=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995
Commission file number 0-13124
WARNER INSURANCE SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2698053
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
17-01 Pollitt Drive, Fair Lawn, New Jersey 07410
(Address of principal (Zip Code)
executive office)
(201)794-4800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares outstanding at May 2, 1995:
8,560,904 shares of Common Stock, par value $.01 per share.
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<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-Q FOR THE QUARTER ENDED
March 31, 1995
Page No.
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 . . . . . 2 - 3
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994 . . 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 . . 5
Notes to Consolidated Financial Statements . . 6 - 8
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . 9 - 12
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 13
-1-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
------------ ------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents. . . $ 3,445,485 $ 6,407,801
Fixed maturity investments
available-for-sale,
at fair value (cost:
$1,973,832 and
$4,110,278). . . . . . . . . 1,925,000 3,872,500
Accounts receivable, less
allowance for
doubtful accounts of
$465,028 and $465,028. . . . 18,101,516 17,675,311
Income taxes receivable. . . . 2,384,588 2,136,028
Deferred income taxes. . . . . 2,750,000 3,250,000
Prepaid expenses . . . . . . . 666,222 232,216
------------ ------------
Total current assets. . . . 29,272,811 33,573,856
------------ ------------
Deferred contract receivables. . 3,124,915 3,218,126
------------ ------------
Property and equipment, at cost:
Furniture, fixtures and
equipment. . . . . . . . . . 14,736,741 15,606,722
Leasehold improvements . . . . 1,696,475 1,696,475
------------ ------------
16,433,216 17,303,197
Less accumulated depreciation
and amortization . . . . . . (12,917,999) ( 13,046,118)
------------ ------------
Property and
equipment-net. . . . . . 3,515,217 4,257,079
------------ ------------
Capitalized software, less
amortization of $2,811,959
and $2,629,112 . . . . . . . . 1,157,791 1,340,639
------------ ------------
Other assets . . . . . . . . . . 494,710 503,753
------------ ------------
$ 37,565,444 $ 42,893,453
============ ============
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<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
March 31, December 31,
1995 1994
------------ ------------
(unaudited) (audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . $ -- $ 2,000,000
Accounts payable . . . . . . . 1,265,584 1,097,668
Accrued liabilities. . . . . . 12,599,287 12,087,706
Unearned contract revenue. . . 8,076,628 8,975,598
----------- -----------
Total current liabilities. . 21,941,499 24,160,972
----------- -----------
Unearned contract revenue. . . . 13,253,182 12,886,460
----------- -----------
Deferred income taxes. . . . . . 470,000 470,000
----------- -----------
Contingencies (Note 4)
Stockholders' equity:
Common stock, $.01 par value;
authorized 20,000,000
shares, issued 9,194,890
and 9,187,323. . . . . . . . 91,949 91,873
Capital in excess of
par value. . . . . . . . . . 10,414,252 10,401,994
Retained earnings (deficit). . (6,038,231) (2,550,639)
Treasury stock at cost -
633,986 and 633,986
shares . . . . . . . . . . . (2,567,207) (2,567,207)
----------- -----------
Total stockholders'
equity . . . . . . . . . . 1,900,763 5,376,021
----------- -----------
$37,565,444 $42,893,453
=========== ===========
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<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
--------------------------
1995 1994
---------- -----------
Revenues:
Insurance services revenue. . . $ 5,901,559 $ 7,231,388
Software licensing revenues . . 1,053,699 483,533
Insurance earned premiums . . . -- 1,528,538
Data processing and MTF
revenue . . . . . . . . . . . 748,855 2,877,967
Net investment income . . . . . 11,366 159,386
Subcontracted claims
servicing revenue . . . . . . 206,689 1,420,445
----------- -----------
7,922,168 13,701,257
----------- -----------
Costs and expenses:
Selling, general and
administrative expenses . . . 10,032,823 11,032,341
Special charges . . . . . . . . 1,165,000 --
