SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
Commission File Number 2-39310
INTERCONTINENTAL LIFE CORPORATION
New Jersey 22-1890938 (State of
Incorporation) (I.R.S. Employer Identification Number)
The Austin Centre,701 Brazos, 12th Floor
Austin, Texas 78701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512)404-5000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of common shares outstanding ($.22 Par Value) at end of
period: 4,138,329.
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994...............3-4
Consolidated Statements of Income
For the three and six month periods ended
June 30, 1995 and 1994............................5-6
Consolidated Statements of Cash Flows
For the three and six month periods ended
June 30, 1995 and 1994............................7-8
Notes to Consolidated Financial Statements...............9
Management's Discussion and Analysis of
Financial Conditions and Results of Operations..10-16
Part II
Computations of Earnings Per Share...................17-18
Part III
Other Information.......................................19
Signature Page..........................................20
Item 1. Financial Statements
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, December 31,
1995 1994
Unaudited
ASSETS
Investments:
Fixed maturities, at amortized cost
(market value approximates $22,399
and $24,175) $ 20,544 $ 23,776
Fixed maturities available for sale
at market value (amortized cost of
$469,054 and $388,263) 474,068 357,084
Equity securities at market (cost
approximates $978 and $368) 2,206 1,243
Policy loans 52,100 48,096
Mortgage loans 16,701 17,055
Invested real estate and other
invested assets 14,298 5,580
Short-term investments 72,844 94,841
Total investments 652,761 547,675
Cash and cash equivalents 3,295 5,563
Notes receivable from affiliates 60,985 60,759
Accrued investment income 8,925 8,495
Agent advances and other
receivables 20,865 19,778
Reinsurance receivables 15,936 14,066
Property and equipment, net 4,503 4,418
Real estate occupied by the
Company, net 36,169 34,418
Deferred policy acquisition costs 24,506 25,282
Present value of future profits of
acquired businesses 52,624 46,153
Deferred financing costs 2,129 2,462
Other assets 7,524 6,506
Separate account assets 398,111 373,419
Total Assets $1,288,333 $1,148,994
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, December 31,
1995 1994
Unaudited
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities and contractholder
deposit funds
Future policy benefits $ 129,116 $ 117,761
Contractholder deposit funds 554,195 490,232
Unearned premiums 11,040 12,203
Other policy claims & benefits
payable 6,813 8,621
701,164 628,817
Other policyholders' funds 2,709 2,669
Senior loans 63,885 66,585
Deferred federal income taxes 17,367 2,662
Other liabilities 26,140 24,781
Separate account liabilities 395,552 371,173
Total liabilities 1,206,817 1,096,687
Commitments and contingencies
Redeemable preferred stock:
Class A Preferred, $1 par value,
5,000,000 shares authorized and
issued 5,000 5,000
Class B Preferred, $1 par value,
15,000,000 shares authorized and
issued 15,000 15,000
20,000 20,000
Redeemable Preferred Treasury Stock at
cost, $20,000,000 shares (20,000) (20,000)
-0- -0-
Shareholders' equity:
Common stock, $.22 par value,
10,000,000 shares authorized;
5,129,239 and 5,107,239 shares
issued, 4,138,329 and 4,116,329
shares outstanding in 1995 and 1994 1,129 1,124
Additional paid-in capital 3,113 2,854
Net unrealized appreciation of equity
securities 798 568
Net unrealized (loss) gain on invest-
ments in fixed maturities available
for sale 3,259 (20,266)
Retained earnings 76,235 71,045
84,534 55,325
Common Treasury stock, at cost 990,910
shares (3,018) (3,018)
Total Shareholders' equity 81,516 52,307
Total Liabilities and Shareholders' $1,288,333 $1,148,994
Equity
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(in thousands of dollars, except per share data)
3 Months Ended
June 30,
1995 1994
Revenues:
Premiums $ 5,267 $ 4,777
Premiums ceded (964) (991)
Net premiums 4,303 3,786
Earned insurance charges 9,119 10,409
Net investment income 16,738 14,152
Other 857 1,090
Total 31,017 29,437
Benefits and expenses:
Interest expense 1,584 1,187
Interest on insurance policies 7,076 7,354
Benefits and other expenses 18,286 17,771
Total 26,946 26,312
Income from operations 4,071 3,125
Provision for federal income taxes 1,470 1,094
Net income $ 2,601 $ 2,031
Per Share Data:
Common stock and common stock
equivalents 5,373 5,378
Net income per share available to
common shareholders $ .52 $ .40
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(in thousands of dollars, except per share data)
6 Months Ended
June 30,
1995 1994
Revenues:
Premiums $ 9,327 $ 9,744
Premiums ceded (1,928) (1,994)
Net premiums 7,399 7,750
Earned insurance charges 18,961 20,056
Net investment income 31,981 28,735
Other 1,781 2,221
Total 60,122 58,762
Benefits and expenses:
Interest expense 3,108 2,522
