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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 9, 1997
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FIRST CENTRAL FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Charter)
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NEW YORK 1-9138 11-2648222
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
Incorporation)
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266 MERRICK ROAD
LYNBROOK, NEW YORK 11563
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 593-7070
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ITEM 5. OTHER EVENTS
The Registrant's principal subsidiary, First Central Insurance Company
("FCIC"), a property and casualty insurer and the Insurance Department of the
State of New York (the "Department") entered into a Stipulation dated July 9,
1997 (the "Stipulation"). A copy of the Stipulation is annexed as Exhibit 99
hereto. The Stipulation provides that FCIC will not write any new business of
any kind in any state, will limit the net amount of renewal business it will
write and will not recommence writing new business or increase the amount of
renewal business it writes without the prior written approval of the Department.
The Stipulation prohibits FCIC from engaging in certain extraordinary or
affiliate transactions without the Department's prior written approval and
requires FCIC to submit a plan of operation, including provisions for
strengthening FCIC's statutory financial condition and results of operations,
for the Department's review and approval. The Stipulation provides that such
plan must contemplate completion within six months of its submission.
On August 11, 1997, FCIC submitted its plan to the Department pursuant
to the Stipulation. The plan comprises the following elements: capital infusion
and conversion or redemption of the Registrant's 9% Convertible Subordinated
Debentures due 2000; reinsurance stop-loss program; revised marketing and
underwriting strategy; improvement in losses incurred; reduction in loss
adjustment expenses; reduction in operating expenses; approval of related party
transactions; and upgrade in the current A.M. Best & Co. rating of FCIC.
Although the Stipulation does not require completion of the plan until February
11, 1998, the Department retains the power to commence proceedings seeking the
earlier rehabilitation or liquidation of FCIC should the financial condition of
FCIC or other circumstances at the time warrant such action. The Department
continues to monitor the statutory financial condition and results of operations
of FCIC.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS
Exhibit Description
99 Stipulation, dated July 9, 1997, between First Central
Insurance Company and the State of New York Insurance
Department.
2
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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 hereunto duly authorized.
FIRST CENTRAL FINANCIAL CORPORATION
October 1, 1997 By: /s/ ANDREW W. ATTIVISSIMO
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Andrew W. Attivissimo
Chairman, Chief Executive Officer,
President and Chief Operating Officer
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EXHIBIT INDEX
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Exhibit Description
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99 Stipulation, dated July 9, 1997, between First Central Insurance
Company and the State of New York Insurance Department
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EXHIBIT 99
STATE OF NEW YORK
INSURANCE DEPARTMENT
160 WEST BROADWAY
NEW YORK, NEW YORK 10013
- ----------------------------------------x
In the Matter of :
:
FIRST CENTRAL INSURANCE : STIPULATION
COMPANY, :
:
Respondent. :
:
- ----------------------------------------x
WHEREAS, First Central Insurance Company ("FCIC") is a
domestic corporation authorized to transact property and casualty business
pursuant to the provisions of the New York Insurance Law (the "Law"); and
WHEREAS, Section 1104(c) of the Law provides that the
Superintendent of Insurance may suspend the license, restrict the license
authority, or limit the amount of premiums written in this state of an insurer
where it is determined after a hearing, unless such hearing is waived, that the
insurer's surplus to policyholders is not adequate in relation to its
outstanding liabilities or financial needs; and
WHEREAS, the Insurance Department has determined from the
Company's filed December 31, 1996 annual statement that the Company's ratio of
loss and loss adjustment expense reserves to surplus to policyholders is 8.4 to
1, in excess of the industry benchmark of 2:1; that the Company's surplus to
policyholders decreased by $15,817,000 from the previous year-end, said decrease
being equal to 60% of the previous year-end surplus to policyholders; that the
primary cause of this decrease is a deficiency in the loss and loss adjustment
expense reserves, the one year reserve development being 73% of surplus and the
two year reserve development being 145% of surplus; the ratio of net premiums
written to surplus to 4.4:1, in excess of the NAIC benchmark of 3:1; that the
Company's reinsurance recoverables are 227%of surplus; that the Company is
experiencing difficulty in collecting balances due from its producers as
evidenced by the amount of agents' balances charged off, $3.5 million, and the
non-admitted asset reported in the Annual Statement, $3.1 million; that the
admitted asset for agents' balances is 42% of surplus to policyholders, in
excess of the
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industry average of 20%; and that the Company's capital is below the authorized
risk based capital control level; and
WHEREAS, the parties desire to enter into a stipulation on the
terms and conditions hereinafter set forth in lieu of proceeding with a hearing
pursuant to Section 1104(c) of the Law; NOW THEREFORE:
IT IS HEREBY STIPULATED AND AGREED by the between FCIC and the
Insurance Department, subject to the approval of the Superintendent of
Insurance, as follows:
1. FCIC waives its right to further notice and a hearing in
this matter.