Insurance expenses including
losses. . . . . . . . . . . . -- 1,436,824
Subcontracted claims services . 206,689 1,420,445
Interest expense. . . . . . . . 5,248 34,138
----------- -----------
11,409,760 13,923,748
----------- -----------
Loss from continuing operations
before income taxes . . . . . . (3,487,592) ( 222,491)
Income taxes/(benefit). . . . . . -- ( 6,035)
----------- -----------
Loss from continuing operations . (3,487,592) ( 216,456)
Provision for loss on spin-off,
including provision of $3,600,000
for estimated operating losses
during phase-out period, net
of tax benefit of $1,360,000. . -- (2,640,000)
----------- ------------
Net loss. . . . . . . . . . . . . $(3,487,592) $(2,856,456)
=========== ===========
Loss per share from continuing
operations. . . . . . . . . . . $( 0.41) $( 0.02)
=========== ===========
Net loss per share. . . . . . . . $( 0.41) $( 0.32)
=========== ===========
Cash dividend per share . . . . . $ -- $ 0.01
=========== ===========
Weighted average common
shares outstanding. . . . . . . 8,554,514 8,960,329
=========== ===========
-4-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
---------------------------
1995 1994
----------- ------------
Cash flows from operating
activities:
Net loss. . . . . . . . . . . . $(3,487,592) $( 2,856,456)
Adjustments to reconcile
net loss to net cash
provided from (used for)
operating activities:
Depreciation and
amortization. . . . . . . . 407,737 484,020
Amortization of
capitalized software. . . . 182,847 610,939
Accounts receivable . . . . . ( 332,994) ( 3,056,573)
Income taxes receivable . . . ( 248,560) --
Premiums receivable . . . . . -- ( 4,652,683)
Deferred acquisition costs. . -- ( 860,957)
Prepaid expenses. . . . . . . ( 434,006) 22,406
Deferred income taxes, net. . 500,000 ( 1,672,850)
Other assets. . . . . . . . . 9,043 ( 93,330)
Accounts payable. . . . . . . 167,916 212,156
Accrued liabilities . . . . . 852,264 5,440,447
Unearned contract revenue . . ( 532,248) 1,145,563
Unpaid losses and loss
expenses. . . . . . . . . . -- 1,306,899
Ceding commissions payable. . -- 921,718
Unearned premiums . . . . . . -- 4,004,451
Income taxes. . . . . . . . . -- ( 252,083)
----------- ------------
Net cash provided from (used
for) operating activities . . . (2,915,593) 703,667
----------- ------------
Cash flows from investing
activities:
Proceeds from sale of fixed
maturity investments
available-for-sale. . . . . . 1,947,500 5,874,993
Purchase of fixed maturity
investments available-
for-sale. . . . . . . . . . . -- (10,204,667)
Capital expenditures. . . . . . ( 6,558) ( 404,425)
Capital software expenditures . -- ( 1,023,900)
Proceeds from disposition of
assets. . . . . . . . . . . . -- 110,446
----------- ------------
Net cash provided from (used
for) investing activities . . . 1,940,942 ( 5,647,553)
----------- ------------
Cash flows from financing
activities:
Proceeds from credit line
borrowings. . . . . . . . . . -- 4,000,000
Payment on credit line. . . . . (2,000,000) --
Dividends to stockholders . . . -- ( 88,807)
Net proceeds from issuance
of common stock . . . . . . . 12,335 112,194
Payment for purchase of
treasury stock. . . . . . . . -- ( 112,373)
----------- ------------
Net cash (used for) provided
from financing activities . . . (1,987,665) 3,911,014
----------- ------------
Net decrease in cash and
cash equivalents. . . . . . . . (2,962,316) ( 1,032,872)
Cash and cash equivalents at
beginning of period . . . . . . . 6,407,801 5,731,498
----------- ------------
Cash and cash equivalents at
end of period . . . . . . . . . $ 3,445,485 $ 4,698,626
=========== ============
-5-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
For a summary of significant accounting policies, refer to Note 1
of Notes to Consolidated Financial Statements included in Warner
Insurance Services, Inc.'s (the "Company") Annual Report on Form
10-K for the year ended December 31, 1994. While the Company
believes that the disclosures presented are adequate to make the
information not misleading, these consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company's latest annual report. Certain amounts for the prior
year have been reclassified to conform with the current period's
financial statement presentation. The financial statements
include on a consolidated basis the results of all subsidiaries.
