2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-1984
INSURANCE INVESTORS & HOLDING CO.
1
(Exact name of registrant as specified in its charter)
Illinois 37-0858627
2
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2512 N. Knoxville Ave., Peoria, Illinois 61604-3622
3
(Address of principal executive offices) (Zip Code)
(309) 685-7661
4
(Registrant's telephone number, including area code)
5
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ]
No
As of September 30, 1995, Registrant had 807,649 shares of
Class A common stock and 472,423 shares of Class B common stock
outstanding.
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Balance sheets, September 30, 1995
(Unaudited) 3
and December 31, 1994
Statements of Operations, Nine-Months
Ended September 30, 1995
and 1994 (Unaudited) 5
Statements of Operations, Three-Months
Ended September 30, 1995
and 1994 (Unaudited) 6
Statements of Cash Flows, Nine-Months
Ended September 30, 1995
and 1994 (Unaudited) 7
Statements of Cash Flows, Three-Months
Ended September 30, 1995
and 1994 (Unaudited) 8
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Conditions and Results
of Operations 17
Part Other Information 21
II.
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
September December
30, 31,
1995 1994
Assets
Investments:
Fixed maturities held for
investment, at
amortized cost (market $1,819,5 $1,955,8
$1,810,421 19 82
in 1995 and $1,902,194 in
1994)
Equity securities, at market (cost
$81,473 in 1995 and 1994) 65,376 57,957
Policy loans 106,745 101,749
Total investments 1,991,640 2,115,588
Cash 325,275 207,506
Accrued investment income 32,056 26,581
Deferred policy acquisition costs 47,693 51,262
Property, plant and equipment (at
cost, less accumulated depreciation
of $108,880 in 1995 and $108,713 in 1,281 1,448
1994)
Total assets $2,428,945 $2,402,385
(Continued)
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
September December
30, 31,
1995 1994
Liabilities and Stockholders' Equity
Liabilities:
Future policy benefit reserves $716,614 $ 717,441
Deferred premium reserve 68,680 67,443
Other policyholders' funds 289,006 292,719
Total policy liabilities 1,074,300 1,077,603
Accounts payable and accrued 47,139 26,424
expenses
Minority interest 94,185 93,268
Notes payable 319,400 267,900
Other liabilities 5,327 3,549
Total liabilities 1,540,351 1,468,744
Stockholders' Equity:
Common stock:
Class A, $1 par value, 1,500,000
shares authorized, 819,249 shares
issued in 1995 and 1994, including
shares in treasury of 11,600 in 1995 819,249 819,249
and 1994
Class B, $.10 stated value, 500,000
shares
authorized, 472,423 shares 47,242 47,242
issued and
outstanding in 1995 and
1994
Paid-in capital 576,347 576,347
Unrealized loss on investments (14,969) (21,869)
Retained deficit (529,850) (477,903)
898,019 943,066
Treasury stock, at cost (9,425) (9,425)
Total stockholders' equity 888,894 933,641
Commitments and contingencies
Total liabilities and stockholders' $2,428,945 $2,402,385
equity
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine-Months Ended September 30, 1995 and 1994
(Unaudited)
Nine-months ended
September 30,
1995 1994
Revenues:
Premiums $ 45,968 $ 41,003
Net investment income 91,431 78,017
Realized investment gains 4,805 1,081
142,204 120,101
Benefits and expenses:
Policy benefits:
Death and other policy benefits 55,758 48,162
Endowments 5,377 9,569
Policyholder dividends 8,430 11,462
69,565 69,193
Increase (decrease) in future policy (827) 7,988
benefit reserves
Amortization of deferred policy 3,569 2,626
acquisition costs
Provision for deferred premium 1,237 383
General insurance expenses 107,166 118,868
Taxes licenses and fees 4,352 8,929
Interest expense 8,693 13,600
193,755 221,587
Income (loss) before federal
income $(51,551) $(101,48
tax and minority interest 6)
Federal income tax expense 0 0
Income (loss) before minority $(51,551) $(101,48
interest 6)
Minority interest in gain (loss) (398) (1,332)
of subsidiary
Net Income (Loss) $(51,949) $(100,15
4)
Per Share Amounts:
Net income (loss) per share of $(0.04) $(0.08)
common stock
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Months Ended September 30, 1995 and 1994
(Unaudited)
Three-months ended
September 30,
1995 1994
Revenues:
Premiums $ 12,393 $ 11,831
Net investment income 28,813 26,474
Realized investment gains 0 0
