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Previous: COMMODORE ENVIRONMENTAL SERVICES INC /DE/, 10-Q, 1996-05-13 |
Next: PHARMHOUSE CORP, SC 13D, 1996-05-13 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -------------------------
For the Quarter Ended March 31, 1996 Commission file number 2-40019.
------------------- --------
SOUTHLAND NATIONAL INSURANCE CORPORATION
- ------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Alabama 63-0572745
- -------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1812 University Blvd., Tuscaloosa, AL 35401
- ---------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number, including area code) (205) 345-7410
-------------------------------
None
- -------------------------------------------------------------------------------
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $6 par value - 250,453
-----------------------------------
<PAGE> 2
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost: 1996-
$22,894,255 1995-$20,879,649) $22,923,561 $21,704,485
Equity securities (cost: 1996-$3,258,287
1995-$3,501,948) 3,704,446 3,991,788
Mortgage loans on real estate 362,333 370,056
Policy loans 225,427 226,739
Student loans 205,731 198,392
Short-term investments 621,026 969,696
Restricted short-term investments 225,257 225,257
---------- -----------
Total Investments 28,267,781 27,686,413
Cash 548,171 870,166
Accrued Investment Income 376,463
358,503
Accounts Receivable:
Uncollected premium 19,280 26,549
Receivable from reinsurers 205,539 227,243
Other receivables and agents' balances (net of
$50,000 allowed for uncollectible accounts) 106,217 104,690
------- ----------- -----------
Total Accounts Receivable 331,036 358,482
Deferred Policy Acquisition Costs 2,604,859 2,588,049
Property & Equipment(net) 605,376 584,032
Other 66,028 66,042
----------- ----------
TOTAL ASSETS $32,799,714 $32,511,687
=========== ===========
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Life insurance $ 23,331,303 $ 22,300,051
Accident and health 3,124 3,124
Accrued claims payable 255,584 300,197
Unearned Premiums 23,720 20,694
------------ ------------
Total Policy Liabilities and Accruals 23,613,731 22,624,066
Annuity deposits 1,041,312 1,017,394
Other Policyholders' funds 110,376 104,526
Income tax payable 31,388 17,580
Deferred Income Taxes 19,256 112,456
Other liabilities 247,797 284,353
------------ ------------
Total Liabilities 25,063,860 24,160,375
------------ ------------
Stockholders' Equity:
Common Stock, $6 par value, 1,250,000 shares
authorized, 250,453 shares issued and
outstanding in 1996 and 1995 1,502,718 1,502,718
Capital in excess of par value 269,331 269,331
Unrealized investment gains (losses)-net of
deferred income taxes of $80,829 and
$223,495 at March 31, 1996 and December 31,
1995, respectively 394,636 1,091,181
Retained earnings 5,569,169 5,488,082
------------ ------------
Stockholders' Equity 7,735,854 8,351,312
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 32,799,714 $ 32,511,687
============ ============
</TABLE>
<PAGE> 4
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1996 and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Common Stock
------------ Capital Net Unrealized
Excess of Investments Retained
Shares Amount Par Value Gains/(Losses) Earnings Total
------ ------ --------- -------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,1995 250,453 $1,502,718 $269,331 $(829,626) $4,578,036 $5,520,459
Cash Dividends
($.09 per share) (22,541) (22,541)
Reclassification of held-
to-maturity investments to
available-for-sale, net of
deferred income taxes of
$71,531 349,240 349,240
Increase (Decrease) in
unrealized investments
gains or (losses), net
of deferred income taxes
of $321,887 1,571,567 1,571,567
Net Income for the year 932,587 932,587
------- ---------- -------- ---------- ---------- ----------
Balance, December 31,1995 250,453 $1,502,718 $269,331 $1,091,181 $5,488,082 $8,351,312
Increase (Decrease) in
unrealized investments
gains or (losses)-net of
deferred income taxes of
($142,666) (696,545) (696,545)
Cash Dividends
($.10 per share) (25,045) (25,045)