All material intercompany transactions have been eliminated.
In the opinion of management, the accompanying consolidated
financial statements include all adjustments which are necessary
to present fairly the Company's financial position as of March
31, 1995 and December 31, 1994 and the results of operations for
the three-month periods ended March 31, 1995 and 1994, and the
changes in cash flows for the three-month periods ended March 31,
1995 and 1994. Such adjustments are of a normal and recurring
nature. The results of operations for the three-month period
ended March 31, 1995 are not necessarily indicative of the
results to be expected for a full year.
Note 2 - Insurance Company
In late 1993, the Company formed Alerion Insurance Company of New
Jersey ("Alerion"). Alerion entered into a reinsurance agreement
with Clarendon National Insurance Company ("Clarendon") to assume
a portion of Clarendon's risk in the New Jersey Assigned Risk
Program. The subsidiary was initially capitalized with $10
million. During the fourth quarter of 1994, the Company decided
to discontinue assuming any underlying insurance risk. This was
accomplished by Alerion commuting all its rights and obligations
under the reinsurance contract back to Clarendon and paying to
Clarendon all amounts received in excess of payments made since
the inception of the reinsurance contract in January 1994.
Note 3 - COVER-ALL
In March 1994, the Company adopted a plan to implement a tax-free
spin-off of 100% of the stock of COVER-ALL Systems, Inc. (a
wholly-owned subsidiary that provides software products to the
property/casualty insurance industry) on a pro rata basis to the
Company's stockholders. On November 11, 1994, the Company
announced that its Board of Directors had voted to retain COVER-
ALL, thereby cancelling the spin-off plan. The Board determined
not to proceed with the proposed spin-off because of questions as
to whether a tax-free ruling on the spin-off could be obtained,
and the impact on existing and prospective customer relationships
of continuing uncertainty. Additionally, the Board determined
that both companies would be stronger financially remaining in
the same corporate structure.
-6-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - COVER-ALL (continued)
Accordingly, COVER-ALL operations for the quarter ended March 31,
1994 have been reclassified and are included in the Consolidated
Statements of Operations as a part of the continuing operations.
In the Company's previously issued quarterly financial reports
for the first two quarters of 1994, COVER-ALL's losses from
operations and provision for loss on spin-off, were reflected as
operations "pending spin-off." Such treatment was reclassified
in the third quarter report.
In December 1994, management instituted a plan to downsize the
COVER-ALL organization and reduce the rate of product development
to a level consistent with the reduced level of customer
installations planned for 1995. The total head count, including
employees and technical consultants, was reduced by approximately
half in the first quarter of 1995.
As a result of this reorganization plan for COVER-ALL, special
charges were reported in the fourth quarter of 1994 to write down
a substantial portion of the unamortized capitalized software
development costs and accrue for excess facilities and other
costs. Additional costs were incurred in the first quarter of
1995 for executive and other severance costs as well as
additional write-off of software development costs. These 1995
provisions and write-offs, aggregating $1,165,000, are reflected
as special charges in the Statement of Operations for the three
months ended March 31, 1995.
Note 4 - Litigation
In March 1994, Material Damage Adjustment Corporation ("MDA"), a
subsidiary of The Robert Plan Corporation and a subcontractor for
the Company performing claims processing work, instituted an
action in the Superior Court of New Jersey seeking injunctive
relief requiring that the Company turn over to MDA in excess of
$1 million that the Company had withheld from certain claims fees
allegedly owed to MDA. This action arose out of the Company's
servicing contract with the Market Transition Facility of New
Jersey ("MTF"). The Company withheld the funds as a set off to
cover unpaid invoices for data processing services rendered by
the Company for MDA. MDA also added a claim for approximately
$2.5 million of surcharge fees paid to the Company by the MTF.
Thereafter, the trial court denied several applications by MDA to
impound the funds pending the litigation. A companion
interpleader action by the MTF was dismissed by the trial court
and stay applications have been denied by the trial court and the
Appellate Division.