41,206 38,305
Benefits and expenses:
Policy benefits:
Death and other policy benefits 2,992 10,498
Endowments 2,508 3,466
Policyholder dividends 702 3,582
6,202 17,546
Increase (decrease) in future policy (7,813) 7,680
benefit reserves
Amortization of deferred policy 978 225
acquisition costs
Provision for deferred premium 335 292
General insurance expenses 44,569 31,792
Taxes licenses and fees 51 2,243
Interest expense (4,001) 5,391
55,947 65,169
Income (loss) before federal
income $(14,741) $(26,864)
tax and minority interest
Federal income tax expense 0 0
Income (loss) before minority $(14,741) $(26,864)
interest
Minority interest in gain (loss) 1,485 44
of subsidiary
Net Income (Loss) $(13,526) $(26,908)
Per Share Amounts:
Net income(loss) per share of common $(0.01) $(0.02)
stock
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine-Months Ended September 30, 1995 and 1994
(Unaudited)
Nine-months ended
September 30,
1995 1994
Cash flows from operating
activities:
Net gain (loss) $(51,949) $(100,15
4)
Adjustments to reconcile net gain to
net cash provided by operating
activities:
Accrued investment income (5,475) (12,558)
Deferred policy acquisition 3,569 5,254
costs
Property, plant and equipment 167 689
Future policy benefit reserves (827) 7,988
Deferred premium reserve 1,237 383
Other policy liabilities (3,713) (10,908)
Accounts payable and accrued 20,715 (7,250)
expenses
Minority interest 917 (1,332)
Other, net (4,451) (220)
Net cash provided (used) by
operating activities (39,810) (118,108)
Cash flows from investing
activities:
Maturity of fixed maturities 741,602 442,356
Sale of fixed maturities available 0 0
for sale
Purchase of fixed maturities (599,527) (449,194)
available for sale
Increase in policy loans (net) (4,996) 0
Net cash provided
(used) by
investing activities 137,079 (6,838)
Cash flows from financing
activities:
Borrowed funds 51,500 87,400
Net cash provided (used) by
financing activities 51,500 87,400
Net increase (decrease) in cash
and short- 148,769 (37,546)
term investments
Cash and short term investments
at beginning of period 207,506 203,106
Cash and short term investments
at end of period $356,275 $165,560
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-Months Ended September 30, 1995 and 1994
(Unaudited)
Three-months ended
September 30,
1995 1994
Cash flows from operating
activities:
Net gain (loss) $(13,256) $(26,908)
Adjustments to reconcile net gain to
net cash provided by operating
activities:
Accrued investment income (1,358) (5,954)
Deferred policy acquisition 978 774
costs
Property, plant and equipment 0 229
Future policy benefit reserves 7,813 7,680
Deferred premium reserve 335 292
Other policy liabilities (1,210) 3,729
Accounts payable and accrued 7,432 (22,689)
expenses
Minority interest 1,485 44
Other, net (3,264) 220
Net cash provided (used) by
operating activities (4,015) (42,583)
Cash flows from investing
activities:
Maturity of fixed maturities 225,439 164,505
Sale of fixed maturities available 0 0
for sale
Purchase of fixed maturities (74,358) (225,558)
available for sale
Increase in policy loans (net) (1,568) 0
Net cash provided
(used) by
investing activities 149,513 (61,053)
Cash flows from financing
activities:
Borrowed funds 0 51,900
Net cash provided (used) by
financing activities 0 51,900
Net increase (decrease) in cash
and short- 145,498 52,176
term investments
Cash and short term investments
at beginning of period 210,777 203,106
Cash and short term investments
at end of period $356,275 $(52,176)
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
(1) Financial Statements
The balance sheet for September 30, 1995, the statements of
operations for the three- and nine-month periods ended
September 30, 1995 and 1994, and the statements of cash
flows for the three- and nine-month periods then ended have
been prepared by the Company without audit. In the opinion
of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the
financial position, results of operations and changes in
cash flows at September 30, 1995, and for comparative
periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 1994 annual 10-K
report filed with the Securities and Exchange Commission.
The results of operations for the period ended September 30,
1995 are not necessarily indicative of the operating results
for the full year.