Interest on insurance policies 14,474 15,042
Benefits and other expenses 34,485 33,624
Total 52,067 51,188
Income from operations 8,055 7,574
Provision for federal income taxes 2,865 2,651
Net income $ 5,190 $ 4,923
Per Share Data:
Common stock and common stock
equivalents 5,373 5,378
Net Income per share available to
common shareholders $ 1.03 $ .96
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(in thousands of dollars)
3 Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994
Net Income $ 2,601 $ 2,031
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Amortization of present value of future
profits of acquired businesses 1,500 1,631
Amortization of deferred policy acquisition
costs 866 818
Depreciation (383) (421)
Net gain on sales of investments (10) 603
Financing costs amortized 15 324
Changes in assets and liabilities
Decrease (increase) in accrued investment
income 240 (60)
Increase in agent advances and other
receivables (1,874) (3,223)
Policy acquisition costs deferred (357) (765)
Increase (decrease) in policy liabilities
and contract holder deposit funds (8,828) (6,529)
Decrease in other policyholders' funds (54) (112)
(Increase) decrease in other liabilities (135) 1,556
(Increase) decrease in other federal income
taxes 8,437 (3,709)
Decrease (increase) in other assets 1,724 1,165
Other, net (603) (6,366)
Net cash provided by (used in)
activities $ 3,139 $(13,057)
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(in thousands of dollars)
6 Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994
Net Income (Loss) $ 5,190 $ 4,923
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Amortization of present value of future
profits of acquired businesses 3,137 2,886
Amortization of deferred policy acquisition
costs 1,735 2,060
Depreciation 11 11
Net gain on sales of investments (54) (220)
Financing costs amortized 333 744
Changes in assets and liabilities
Decrease (increase) in accrued investment
income 1,024 316
Increase in agent advances and other
receivables (1,081) (5,880)
Policy acquisition costs deferred (959) (1,651)
Increase (decrease) in policy liabilities
and contract holder deposit funds (17,416) (9,451)
Decrease in other policyholders' funds (340) (82)
(Increase) decrease in other liabilities (54) 2,463
(Increase) decrease in deferred federal
income taxes 14,480 (8,091)
Decrease (increase) in other assets (1,018) (598)
Other, net (857) (1,131)
Net cash provided by (used in) operating
activities $ 4,131 $(13,701)
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(In thousands of dollars)
3 Months Ended
June 30,
CASH FLOWS FROM INVESTING ACTIVITIES 1995 1994
Investments purchased $ (1,560) $(38,314)
Proceeds from sale and maturities of
investments (743) 37,046
Net change in short-term investments 14,863 31,679
Payment for purchase of insurance sub-
sidiary, net of cash acquired -0- -0-
Purchase & retirement of equipment, net 163 399
Net cash provided by investing activities 12,723 30,810
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -0- -0-
Issuance of senior loan -0- -0-
Repayment of debt (13,200) (17,615)
Net cash used in financing activities (13,200) (17,615)
Net increase in cash and cash equivalents 2,662 138
Cash and cash equivalents, beginning of
period 633 5,484
Cash and cash equivalents, end of period $ 3,295 $ 5,622
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(In thousands of dollars)
6 Months Ended
June 30,
CASH FLOWS FROM INVESTING ACTIVITIES 1995 1994
Investments purchased $(14,858) $(67,725)
Proceeds from sale and maturities of
investments 6,628 72,909
Net change in short-term investments 21,996 27,128
Payment for purchase of insurance
subsidiary, net of cash acquired (17,492) -0-
Purchase & retirement of equipment, net (237) 3
Net cash provided by (used in) investing
activities (3,963) 32,315
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 264 42
Issuance of senior loan 15,000 -0-
Repayment of debt (17,700) (17,615)
Net cash used in financing activities (2,436) (17,573)
Net increase (decrease) in cash and cash
equivalents (2,268) 1,041
Cash and cash equivalents, beginning of
period 5,563 4,581
Cash and cash equivalents, end of period $ 3,295 $ 5,622
(See Notes to Consolidated Financial Statements)
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Unaudited)
The financial statements included herein reflect all adjustments
which are, in the opinion of management, necessary to present a
fair statement of the interim results. The statements have been
prepared to conform to the requirements of Form 10-Q and do not
necessarily include all disclosures required by generally
accepted accounting principles (GAAP). The reader should refer
to Form 10-K for the year ended December 31, 1994 previously
filed with the Securities and Exchange Commission for financial
statements prepared in accordance with GAAP. Certain prior year
amounts have been reclassified to conform with current year
presentation.