The Company is vigorously contesting MDA's claims. The Company
is pursuing counterclaims against MDA to establish the Company's
entitlement to the disputed sums. Discovery is not yet completed
in this matter. The court has set a July 1995 trial date and the
Company is currently in negotiations with respect to the
settlement of this lawsuit.
-7-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Litigation (continued)
In May, 1994, The Company filed an action in the Superior Court
of New Jersey against Lion Insurance Company, National Consumer
Insurance Corporation, and The Robert Plan Corporation seeking
payment of unsatisfied invoices under an April 1991 agreement
totalling approximately $2.7 million. Under the agreement, the
Company agreed to provide data processing services for a three-
year term in support of Lion Insurance Company's "depopulation
pool" automobile insurance business in New Jersey. Lion
Insurance Company is a subsidiary of The Robert Plan Corporation
whose affiliate, National Consumer Insurance Corporation, has
taken over the "depopulation pool" business. The Robert Plan
Corporation guaranteed Lion's performance and payment.
Defendants have counterclaimed asserting anti-trust violations
and other claims which the Company is vigorously disputing. In
connection with the Company's motion for summary judgment, the
allegations of antitrust and insurance law violations were
dismissed.
At this time, a trial date has not been set on the above matters,
and it is not anticipated that discovery will be completed until
some time in 1996. The Company is currently in negotiations with
respect to the settlement of this lawsuit.
Because of the uncertainties associated with the litigation
described above, an estimate of the ultimate liability of the
Company cannot be made with any degree of certainty at this time.
Therefore, no such liability has been recorded in the financial
statements. In addition, the effect of these material
uncertainties on the Company's future cash flows is not presently
determinable. As a result, should the Company not be successful
in these litigation matters, there can be no assurance that the
Company can continue as a going concern. The financial
statements have been prepared assuming that the Company will
continue as a going concern and do not include any adjustments
that might result from the outcome of these uncertainties.
The Company believes that current cash balances (including
amounts invested in its insurance subsidiary) and anticipated
cash flow from operations will be sufficient to meet normal
operating needs over the remainder of 1995. The Company plans to
liquidate or sell its insurance subsidiary (thus making $2.5
million of cash available to Warner) and regulatory approval of
such liquidation or sale is considered obtainable. Management is
negotiating for new bank credit lines and alternative means are
being explored to raise additional permanent capital.
In addition to the matters described above, the Company is named
as defendant in a number of legal actions arising from its
operations. Those actions have been considered in establishing
liabilities. Management and its legal counsel are of the opinion
that the settlement of those actions will not have a material
adverse effect on financial position or results of operations.
Note 5 - Income Taxes
For 1995, no income tax provision/(benefit) has been reflected in
the Statement of Operations. A valuation allowance was provided
equal to the tax benefit that the loss generated. The 1994
income tax/(benefit) represents the federal tax benefit of losses
net of a provision for state income taxes of approximately
$65,000.
-8-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Total revenues for the three months ended March 31, 1995
(including subcontracted claims services) were $ 7,922,168
compared to $13,701,257 for the same period in 1994.
Subcontracted claims servicing revenue (representing flow-through
activity associated with the Market Transition Facility of New
Jersey ("MTF") with no impact on profit) decreased to $206,689 in
the 1995 quarter as compared to $1,420,445 in the 1994 quarter.
Insurance services revenues are primarily made up of policy
administration and claims servicing fees from customers such as
Atlantic/Pacific Employers Insurance Company for servicing
policies in the New Jersey voluntary and assigned risk markets.
The contract with Atlantic/Pacific Employers Insurance Company
reached its peak level of activity in 1994 and policy volumes are
starting to decline in 1995. During 1995 and 1996,
Atlantic/Pacific Employers Insurance Company will non-renew all
of their auto insurance policies in New Jersey in accordance with
the accelerated withdrawal order entered into with the New Jersey
Department of Insurance in August 1994. As a result, Warner's
policy administration fees declined in the first quarter of 1995
as compared with the same period in 1994 reflecting the reduced
number of policies being issued. Warner is currently seeking to
make business arrangements with other insurance companies which
could result in Warner's continued handling of some portion of
this business for the "replacement" carrier or carriers.