Net Income for the three
months ended March 31, 1996 106,132 106,132
------- ---------- -------- -------- ---------- ----------
Balance, March 31, 1996 250,453 $1,502,718 $269,331 $394,636 $5,569,169 $7,735,854
======= ========== ======== ======== ========== ==========
</TABLE>
<PAGE> 5
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Revenues:
Traditional life and other premiums $ 1,507,106 $ 717,809
Universal life policy charges 144,905 159,392
Net investment income 432,502 357,366
Other income:
Realized gains (losses) on investments (7,627) (17,561)
Claims administration fees 568,807 619,254
Miscellaneous income 23,106 7,189
----------- -----------
Total Revenues 2,668,799 1,843,449
Benefits, Losses and Expenses:
Benefits, claims, losses and settlement expenses:
Death and other benefits 590,456 285,541
Increase in future policy benefits 1,027,694 514,758
---------- -----------
1,618,150 800,299
Underwriting, acquisition and insurance expenses:
Amortization of deferred policy acquisition costs 53,191 64,792
Commissions 162,398 119,331
Other Operating expenses 648,074 545,193
----------- -----------
863,663 729,316
----------- -----------
Income before Income Tax Expense 186,986 313,834
Income Tax Expense (Benefit):
Currently 31,388 64,777
Deferred 49,466 (4,594)
----------- -----------
80,854 60,183
----------- -----------
NET INCOME $ 106,132 $ 253,651
=========== ===========
NET INCOME PER SHARE $ .42 $ 1.01
=========== ===========
Dividends Declared PER SHARE $ .10 $ .09
=========== ===========
</TABLE>
<PAGE> 6
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months ended
March 31, March 31,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
Operating Activities:
Net income $ 106,132 $ 253,651
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) Decrease in accrued investment income (18,348) 20,444
(Increase) Decrease in accounts receivable and
agents balances, and reinsurance recoverable 27,446 26,542
Increase (Decrease) in future policy benefits 1,036,938 545,933
Increase (Decrease) in accrued claims (44,613) 10,886
Increase (Decrease) in other policyholders' funds 27,108 32,128
Increase (Decrease) in accrued expenses and other
liabilities (22,736) (51,981)
Policy acquisition costs deferred (70,001) (79,679)
Amortization of policy acquisition costs 53,191 64,792
Provision for depreciation 20,479 22,785
Provision for deferred income tax 49,466 (4,594)
Net realized (gains) losses on investments 7,627 17,561
---------- -----------
Net Cash Provided(Used) by Operation Activities 1,172,689 858,468
Investing Activities:
Purchases of investments and loans made (3,453,941) (2,714,529)
Sales, maturities and repayments of investments and loans 1,677,455 1,629,070
Purchase of property and equipment (41,823) (6,624)
(Increase) Decrease in short term investments 348,670 15,733
---------- -----------
Net Cash (Used) by Investing Activities (1,469,639) (1,076,350)
Financing Activities:
Dividends to shareholders (25,045) (22,541)
---------- -----------
Net Cash Provided (Used) by Financing Activities (25,045) (22,541)
---------- -----------
Increase (Decrease) in Cash (321,995) (240,423)
Cash at beginning of year 870,166 1,115,876
---------- -----------
Cash at end of period $ 548,171 $ 875,453
========== ===========
</TABLE>
<PAGE> 7
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Southland
National Insurance Corporation and subsidiaries are prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1996, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1995.
NOTE B -- CHANGES IN ACCOUNTING PRINCIPLES AND POLICIES
The amortized cost and estimated market values of the Company's investments are
shown on the following page.
Fair values are based on quoted market prices, where available. For securities
not actively traded or in the case of private placements, fair values are
estimated using values obtained from independent pricing services.
NOTE C --
On March 1, 1996, the Board of Directors declared a cash dividend to be paid on
the Company's common stock at the rate of $.10 per share. The cash dividend
was paid on April 15, 1996, to shareholders of record on March 29, 1996.