Earnings per common share are computed on the basis of the
weighted average numbers of common "A" and "B" shares
outstanding during each period. For the three- and nine-
month periods ended September 30, 1995 and 1994, the
weighted average number of such shares outstanding was
1,280,072.
(2) Pending Acquisition and Merger
On December 9, 1994, the Company announced that it had
signed a definitive written agreement to be acquired by
Citizens, Inc., an Austin, Texas based life insurance
holding company.
The agreement provides that following the acquisition by
Citizens, Investors' shareholders will receive one share of
Citizens' Class A Common Stock for each eight shares of
Investors Common Stock owned. Additionally, Citizens will
acquire all shares of Central Investors Life Insurance
Company, a subsidiary of the Company, not wholly-owned by
Insurance Investors, based upon an exchange ratio of one
share of Citizens' Class A common stock for each four shares
of Central Investors owned. The transaction will involve
issuance of approximately 170,000 of Citizens' Class A
shares and will also be accounted for as a purchase. The
agreement is subject to approval by the Company's
shareholders. The Illinois Department of Insurance approved
the transaction on March 10, 1995.
The following unaudited pro forma condensed balance sheet as
of September 30, 1995 reflects the purchase of the Company
by Citizens (including a similar acquisition of American
Liberty Financial Corporation ("ALFC") by Citizens pending
as of the date of this 10-Q) as if it occurred on September
30, 1995. The unaudited pro forma condensed consolidated
income statement for the nine months ended September 30,
1995 reflects the purchase of the Company as if they had
occurred on January 1, 1995.
Management's estimate of the impact of applying purchase
accounting, as if the two acquisitions had occurred as
described above, is presented below. The unaudited pro
forma financial information is not necessarily indicative
either of the results of operations that would have occurred
had the acquisition been consummated at the beginning of
1995 or of future results of operations of the consolidated
entities.
Pro-Forma Condensed Consolidated Financial Information
(Amounts in thousands)
Pro-Forma Consolidated Balance Sheet
September 30, 1995
(Unaudited)
Historica Purchase
l Historic Adjustmen
Assets Citizens al ts and Pro-forma
Inc. and Insuranc Eliminati Consolidate
Subsidiar e ons d
ies Investor
s
Long term $122,261 $1,992 $(9) (a $124,244
Investments )
Short term 1,904 0 0 1,904
Investments
Total 124,165 1,992 (9) 126,148
Investments
Cash 3,039 356 3,395
Other 4,163 0 4,163
receivables
Accrued
investment 1,696 32 1,728
income
Deferred policy
acquisition 36,473 48 (48) (b 36,473191
costs )
Cost of
insurance 7,719 0 120 584 (c 7,8397,810
acquired )
Excess of cost
over net 13,985 0 59011,081 (d 14,57514,37
assets ) 9
acquired
Other assets 8,097 1 0 8,098
Total Assets $199,337 $2,429 $ 653 $202,419173
12
Pro-Forma Consolidated Balance Sheet (continued)
September 30, 1995
(Unaudited)
Historic Purchase
Liabilities and al Histori Adjustment
Stockholders' Citizens cal s and Pro-forma
Equity Inc. and Insuran Eliminatio Consolida
Subsidia ce ns ted
ries Investo
rs
Future policy
benefit $119,717 $717 $146 (e $120,580
reserves )
Other
policyholder 10,377 358 10,735
liabilities
Other 3,764 52 3,816
liabilities
Notes payable 787 319 1,106
Deferred tax 2,284 0 2,284
liability
Total 136,929 1,446 146 138,521
liabilities
Class A common 43,703 819 1,201 (f 45,725
stock )
Class B common 283 47 (47) (f 283
stock )
Minority 14 94 (94) (f 14
interest )
Additional paid-
in 0 576 (576) (f 0
capital )
Unrealized loss
on (70) (14) 14 (f (70)
investments )
Retained 20,659 (530) 20,129
earnings
64,589 992 498 66,079302
Treasury stock (2,181) (9) 9 (2,181)
Total
stockholders' 62,408 983 50793 63,89821
equity
Total
liabilities and $199,337 $2,429 $65312 $202,4197
stockholders' 3
equity
Explanation of Pro-Forma Adjustments as of September 30,
1995:
(a) Adjustment necessary to record acquired fixed
maturities at market value.