Revenues earned under a contract with Clarendon National
Insurance Company ("Clarendon") involved full service policy
administration and claims services for approximately 18% of the
assigned risk drivers in New Jersey. This activity started in
1993 with the commencement of the New Jersey Personal Automobile
Insurance Plan ("PAIP") following the end of New Jersey's direct
insurance program provided by its MTF. Warner's service for
Clarendon was performed under New Jersey's Limited Assignment
Distribution Program ("LAD") which required that servicing
carriers such as Warner bear some of the underlying insurance
risk of the policies being handled. For this reason, Warner
formed a wholly-owned insurance subsidiary, Alerion, and
effective January 1, 1994, Alerion reinsured a portion of
Clarendon's insurance risk under the PAIP program.
By the end of 1994, Warner decided that risk taking, even as a
reinsurer, was not an attractive business strategy, particularly
because of the substantial capital required by its insurance
subsidiary relative to other Warner capital commitments. Warner
and Clarendon agreed, therefore, to end the reinsurance
arrangement in the fourth quarter of 1994 and "commute" all
reinsurance interests and liabilities back to the inception of
the agreement, thus eliminating all reinsurance activity of
Alerion.
Since Warner is no longer willing to share in the underlying
insurance risk of PAIP policies, it cannot, by law, continue to
provide policy administration and claims servicing to Clarendon
under the LAD program after 1994. However, Warner will continue
to provide claims adjustment services for policies issued in 1994
and prior.
Most of Warner's insurance services contracts include a variable
fee structure based on the loss ratios of the underlying
insurance policies which could increase or decrease fee revenues.
The Company obtains periodic independent actuarial evaluations of
the loss ratios for these programs and adjusts the amount of its
revenue when required.
-9-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
The loss of service revenues in 1995 and beyond from the
accelerated withdrawal of Atlantic/Pacific Employers Insurance
Company from auto insurance in New Jersey and Warner's decision
to cease the PAIP activity with Clarendon has required Warner to
accelerate its plan to develop new service contracts with others.
Warner has already identified a number of new service
opportunities in early 1995, and it has established a marketing
strategy with objectives to develop new business to replace a
portion of the contracts referred to above which are ending.
The overall decline in total revenues in the first quarter of
1995 is also due to the phasing out of the MTF program, as
described in the next paragraph, and related data processing
contracts with other insurance companies.
Policies serviced under the three-year MTF contract came to an
end at September 30, 1993 with respect to policy processing and
administration as the last of the MTF policies expired. The
claims for these MTF policies have been handled for Warner since
the inception of the contract by a subcontractor. The claims
fees are included in Warner's total revenues as "subcontracted
claims servicing revenue" and are passed through to the
subcontractor without any profit for Warner. In the first
quarter of 1995, these "pass-through" subcontract claims
servicing revenues were approximately $.2 million, compared with
approximately $1.4 million in the first quarter of 1994.
Although some claims remain to be settled in the MTF, Warner's
contracted activity has substantially ended.
Revenues from data processing services to certain long-standing
customers amounted to approximately $.8 million in the first
quarter of 1995, down from $2.5 million in the first quarter of
1994. While Warner's profit margins on these data processing
services were high, the departure of these customers has enabled
Warner to decommission several of its aging mainframe computers
and downsize the data processing costs considerably.
Revenues from COVER-ALL software licensing and maintenance
increased to $1.1 million in the first quarter of 1995 as
compared with $.5 million in the same quarter of 1994, reflecting
increasing progress on initial installations and increased fees
from professional support services to customers.
Selling, general and administrative expenses were reduced by
approximately $1 million in the first quarter of 1995 as compared
with the same quarter of 1994, primarily as a result of the lower
data processing costs referred to above.
In December 1994, Warner management adopted a plan to reduce the
COVER-ALL marketing and product development costs until revenues
increased to significantly higher levels. The cash outlay had
grown to a level of approximately $1 million per month but the
revenues from customers continued to lag expectations. The total
head count, including employees and technical consultants, was
reduced by approximately half in the first quarter of 1995 and a
business plan was adopted for 1995 which would match slowly
growing revenues with reduced costs resulting in the expectation
of profitable operations by late 1995.