Acquisition of Insurance Subsidiary
On February 14, 1995, the Company, through Investors-NA,
purchased from Meridian Mutual Insurance Company the stock of
Meridian Life Insurance Company, an Indianapolis-based life
insurer, for a cash purchase price of $17.1 million. After the
aquisition, Meridian Life changed its name to Investors Life
Insurance Company of Indiana ("Investors-IN"). Investors-IN is
licensed in ten states and markets a variety of individual life
and annuity products through independent agents. This is not
considered a significant subsidiary for Securities and Exchange
Commission reporting purposes.
Under the terms of the purchase agreement, the Company acquired
approximately 82% of the outstanding stock of Investors-IN for
$14 million and Investors-NA acquired approximately 18% of the
outstanding stock of Investors-IN for the remainder of the
purchase price. Immediately following the closing of the
transaction, the Company contributed the shares acquired by it to
the unassigned surplus of Investors-NA. As a result, Investors-
IN will be a wholly-owned subsidiary of Investors-NA. This
transaction was financed, in part, through a $15 million increase
in the Company's Senior Loan.
New Accounting Pronouncement
In May 1993, the FASB issued FAS No. 114, "Accounting by
Creditors for Impairment of a Loan", effective for fiscal years
beginning after December 15, 1994. This statement requires that
impaired loans be valued at the present value of the expected
future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's effective
interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if
the loan is collateral dependent. It further amends FAS No. 5,
"Accounting for Contingencies," to require that all contractual
principal and interest payments be considered in determining the
impairment of a loan. The adoption of FAS No. 114 in January
1995 did not have a material effect on the Company's financial
statements.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operation:
For the six-month period ended June 30, 1995, ILCO's net income
was $5,190,000 ($1.03 per common share), as compared to
$4,923,000 ($0.96 per common share) for the similar period in
1994.
The results for the first six months of 1995 include the
operations of Investors Life Insurance Company of Indiana
(formerly known as Meridian Life Insurance Company) for the
period from February 14, 1995 to June 30, 1995. Investors Life
Insurance Company of Indiana (Investors-IN) was purchased by ILCO
and Investors Life Insurance Company of North America (Investors-
NA) for an adjusted purchase price of $17.1 million; the
transaction was completed on February 14, 1995. The name change
was completed in May, 1995.
The statutory earnings of the Company's insurance subsidiaries,
as required to be reported to insurance regulatory authorities,
before interest expense, capital gains and losses, and federal
income taxes were $12,621,883 for the six-month period ended June
30, 1995, as compared to $9,953,465 for the six-month period
ended June 30, 1994. These statutory earnings are the source to
provide for the repayment of ILCO's indebtedness.
The operating strategy of the Company's management emphasizes
several key objectives: expense management; marketing of
competitively priced insurance products which are designed to
generate an acceptable level of profitability; maintenance of a
high quality portfolio of investment grade securities; and the
provision of quality customer service.
Premium income, net of reinsurance, for the first six months of
1995 was $7.4 million, as compared to $7.8 million in the same
period of 1994. The decision to discontinue the writing of
credit life and accident and health insurance contributed to this
decline by approximately $1.3 million, offset partially by
increased premium resulting from the inclusion of Investors-IN.
Reinsurance premiums ceded were $1.9 million in the first six
months of 1995, as compared to $2.0 million for the similar
period in 1994.
Earned insurance charges for the first six months of 1995 were
$19.0 million, as compared to $20.1 million for the similar
period in 1994. This source of revenues is related to the
universal life insurance book of business of Investors-NA.
Interest expense was $3.1 million for the first six months of
1995, as compared to $2.5 million for the first six months of
1994. The increase is attributable to an increase in the average
rate of interest paid on the senior loan - 8.77% for the first
six months of 1995 as compared to 6.30% for the 1994 period.