(b) Deferred policy acquisition costs are reflected in the
accompanying pro-forma financial statements as follows:
Historical Citizens $36,473
Historical II 48
Historical DAC 36,521
Reverse historical II (48)
Net DAC $36,473
(cb) Reverse ALFC and II policy acquisition costs at March
31, 1995 and eEstablish cost of insurance acquired.
Cost of insurance acquired represents the estimated
present value of future profits in the acquired
business This amount was calculated as the difference
between II's historical future policy benefit reserves
and the estimated gross premium reserve at September
30, 1995. The gross premium reserve was estimated
assuming a level interest yield of 7%. Life mortality
was based on appropriate multiples of the 1965-70
Select and Ultimate and the Ultimate Intercompany Table
and withdrawals based on Linton B and BB tables as
deemed appropriate based on individual life plan
experience. Accident and health morbidity was based on
multiples of 1974 Cancer tables, Stroke/Heart Attack
Indemnity Table, 1985 NAIC Cancer Tables and published
claim costs and withdrawals based on Linton C and CC
Tables as deemed appropriate based on individual health
plan experience. Cost of insurance acquired is being
amortized in proportion to the profit over the lives of
the respective policies.
Cost of insurance acquired is presented in the
accompanying pro-forma financial statements as follows:
Historical Citizens $7,719
II cost of insurance 120
capitalized
Pro-forma cost of
insurance $7,839
acquired
(dc) Excess of cost over net assets acquired was calculated
as follows: (in thousands)
II
Acquisition of common
stock 1,530
Estimated fair value
of net assets (940)
acquired
Excess of cost
(purchase price) over 590
net assets acquired
(ed) Revaluation of policy benefit reserves to reflect
Company reserve assumption
with regard to interest rates, lapse rates and
surrenders.
(fe) Eliminate II capital, minority interest, and retained
earnings and record
the cost of net assets acquired as increased capital of
the Company due to the
issuance of additional Class A common shares.
Pro-Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 1995
(Unaudited)
Historica Purchase
l Historical Adjustment
Citizens Insurance s and Pro-forma
Inc. and Investors Eliminatio Consolidate
Subsidiar ns d
ies
Revenues:
Premiums $32,166 $46 $32,212
Net investment 4,898 91 4,989
income
Other 91 5 0 96
Total revenues 37,155 142 0 37,217
Benefits and
Expenses
Policy benefits 23,422 69 23,491
Commissions 7,559 0 7,559
Capitalization (7,919) 0 (7,919543)
of DAC
Amortization of 5,983 4 (4) (a 5,983
DAC )
Amortization of
cost 255 0 179 (b 256371
of insurance b)
acquired
Amortization of
excess
of cost over 93 0 22501 (c 115501
net assets c)
acquired
Other expenses 4,320 121 0 4,441
Total benefits
and 33,713 194 18412 33,925824
expenses
Income before $3,363 $(52) $(18412) $3,292270
taxes
Net income per $0.171
share (dg)
Explanation of Pro-Forma statement of Operations for the Nine-
Month Period Ended September 30, 1995:
(a) Amortization and capitalization of deferred policy
acquisition costs are reflected in the accompanying pro-
forma statement of operations as follows: (in
thousands)
Capitalizat Amortizati
ion on
Historical Citizens (7,919) 5,983
Historical II 0 4
Total Historical (7,919) 5,987
Reverse Historical II 0 (4)
Capitalization of Post- (0) 0
Purchase
Net Pro-Forma adjustment (0) (4)
Net (7,919) 5,983
(bb) Amortization of cost of insurance acquired is presented
in the accompanying pro-forma statement of operations
as follows:
Historical Citizens $78,00
0
Interest accrued @ 7%
(8)
Amortization of II cost 51
of insurance 1
Net Pro-Forma 50
adjustment 3
Pro-forma amortization $78,50
3
Estimated amortization of cost of insurance acquired
assuming a purchase date of January 1, 1995 is $503,
$560, $621, $686, and $759 for each year, respectively,
in the five year period ending December 31, 1999.
(cc) Excess of cost over net assets acquired is being
amortized over a 20-year period. Such amortization,
reflected in the accompanying pro-forma statement of
operations is $22,000.
(dg) Calculated using estimated common shares
outstanding of 19,433,080.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Nine-months ended September 30, 1995 and 1994
The net loss for the first nine months of 1995 was $51,949,
compared to a loss of $100,154 in the previous year. Decreases
in operating expenses, policy reserves and increased investment
income were the primary reasons for the improvement.