-10-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
As a result of this reorganization plan for COVER-ALL, special
charges were reported in the fourth quarter of 1994 to write down
a substantial portion of the unamortized capitalized software
development costs (approximately $2.7 million) and accrue for
excess facilities and other costs ($.6 million). Additional
costs were incurred in the first quarter of 1995 for executive
severance, employee severance, and additional write-off of
software development costs as the reorganization was completed.
These 1995 provisions and write-offs, aggregating $1,165,000,
were reflected as special charges in the Statement of Operations
for the quarter ended March 31, 1995. COVER-ALL's pretax loss
for the first quarter of 1995 was in excess of $2 million which
is not indicative of results which are expected during the
remainder of 1995.
As described in Note 5 to the Consolidated Financial Statements,
no net income tax benefit is available with respect to the loss
incurred in the first quarter of 1995.
Liquidity and Capital Resources
-------------------------------
Cash flows from operations were negative in the first quarter of
1995 by $2.9 million as compared with positive cash flows of $.7
million in the same period in 1994. This is primarily due to the
loss from operations caused by reduced revenues and increased
costs as described above.
In the first quarter of 1994, the insurance subsidiary, Alerion,
was capitalized with approximately $10 million of cash generated
from insurance service contracts. By the end of 1994, the
decision was reached to remove all available capital from this
inactive insurance subsidiary and $4.5 million was distributed to
Warner by December 31, 1994. In early February 1995, an
additional $3 million was distributed to Warner leaving Alerion
with a minimum statutory capital of approximately $2.5 million at
March 31, 1995, pending Alerion's sale or dissolution.
At December 31, 1994, Warner had $2 million of short-term
borrowings against its $4 million secured line of credit with a
bank. Subsequent to year-end, the borrowings were repaid and the
credit line was withdrawn. Warner intends to seek new bank
credit lines.
In April 1995, the Company received a $2.3 million refund of
federal income taxes paid prior to 1994.
There is a $1 million letter of credit outstanding with a bank
which was issued in favor of the JUA/MTF in connection with the
Company's contractual obligations. The letter of credit expires
in February 1996, and it has been fully cash collateralized by
the Company.
The Company believes that current cash balances (including
amounts invested in its insurance subsidiary), and anticipated
cash flows from operations will be sufficient to meet normal
operating needs during 1995. However, the amounts invested in
the insurance subsidiary are subject to regulatory approval prior
to withdrawal. Also, as discussed in Note 4 to the consolidated
financial statements for the three months ended March 31, 1995,
the ultimate outcome of the pending litigation, either at trial
or by settlement, cannot be determined at this time.
-11-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Management is exploring alternative means of raising longer-term
capital that will be required to continue the COVER-ALL software
development and to sustain and grow the Company's insurance
services business in 1996 and beyond.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
--------
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
None.
-12-
<PAGE>
WARNER INSURANCE SERVICES, INC.
AND SUBSIDIARIES
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.
WARNER INSURANCE SERVICES, INC.
May 12, 1995 By: /s/ Harvey Krieger
--------------------------
Harvey Krieger
President and Chairman of
the Board of Directors
May 12, 1995 By: /s/ Bradley J. Hughes
--------------------------
Bradley J. Hughes
Vice President - Finance
and Administration and
Chief Financial Officer
-13-
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WARNER
INSURANCE SERVICES INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,445,485
<SECURITIES> 1,925,000
<RECEIVABLES> 18,566,544
<ALLOWANCES> 465,028
<INVENTORY> 0
<CURRENT-ASSETS> 29,272,811
<PP&E> 16,433,216
<DEPRECIATION> 12,917,999
<TOTAL-ASSETS> 37,565,444
<CURRENT-LIABILITIES> 21,941,499
<BONDS> 0
<COMMON> 91,949
0
0
<OTHER-SE> 1,808,814
<TOTAL-LIABILITY-AND-EQUITY> 37,565,444
<SALES> 0
<TOTAL-REVENUES> 7,922,168
<CGS> 0
<TOTAL-COSTS> 206,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,248
<INCOME-PRETAX> (3,487,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,487,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,487,592)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