2. For purposes of Section 1104(c) of the Law, FCIC does not
contest the Department's finding that its surplus to policyholders is not
adequate in relation to its outstanding liabilities and financial needs.
3. FCIC voluntarily ceased writing new business and agrees
that it will not write any new business of any kind in any state.
4. FCIC agrees that it will limit the net amount of renewal
business it will write to $10 million for the first six months of 1997, which
amount includes both voluntary and involuntary business. At the end of the six
month period, the Department will reassess the Company's ability to write a like
amount during the second half of 1997.
5. FCIC agrees that it will not recommence writing new
business or increase the amount of renewal business it writes without the prior
written approval of the Department.
6. FCIC will submit, for the Department's review and approval,
a plan of operation within 30 days, which plan shall include provisions for
acquiring capital, pursuing the sale of its book of business to another
insurance company, possible merger with another insurance company pursuant to
Article 71 of the Insurance Law, and the reduction of its operating expenses.
The plan shall contemplate completion within six months of its submission.
7. FCIC agrees that it will not grant any increase in
compensation or pay any bonuses to any officer, employee or consultant without
the prior written approval of the Department or in accordance with any plan to
be filed pursuant to paragraph 6 above. This will not preclude the Company from
reimbursing any officer, employee or consultant for ordinary and appropriate
business expenses. FCIC may continue to pay invoices for reasonable fees and
disbursements rendered by outside accountants, actuaries, lawyers and like
professionals.
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8. FCIC agrees not to advance any funds or pay any fees to its
parent corporation or any affiliate, or on their behalf, without the
Department's prior written approval.
9. FCIC agrees not to sell, assign, transfer, pledge or
otherwise dispose of any of its assets, except in the ordinary course of its
business and investment activities, without the Department's prior written
permission.
10. FCIC acknowledges that it has been advised by the
Department that, should the Department subsequently determine that its surplus
to policyholders is insufficient to meet the minimum required to maintain its
license, the Superintendent may apply for an order of rehabilitation of FCIC
pursuant to Article 74 of the Law.
Dated: New York, N.Y. NEW YORK STATE INSURANCE DEPARTMENT
July 9, 1997
By: /s/ Jeffrey A. Stonehill
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Name: Jeffrey A. Stonehill
Title: Senior Attorney
FIRST CENTRAL INSURANCE COMPANY
By: /s/ Andrew W. Attivissimo
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Name: Andrew W. Attivissimo
Title: President and CEO
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STATE OF NEW YORK )
): ss
COUNTY OF NASSAU )
On the 7th day of July, 1997 before me personally came, Andrew W.
Attivissimo to me known, who, being by me duly sworn, did depose and say that he
resides at _______________________________________; that he is the President of
First Central Insurance Company, the corporation described in and which executed
the foregoing instrument; that he/she knows the corporate seal of the said
corporation; that the seal affixed to the said instrument is such corporate
seal; and that it was so affixed by order of the Board of Directors of the said
corporation, and that he/she signed his/her name thereto by like order.
/s/ Harvey Mass
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Notary Public
REVIEWED:
/s/ Alan Rachlin
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Alan Rachlin
Principal Attorney
The foregoing Stipulation is hereby approved.
Dated: New York, NY NEIL D. LEVIN
July 10, 1997 Superintendent of Insurance
By: /s/ Paul F. Altruda
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Paul F. Altruda
Assistant Deputy Superintendent
& Counsel