Premium income for the first nine months of 1995 was $45,968
compared to $41,003 for the same period in 1994. The increase is
due primarily to a reduction in the amount of deferred premium
seen in previous periods. The Company has not written new
policies for the past several years.. Currently, there are no
products qualified for sale under the revised life insurance
reserve law that was effective for years beginning after January
1, 1989. Increases in requirements for Statutory capital and
surplus of the Company's life insurance subsidiary, coupled with
the relatively high cost of regulatory compliance for a company
the size of Insurance Investors, have severely limited the
resources available in recent years that are necessary for the
development and sale of new products. As a result, the Company's
in-force block of business is in a "run-off" state.
Net investment income grew substantially during 1995 to $91,431
compared to $78,017 for the same period in 1994. The increase
results from higher yields that are available upon reinvestment
of matured securities that bore lower interest rates.
Policy benefits increased to slightly $69,565 during 1995 from
$69,193 during the first nine months of 1994. Death benefits
increased during 1995 to $27,560, compared to $24,660 for the
same period in 1994. Management does not believe the increase in
such benefits to be indicative of an adverse trend, but rather
normal fluctuations which occur over time. Surrender expense
decreased to $15,103 from $19,815 in the previous year. Other
benefits amounted to $26,902 compared to $24,718 in 1994.
Future policy benefit reserves reflected a decrease of $827
compared to an increase of $7,988 for the first nine months of
1994. The decrease in policy reserves is explained by lapses and
the increased death claim activity since as claims are paid, the
policy reserves that have historically been established are
released. Deferred premium reserves increased by $1,237 in 1995
compared to $383 for 1994. The increase reflects the aging of
the policies in force.
General expenses were lower as a result of decreases in salaries,
office expenses and the timing of audit and actuarial expenses.
As Management works toward consummation of the sale of the
Company to Citizens, Inc. as discussed in the "Notes to Financial
Statements" the overhead of the Company has been trimmed due to
the execution of a Management Services Agreement with Citizens.
Three-months ended September 30, 1995 and 1994
The net loss for the quarter ended September 30, 1995 was $13,526
compared to $26,908 in the prior year. Increased investment
income, coupled with lower claims and higher premium receipts
narrowed the operating loss.
Premium income for the quarter was $12,393 in 1995 compared to
$11,831 in the previous year. Reductions in deferred premiums
contributed to the increase.
Investment income grew to $28,813 from $26,474, primarily as the
result of higher yields available in the bond market as matured
funds were reinvested.
Policy benefits decreased to $6,202 through September 30, 1995,
compared to $17,546 in the previous year. Decreases in death
claims and policy dividends during the quarter were the primary
reason for the increase.
Policy reserves increased by $7,813 for the quarter, compared to
an increase of $7,680 in the prior year. The decrease in claims
contributed to the higher reserves.
General expenses increased to $44,569 from $31,792 primarily as
the result of expenses associated with the merger transaction
described above.
Liquidity and Capital Resources
Stockholders' equity as of September 30, 1995 totaled $888,594,
compared to $933,641 at December 31, 1994. The loss from
operations is the primary reason for the decline in equity since
year end.
A majority of the Company's invested assets are in bonds
guaranteed by the U.S. Government. As a result, the bond
portfolio offers better than average liquidity to meet the
demands of the outstanding obligations. The Company has no
investments in mortgage loans or real estate and minimal policy
loans.
The Illinois legislature established $1,200,000 as the minimum
statutory capital and surplus for an Illinois-domiciled life
insurance company after December 31, 1990. On December 31, 1995,
the requirement increases to $1,500,000. The traditional
"grandfathering" of existing companies was not permitted in the
new legislation, meaning that the Company's subsidiary must
increase its Capital and Surplus to the $1,500,000 level. At the
end of September, 1995, the subsidiary reported capital and
surplus of $1,202,000. The sale of the Company to Citizens, Inc.
will afford the Company the strength to comply with the
requirements of the new law.
The Company's ability to allocate funds to product development
has been extremely limited. The burden of maintaining two
accounting systems (Statutory and GAAP) as well as maintaining
the capital and surplus of the life insurance subsidiary have
been the leading constraints.
Financial Accounting Standards
In February 1992, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Statement 109 requires a
change from the deferred method of accounting for income taxes of
APB Opinion 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of
Statement 109, deferred tax asset and liabilities are recognized
for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date. The Company adopted Statement
109. The implementation had no impact on operations or
stockholders' equity.