<PAGE> 8
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE B -- Continued
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale securities at
March 31, 1996:
Fixed maturity securities:
Corporate bonds $ 9,810,734 $ 229,053 $ (139,713) $ 9,900,074
U. S. Government bonds 6,130,238 38,853 (80,065) 6,089,026
State and municipal bonds 727,987 9,827 (5,701) 732,113
Public utility bonds 2,601,988 51,542 (32,240) 2,621,290
Mortgage-backed bonds 3,623,308 63,105 (105,355) 3,581,058
------------ ----------- ------------ --------------
Total 22,894,255 392,380 (363,074) 22,923,561
Equity securities:
Common stock 509,633 456,693 (32,729) 933,597
Preferred stock 2,748,654 53,700 (31,505) 2,770,849
------------ ----------- ------------ --------------
Total $ 26,152,542 $ 902,773 $ (427,308) $ 26,628,007
============ =========== ============ ==============
Available-for-sale securities at
December 31, 1995:
Fixed maturity securities:
Corporate bonds $ 9,924,289 $ 472,530 $ (24,263) $ 10,372,556
U. S. Government bonds 4,774,146 112,811 (1,337) 4,885,620
State and municipal bonds 728,160 30,755 (677) 758,238
Public utility bonds 2,311,433 141,368 (3,309) 2,449,492
Mortgage-backed bonds 3,141,621 117,314 (20,356) 3,238,579
------------- ----------- ------------ --------------
Total 20,879,649 874,778 (49,942) 21,704,485
Equity securities:
Common stock 549,039 479,001 (53,931) 974,109
Preferred stock 2,952,909 96,661 (31,891) 3,017,679
------------- ----------- ------------ --------------
Total $ 24,381,597 $ 1,450,440 $ (135,764) $ 25,696,273
============= =========== ============ ==============
</TABLE>
<PAGE> 9
SOUTHLAND NATIONAL INSURANCE CORPORATION AND SUBSIDIARIES
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE PERIOD OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995.
The first three months of 1996 produced a net profit of $106,132 compared to
net income of $253,651 for the first three months of 1995. Although total
revenues increased 45%, total expenses increased 62%, resulting in lower
profits.
Premium and policy fee revenues for the first three months of 1996 increased
approximately 88% over the first three months of 1995, due to increased
premiums in the pre-need line of business. This more than offset reductions in
group life premiums, where our group contracts were terminated during the first
quarter, and reductions in claim administration revenues.
Revenues attributable to TPA claim administration services provided by SIMA,
the Company's wholly owned subsidiary, decreased approximately 4% to $168,370
from $174,807 for the three months of 1996 and 1995, respectively. Claim
administration revenues related to the Company's agreement with the Public
Education Health Insurance Board ("PEHIP") decreased 10% as a result of a new
fee structure upon renewal of the contract in October 1995.
Total benefits, losses, and expenses increased approximately 62% to $2,481,813
from $1,529,615 for the first three months of 1996 and 1995, respectively.
Death and other policy benefits increased 107% due to higher than expected
mortality in universal life and pre-need lines of business along with an
increase in surrender benefits paid for the first quarter of 1996 compared to
the same time period of 1995. Future policy benefits, commissions, and other
operating expenses all increased as a result of an increased volume of sales.
Management has made a conscious effort to increase market share. While this
effort has started to result in increased business, expenses in the short run
have also increased. Although this trend will probably continue in the short
run, management is confident that these efforts will result in longer term
profitability.
Net investment income increased over 21% as cash and invested assets increased
4% for the three month period from $27,241,903 at December 31, 1995 to
$28,340,487 at March 31, 1996, before any adjustment to market value as
described in Note B of the Notes to Consolidated Financial Statements of the
Company and its subsidiaries, which appear elsewhere herein. Cash flow from
operations is adequate to fund current operating needs.
<PAGE> 10
SIGNATURE
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.
SOUTHHLAND NATIONAL INSURANCE CORPORATION
-----------------------------------------
Date: 5/09/96 By: /s/ William H. Lanford
---------------------------- -------------------------------------
W.H. Lanford
President
Date: 5/09/96 By: /s/ Ronald J. Koch
---------------------------- -------------------------------------
Ronald J. Koch
Secretary
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1996 - FORM 10QSB AND DECEMBER 31, 1995 - FORM 10KSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 22,923,561
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3,704,446
<MORTGAGE> 362,333
<REAL-ESTATE> 0
<TOTAL-INVEST> 28,267,781
<CASH> 548,171
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 2,604,859
<TOTAL-ASSETS> 32,799,714
<POLICY-LOSSES> 23,590,011
<UNEARNED-PREMIUMS> 23,720
<POLICY-OTHER> 1,041,312
<POLICY-HOLDER-FUNDS> 110,376
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,502,718
<OTHER-SE> 6,233,136
<TOTAL-LIABILITY-AND-EQUITY> 32,799,714
1,652,011
<INVESTMENT-INCOME> 432,502
<INVESTMENT-GAINS> (7,627)
<OTHER-INCOME> 591,913
<BENEFITS> 1,618,150
<UNDERWRITING-AMORTIZATION> 53,191
<UNDERWRITING-OTHER> 810,472
<INCOME-PRETAX> 186,986
<INCOME-TAX> 80,854
<INCOME-CONTINUING> 106,132
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,132
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
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