<PAGE>
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 quarterly period ended. . . . . . . . . . . . . . . . .June 30, 1996
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. . . . . . . . . . . . . . . . . . . . 0-13591
PROVIDENT AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2214195
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 DeKalb Pike, Norristown, Pennsylvania 19404
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 279-2500
Former name, former address and former fiscal year,
if changed since last report: N/A
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 9,720,231 shares of common
stock, par value $.10, outstanding as of August 10, 1996.
Page 1 of 22 Pages
<PAGE>
PROVIDENT AMERICAN CORPORATION
INDEX
Page No.
-------
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Consolidated Statements of Operations. . . . . . . . . 3
Consolidated Balance Sheets. . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows. . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition. . . . . . . . . 10
Part II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 20
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Page 2 of 22 Pages
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Provident American Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(In thousands except per share data) 3 Months Ended June 30, 6 Months Ended June 30,
1996 1995 1996 1995
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Revenue:
Premiums: Accident and health . . . . . . . . . $13,706 $ 9,114 $25,364 $19,018
Less reinsurance ceded. . . . . . . . 6,074 3,693 11,216 7,816
------- ------- ------- -------
7,632 5,421 14,148 11,202
Life and annuity net of
reinsurance ceded of $(2,126),
$124, $(2,222) and $244 . . . . . . . 5,213 3,472 8,078 6,586
------- ------- ------- -------
Total Premiums . . . . . . . . . . 12,845 8,893 22,226 17,788
Net investment income. . . . . . . . . . . . . . 771 754 1,480 1,447
Realized gains (losses) on investments . . . . . (101) 114 29 142
Other revenues . . . . . . . . . . . . . . . . . 238 268 452 577
Litigation settlement,
net of expenses . . . . . . . . . . . . . . . 22,400
------- ------- -------
Total revenue . . . . . . . . . . . . . . 13,753 10,029 46,587 19,954
------- ------- ------- -------
Benefits and expenses:
Death and other policy benefits:
Life . . . . . . . . . . . . . . . . . . . 1,203 977 2,500 2,206
Accident and health net of
reinsurance ceded of $4,237,
$2,809, $7,792 and $4,915 . . . . . . 4,607 3,600 8,483 7,196
Annuity and other. . . . . . . . . . . . . (24) 310 176 471
Increase in liability for
future policy benefits. . . . . . . . 3,305 1,741 5,383 2,937
Depreciation and amortization . . . . . . . . 89 214 145 426
Taxes, licenses, and fees . . . . . . . . . . 601 281 1,174 811
Commissions, net of ceding
allowance of $2,128, $1,135, $3,855
and $2,341. . . . . . . . . . . . . . 2,165 1,270 3,689 2,514
Other operating expenses. . . . . . . . . . . 3,045 2,501 5,629 4,788
Amortization of deferred policy
acquisition costs. . . . . . . . . . . . . 26 63 52 107
Policy acquisition costs deferred . . . . . . (150) (258) (341) (483)
------- ------- ------- -------
Total benefits and expenses. . . . . . . . 14,867 10,699 26,890 20,973
------- ------- ------- -------
Income (loss) before income taxes. . . . . . . . (1,114) (670) 19,697 (1,019)
Provision for income taxes:
Current . . . . . . . . . . . . . . . . . . . (450) 2 4,900 20
Deferred. . . . . . . . . . . . . . . . . . . 400
------- ------- -------
Total income taxes . . . . . . . . . . . . (450) 2 5,300 20
------- ------- ------- -------
Net income (loss). . . . . . . . . . . . . (664) (672) 14,397 (1,039)
Dividends on preferred stock . . . . . . . . . . 37 84 120 167
------- ------- ------- -------
Net income (loss) applicable
to common stock . . . . . . . . . . . $ (701) $ (756) $14,277 $(1,206)
------- ------- ------- -------
Income (loss) per share of
common stock. . . . . . . . . . . . . $ (.08) $ (.09) $ 1.38 $ (.14)
------- ------- ------- -------
Common shares and equivalents used in
computing income (loss) per share . . . . . . 8,825 8,484 10,374 8,484
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 22 Pages
<PAGE>
Provident American Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars In Thousands) June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Assets
Investments:
Bonds, amortized cost $46,034 and $44,062. . . . . $44,940 $44,996
Marketable securities, cost $19,400. . . . . . . . 21,735
Real estate, at cost, less accumulated
depreciation of $146 and $134 . . . . . . . . . 954 966
Policy loans . . . . . . . . . . . . . . . . . . . 531 533
Other invested assets. . . . . . . . . . . . . . . 532 395
------- -------
Total Investments 68,692 46,890