In December 1990, the FASB issued Statement 106, "Employers'
Accounting for Post Retirement Benefits Other than Pensions",
("Statement 106"). Statement 106 establishes accounting
standards for employers' accounting for, primarily, post
retirement health care benefits. The statement was effective for
fiscal years beginning after December 15, 1992. Since the
Company currently pays no such benefits, implementation had no
impact on the results of operations of the Company.
In December 1992, the FASB issued Statement 113 "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts" ("Statement 113"). Statement 113 eliminated the net
reporting of reinsurance amounts in the balance sheet previously
required by Statement 60 "Accounting by Insurance Enterprises."
Statement 113 also provides accounting guidance for ceding
enterprises as well as disclosure requirements and guidance on
assessing transfer of risk in reinsurance contracts.
Furthermore, it precludes immediate recognition of gains related
to reinsurance contracts unless the ceding enterprises liability
to its policyholders is extinguished.
The Company adopted Statement 113 in the first quarter of 1993.
There was no impact on the consolidated financial statements due
to implementation of the risk transfer provisions.
In May 1993, the FASB issued Statement 114, "Accounting by
Creditors for Impairment of a Loan" ("Statement 114"). Statement
114 requires impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's
effective interest rate or at the loan's observable market price
or the fair value of the collateral if the loan is collateral
dependent. Statement 114 is effective for years beginning after
December 15, 1994 Statement 114 does not have a material impact
on the Company's financial statements.
Also in 1993, the FASB issued Statement 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("Statement
115"). Statement 115 requires the classification of debt and
equity securities as held to maturity, trading or available for
sale based on established criteria. Trading securities are
bought and held principally for the purpose of selling them in
the near term. The Company had no investment securities
classified as trading or available for sale at January 1, 1994,
December 31, 1994 or September 30, 1995. Held-to-maturity
securities are those in which the Company has the ability and
intent to hold the security until maturity.
Trading and available-for-sale securities are recorded at fair
value. Held-to-maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of premiums or
discounts. Unrealized holding gains and losses on trading
securities are included in earnings. Unrealized holding gains
and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized.
Transfers of securities between categories are recorded at fair
value at the date of transfer. Unrealized holding gains and
losses are recognized in earnings for transfers into trading
securities. Unrealized holding gains or losses associated with
transfers of securities from held-to-maturity to available-for-
sale are recorded as a separate component of stockholders'
equity. The unrealized holding gains or losses included in the
separate component of equity for securities transferred from
available-for-sale to held-to-maturity are maintained and
amortized into earnings over the remaining life of the security
as an adjustment to yield in a manner consistent with the
amortization or accretion of premium or discount on the
associated security.
A decline in the market value of any available-for-sale or held-
to-maturity security below cost that is deemed other than
temporary is charged to earnings resulting in the establishment
of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of
the related security as an adjustment to yield using the
effective interest method. Dividend and interest income are
recognized when earned. Realized gains and losses for securities
classified as available-for-sale and held-to-maturity are
included in earnings and are derived using the specific
identification method for determining the cost of securities
sold. The Company adopted Statement 115 at January 1, 1994. The
impact on the consolidated stockholders' equity due to the
implementation was $0.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2 Changes in Securities
None, other than disclosed in the Notes to the Financial
Statements or Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INSURANCE INVESTORS & HOLDING CO.
By: /s/ Frank J.
Wilkins
Frank J. Wilkins
President and Chief Accounting
Officer
Date: December 1, 1995
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 1819519
<DEBT-MARKET-VALUE> 0
<EQUITIES> 65376
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1991640
<CASH> 325275
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 47693
<TOTAL-ASSETS> 2428945
<POLICY-LOSSES> 716614
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 68680
<POLICY-HOLDER-FUNDS> 289006
<NOTES-PAYABLE> 319400
<COMMON> 866491
0
0
<OTHER-SE> (544819)
<TOTAL-LIABILITY-AND-EQUITY> 2428945
45968
<INVESTMENT-INCOME> 91431
<INVESTMENT-GAINS> 4805
<OTHER-INCOME> 0
<BENEFITS> 69565
<UNDERWRITING-AMORTIZATION> 3569
<UNDERWRITING-OTHER> 120621
<INCOME-PRETAX> (51551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51551)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