The decline in long-term interest rates during the first six
months of 1995, which was related to general economic conditions,
had a positive effect upon the market value of the fixed
maturities available for sale segment of the portfolio. As of
June 30, 1995, the market value of the fixed maturities available
for sale segment was $474.1 million as compared to a carrying
value of $469.1 million, or an unrealized gain $5.0 million.
There is no assurance that this unrealized gain may be realized
in the future.
The investment income earned on the Company's portfolio affects
the level of interest rates which the Company credits to its
universal life insurance, whole life insurance and annuity
products. The objective of the Company is to maintain an
appropriate margin between the rate of interest which it earns on
its investments and the rate which it credits to policyholders.
During the first six months of 1994, management completed its
review of the credit life and credit disability business of the
Company. As a result of this review, management determined that
these product lines were not producing desired profitability
objectives. Accordingly, management announced that the Company's
subsidiaries which underwrote credit insurance would discontinue
the writing of new credit life and credit disability insurance.
For the full year of 1995, this action will have a negative
effect on premium income in the amount of $2.4 million
Total assets as of June 30, 1995 ($1.29 billion) increased from
the level as of December 31, 1994 ($1.15 billion). The increase
in total assets is primarily attributable to (a) the inclusion of
Investors-IN and (ii) an increase in the amount of separate
account assets.
On January 31, 1995, ILCO, through Investors-NA, purchased, as an
investment property, an office building project known as One
Bridgepoint Office Square in Austin, Texas for a cash purchase
price of $9.75 million. The property, which is 100% leased to
third-party tenants, consists of 20 acres of land, a five-story
office building with 83,474 square feet of rentable space and a
550-car parking garage.
Results of Operations
For the quarter ended June 30, 1995, the Company's income from
operations before Federal income taxes was $4,071,000 on revenues
of $31,017,000, as compared to $3,125,000, on revenues of
$29,437,000 for the second quarter of 1994.
For the three-month period ended June 30, 1995, the lapse rate
with respect to universal life insurance policies increased
slightly from the lapse rate experienced in the similar period in
1994. The rate for the 1995 period was 8.0%, as compared to 7.9%
in the 1994 period. The lapse rate with respect to traditional
(non-universal) life insurance policies decreased from the levels
experienced in the second quarter of 1994. The rate for the
three-month period ended June 30, 1995 was 10.4%, as compared to
13.4% in the similar period in 1994. The lapse rates experienced
during these periods were within the ranges anticipated by
management.
Liquidity and Capital Resources
ILCO is a holding company whose principal assets consist of the
common stock of Investors Life Insurance Company of North America
and its subsidiaries - Investors Life Insurance Company of
Indiana (formerly known as Meridian Life Insurance Company) and
InterContinental Life Insurance Company ("ILIC"). ILCO's primary
source of funds consists of payments under two Surplus Debentures
from Investors-NA.
As of December 31, 1994, the outstanding principal balance of the
ILCO's senior loan obligations was $66.6 million. On January 2,
1995, the Company made a scheduled payment of $4.5 million under
its Senior Loan. In connection with the acquisition of
Investors-IN in February, 1995, ILCO borrowed an additional $15
million under its Senior Loan to help finance the purchase. On
April 3, 1995, a principal payment in the amount of $13.2 million
was made, which prepaid the Senior Loan until October 1, 1995.
As a result, the Senior Loan had a principal balance at June 30,
1995 of $63.9 million.
ILCO's principal source of liquidity consists of the periodic
payment of principal and interest by Investors-NA, pursuant to
the terms of the Surplus Debentures. The Surplus Debentures were
originally issued by Standard Life Insurance Company and their
terms were previously approved by the Mississippi Insurance
Commissioner. Upon the merger of Standard Life into Investors-
NA, the obligations of the Surplus Debentures were assumed by
Investors-NA. As of June 30, 1995, the outstanding principal
balance of the Surplus Debentures was $7.5 million and $66.3
million, respectively. Since Investors-NA is domiciled in the
State of Washington, the provisions of Washington insurance law
apply to the Surplus Debentures. Under the provisions of the
Surplus Debentures and current law, no prior approval of the
Washington Insurance Commissioner is required for Investors-NA to
pay interest or principal on the Surplus Debentures; provided
that, after giving effect to such payments, the statutory surplus
of Investors-NA is in excess of $10 million (the "surplus
floor"). However, Investors-NA has voluntarily agreed with the
Washington Insurance Commissioner that it will provide at least
five days advance notice of payments which it will make under the
surplus debenture. As of June 30, 1995, the statutory surplus of
Investors-NA was $57.7 million, an amount substantially in excess
of the surplus floor. The funds required by Investors-NA to meet
its obligations to the Company under the terms of the Surplus
Debentures are generated from operating income generated from
insurance and investment operations.