Cash and cash equivalents . . . . . . . . . . . . . . 1,738 2,162
Accrued investment income . . . . . . . . . . . . . . 731 650
Premiums due and uncollected. . . . . . . . . . . . . 1,701 1,201
Amounts due from reinsurers . . . . . . . . . . . . . 9,877 10,191
Property and equipment, at cost, less
accumulated depreciation of $931
and $831 . . . . . . . . . . . . . . . . . . . . . 3,850 3,479
Goodwill. . . . . . . . . . . . . . . . . . . . . . . 1,961
Unamortized deferred policy acquisition costs . . . . 1,275 986
Loans receivable from director and stockholders . . . 440
Other assets. . . . . . . . . . . . . . . . . . . . . 1,671 1,592
------- -------
Total Assets $91,936 $67,151
------- -------
Liabilities and Stockholders' Equity
Future policy benefits:
Life . . . . . . . . . . . . . . . . . . . . . . . 37,234 35,290
Annuities and other. . . . . . . . . . . . . . . . 7,345 8,265
Policy claims . . . . . . . . . . . . . . . . . . . . 13,563 10,105
Unearned premiums . . . . . . . . . . . . . . . . . . 745 544
Premiums received in advance. . . . . . . . . . . . . 864 716
Amounts due to reinsurers . . . . . . . . . . . . . . 828 3,768
Accrued commissions and expenses. . . . . . . . . . . 3,366 1,893
Notes payable - bank. . . . . . . . . . . . . . . . . 605 830
Current income taxes. . . . . . . . . . . . . . . . . 5,109 36
Deferred income taxes . . . . . . . . . . . . . . . . 834 327
Other liabilities . . . . . . . . . . . . . . . . . . 2,655 1,953
------- -------
Total Liabilities 73,148 63,727
Commitments and Contingencies
Stockholders' Equity
Preferred stock, par value $1: authorized
5,000,000 shares:
Series A Cumulative Convertible, issued 580,250 580 580
Series B Cumulative Convertible, issued and 426,250 426
Common stock, par value $.10: authorized
25,000,000 issued 9,245,481 in 1996
and 8,650,481 in 1995 . . . . . . . . . . . . . 925 865
Common stock, Class A, par value $.10:
Authorized 2,500,000, none issued
Additional paid-in capital. . . . . . . . . . . . . . 11,340 10,227
Net unrealized appreciation (depreciation) of bonds . (711) 467
Net unrealized appreciation of marketable securities 1,518
Retained earnings (deficit) . . . . . . . . . . . . . 5,456 (8,821)
------- -------
19,108 3,744
Less common stock held in treasury,
at cost, 143,550 shares. . . . . . . . . . . . . . (320) (320)
------- -------
Total Stockholders' Equity 18,788 3,424
------- -------
Total Liabilities & Stockholders' Equity $91,936 $67,151
------- -------
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 22 Pages
<PAGE>
Provident American Corporation and Subsidiaries
Statements of Cash Flows
<TABLE>
<CAPTION>
(In Thousands) 6 Months ended June 30,
1996 1995
-------- ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . $14,397 $(1,039)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Marketable securities received
from litigation. . . . . . . . . . . . . (19,400)
Change in future policy benefits
and claims . . . . . . . . . . . . . . . 5,509 2,573
Change in premium due and uncollected
unearned premiums and
premiums received in advance . . . . . . (151) 53
Change in amounts due to/from
reinsurers . . . . . . . . . . . . . . . (2,626) 1,230
Change in accrued investment income . . . . (81) 16
Change in accrued commissions and
expenses . . . . . . . . . . . . . . . . 1,115 (163)
Change in other assets, current
and deferred income taxes and
other liabilities. . . . . . . . . . . . 5,076 (323)
Depreciation and amortization . . . . . . . 147 422
Deferred policy acquisition costs, net. . . (289) (376)
Net realized gain on investments. . . . . . (29) (142)
-------- -------
Net cash from operating activities . . . . . . 3,668 2,251
-------- -------
INVESTING ACTIVITIES
Purchases of investments and loans
made. . . . . . . . . . . . . . . . . . . . (13,417) (6,834)
Sale of investments. . . . . . . . . . . . . . 14,471 5,605
Maturity of investments and loans. . . . . . . 444 108
Acquisition of property and equipment. . . . . (179) (76)
(Increase) decrease in loans receivable. . . . (440) 105
Acquisition of business, net of cash acquired. (4,486)
Sale of business, net of cash given. . . . . . 1,121
-------- -------
Net cash from investing activities . . . . . . (3,607) 29
-------- -------
FINANCING ACTIVITIES
Deposits and interest credited to
contractholder deposit funds. . . . . . . . 231 497
Withdrawals from contractholder
deposit funds . . . . . . . . . . . . . . . (1,118) (793)
Issuance of common stock . . . . . . . . . . . 747
Dividends paid on preferred stock. . . . . . . (120) (167)
Proceeds from note payable - bank. . . . . . . 50
Repayment of note payable - bank . . . . . . . (225) (212)
-------- -------
Net cash from financing activities . . . . . . (485) (625)
-------- -------
Increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . (424) 1,655
