMENT-GAINS> 71,434
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