In addition to the payments under the terms of the Surplus
Debentures, ILCO has received dividends from Standard Life (now,
from Investors-NA). Effective July 25, 1993, Washington amended
its insurance code to retain the "greater of" standard for
payment of dividends to shareholders, but enacted requirements
that prior notification of a proposed dividend be given to the
Washington Insurance Commissioner and that cash dividends may be
paid only from earned surplus. Investors-NA does not presently
have earned surplus as defined by the regulations adopted by the
Washington Insurance Commissioner and, therefore, is not
permitted to pay a cash dividend. However, since the new law
applies only to dividend payments, the ability of Investors-NA to
make principal and interest payments under the Surplus Debentures
is not affected. ILCO does not anticipate that Investors-NA will
have any difficulty in making principal and interest payments on
the Surplus Debentures in the amounts necessary to enable ILCO to
service the Senior Loan for the foreseeable future.
Investors-IN is domiciled in the State of Indiana. Under the
Indiana insurance code, a domestic insurer may make dividend
distributions upon proper notice to the Department of Insurance,
as long as the distribution is reasonable in relation to adequate
levels of policyholder surplus and quality of earnings. Under
Indiana law the dividend must be paid from earned surplus.
Extraordinary dividend approval would be required where a
dividend exceeds the greater of 10% of surplus or the net gain
from operations for the prior fiscal year. Investors-IN
currently has earned surplus.
ILCO's net cash flow provided by (used in) operating activities
was $314,000 for the six-month period ended June 30, 1995, as
compared to $(13,057,000) for the same period in 1994. This
change is primarily due to fluctuations in the amount of deferred
federal income taxes, related to the market value of the portion
of investments assets that are fixed maturities available for
sale.
Management believes that its cash, cash equivalents and short
term investments are sufficient to meet the needs of its business
and to satisfy debt service.
Investments
As of June 30, 1995, the book value of the Company's invested
assets totaled $652.8 million, as compared to $547.7 million as
of December 31, 1994. This change was affected primarily by the
inclusion of Investors-IN, which added approximately $93 million
in investment assets.
The level of short-term investments as of June 30, 1995 was $72.8
million, as compared to $94.8 million as of December 31, 1994.
The decline in the level of short-term investments reflects the
actions of management to diversify the investment portfolio of
the Company.
The fixed maturities available for sale portion of invested
assets at June 30, 1995 was $474.1 million. The amortized cost
of the fixed maturities available for sale segment as of June 30,
1995 was $469.1 million, representing a net unrealized gain of
$5.0 million. This unrealized gain principally reflects changes
in interest rates from the date the respective investments were
purchased. To reduce the exposure to interest rate changes,
portfolio investments are selected so that diversity, maturity
and liquidity factors approximate the duration of associated
policyholder liabilities.
The assets held by ILCO's life insurance subsidiaries must comply
with applicable state insurance laws and regulations. In
selecting investments for the portfolios of its life insurance
subsidiaries, the Company's emphasis is to obtain targeted profit
margins, while minimizing the exposure to changing interest
rates. This objective is implemented by selecting primarily
short- to medium-term, investment grade fixed income securities.
In making such portfolio selections, the Company does not select
new investments which are commonly referred to as "high yield" or
"non-investment grade."
The Company's fixed maturities portfolio (including short-term
investments), as of June 30, 1995, included a non-material amount
(0.75% of total fixed maturities and short-term investments) of
debt securities which, in the statements of the companies as
filed with state insurance departments, were designated under the
National Association of Insurance Commissioners ("NAIC") rating
system as "3" (medium quality) or below. As of December 31,
1994, the comparable percentage was 1.1%. Of these non-
investment grade investments, 0.42% were in the medium quality
(or "3") category, with only 0.34% receiving an NAIC rating of
"4" (low quality) or below.
The consolidated balance sheets of the Company as of June 30,
1995 include $60.985 million of "Notes receivable from
affiliates", represented by: (i) a loan of $22.5 million from
Investors-NA to Family Life Corporation and a $2.5 million loan
from Investors-CA to Financial Industries Corporation (which is
now owned by Investors-NA as a result of the merger of Investors-
CA into Investors-NA) and $1.485 million of additions to the $2.5
million note made in accordance with the terms of such note;
these loans were granted in connection with the 1991 acquisition
of Family Life Insurance Company by a wholly-owned subsidiary of
FIC, (ii) a loan of $30 million by Investors-NA to Family Life
Corporation made in July, 1993, in connection with the prepayment
by the FIC subsidiaries of indebtedness which had been previously
issued to Merrill Lynch as part of the 1991 acquisition and (iii)
a loan of $4.5 million by Investors-NA to Family Life Insurance
Investment Company made in July, 1993, in connection with the
same transaction described above. The NAIC has assigned a rating
of "3" to the $30 million note and the $4.5 million note
described above. These loans have not been included in the
preceding description of NAIC rating percentages.
Management believes that the absence of any material amounts of
"high-yield" or "non-investment grade" investments (as defined
above) in the portfolios of its life insurance subsidiaries
enhances the ability of the Company to service its debt, provide
security to its policyholders and to credit relatively consistent
rates of return to its policyholders.
Accounting Developments:
In May 1993, the FASB issued FAS No. 114, "Accounting by
Creditors for Impairment of a Loan", effective for fiscal years
beginning after December 15, 1994. This statement requires that
impaired loans be valued at the present value of the 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 value of the collateral if the loan is
collateral dependent. It further amends FAS No. 5, "Accounting
for Contingencies," to require that all contractual principal and
interest payments be considered in determining the impairment of
a loan. The adoption of FAS No. 114 in January, 1995, did not
have a material impact on the Company's financial statements.
INTERCONTINENTAL LIFE CORPORATION
PART II
ITEM 6(A)
Net income per share is based on the weighted average common and
common equivalent shares outstanding during each year.
3 Months Ended 6 Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands)
Net income $ 2,601 $ 2,031 $ 5,190 $ 4,923
Interest expense reduc-
tion net of income tax
effect 170 141 335 256
Net income available to
common shareholders $ 2,771 $ 2,172 $ 5,525 $ 5,179
Divide by:
Common shares out-
standing, treasury
stock 4,138 4,114 4,138 4,114
Dilutive common share
equivalents 1,235 1,264 1,235 1,264
Common stock and common
stock equivalents 5,373 5,378 5,373 5,378
Net income per share
available to common
shareholders $ .52 $ .40 $ 1.03 $ .96
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDARIES
Part III. Other Information
Item 1. Legal Proceedings
The Company and its subsidiaries are defendants in certain legal
actions related to the normal business operations of the Company.
Management believes that the resolution of such legal actions
will not have a material impact upon the financial statements.
Item 2. Changes in Securities
None
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
(a) Exhibits
Form 10-K Annual Report of Registrant for the year ended
December 31, 1994 heretofore filed by Registrant with the
Securities and Exchange Commission, which is hereby
incorporated by reference.
(b) Reports on Form 8-K:
None
INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
INTERCONTINENTAL LIFE CORPORATION
/s/ James M. Grace
James M. Grace
Treasurer
Date: August 11, 1995
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR
THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 474,068
<DEBT-CARRYING-VALUE> 20,544
<DEBT-MARKET-VALUE> 22,399
<EQUITIES> 2,206
<MORTGAGE> 16,701
<REAL-ESTATE> 14,298
<TOTAL-INVEST> 652,761
<CASH> 3,295
<RECOVER-REINSURE> 15,936
<DEFERRED-ACQUISITION> 24,506
<TOTAL-ASSETS> 1,288,333
<POLICY-LOSSES> 129,116
<UNEARNED-PREMIUMS> 11,040
<POLICY-OTHER> 554,195
<POLICY-HOLDER-FUNDS> 6,813
<NOTES-PAYABLE> 63,885
<COMMON> 1,129
0
0
<OTHER-SE> 80,387
<TOTAL-LIABILITY-AND-EQUITY> 1,288,333
7,399
<INVESTMENT-INCOME> 31,981
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 1,781
<BENEFITS> 25,736
<UNDERWRITING-AMORTIZATION> 1,735
<UNDERWRITING-OTHER> 7,014
<INCOME-PRETAX> 8,055
<INCOME-TAX> 2,865
<INCOME-CONTINUING> 5,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,190
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