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . 2,162 2,310
-------- -------
Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . $ 1,738 $ 3,965
-------- -------
Interest paid . . . . . . . . . . . . . . . . . . $ 34 $ 54
Income tax paid . . . . . . . . . . . . . . . . . $ 1 $ 3
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 22 Pages
<PAGE>
Provident American Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands)
(1) General
The condensed consolidated financial statements included herein have
been prepared by Provident American Corporation (the "Company") without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
and reflect all adjustments which, in the opinion of the Company, are necessary
to present fairly results for the interim periods. Certain financial information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the accompanying disclosures are adequate to make the information presented
not misleading. Results of operations for the six-month period ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
The Company is a Pennsylvania corporation which was organized in 1982
and is regulated as an insurance holding company by the states in which its
principal insurance subsidiaries, Provident Indemnity Life Insurance Company
("PILIC") and Provident American Life and Health Insurance Company ("PAHLIC"),
both Pennsylvania stock life insurance companies, are licensed.
(2) Acquisitions
Effective March 1, 1996 PILIC acquired all of the issued and
outstanding stock of Union Benefit Life Insurance Company, a Pennsylvania stock
life insurance company, ("UBLIC") for an amount equal to its adjusted capital
and surplus (approximately $3,750), $500 in cash, plus the issuance of 100,000
shares of the Company's common stock. The shares issued are registered
securities but have trading restrictions attached. At the time of the closing,
UBLIC did not retain or operate any insurance business. Concurrently, the
Company, UBLIC and PILIC entered into an agreement for the purchase and sale of
the UBLIC business with Life and Health Insurance Company of America, a
Pennsylvania insurer ("LHI"), pursuant to which all of the insurance business of
UBLIC was purchased by LHI immediately prior to or concurrently with the
purchase of the UBLIC stock by PILIC. The purchase price payable by LHI to UBLIC
for the purchase of the UBLIC business is $1,800. UBLIC is licensed to transact
life, accident and
Page 6 of 22 Pages
<PAGE>
health insurance in forty (40) states and the District of Columbia. After the
closing, it is anticipated that UBLIC will engage in the sale of life, accident
and health insurance business, subject to approval by the Pennsylvania Insurance
Department. This transaction is accounted for as a purchase and it is not
expected to have a material effect on the Company's consolidated results of
operations, total assets or stockholders' equity.
Effective May 1, 1996 the Company acquired all of the issued and
outstanding stock of NIA Corporation ("NIA"), d/b/a National Insurance
Administrators, and its wholly owned subsidiary, American Brokerage Corporation
("ABC") from MidAmerica Mutual Life Insurance Company ("MAM") for $254 of cash
and 50,000 shares of the Company's common stock. NIA and ABC are Colorado
corporations. NIA, a third party administrator and ABC, an insurance marketer
collectively design, market and service private label health insurance plans. As
a part of this transaction PILIC assumed approximately 3,500 inforce
"HealthQuest" medical policies originally underwritten by MAM and its
subsidiaries. This transaction is accounted for as a purchase and its impact on
the Company's consolidated results of operations is discussed in Management's
Discussion and Analysis and its impact on the Company's Condensed Consolidated
Balance Sheet is disclosed in Note 3.
On June 18, 1996 the Company acquired effective January 1, 1996 all of
the issued and outstanding stock of REF Associates, d/b/a Richard E. Field
Associates from its principal shareholders Richard E. Field and Arthur Ivey for
610,000 shares of the Company's common stock. REF Associates, a California
corporation, is engaged in marketing certain life and health insurance products
of PILIC, owns certain product trademarks and derives commission earnings from
PILIC. This transaction is accounted for as a Pooling of Interests and it is not
expected to have a material effect on the Company's consolidated results of
operations, total assets or stockholders' equity. The Company has not restated
consolidated results of operations, total assets or stockholders' equity due to
immateriality.
(3) Goodwill
Goodwill arises from the Company's 1996 acquisitions of NIA and UBLIC
and represents the difference between the Company's cost and the acquired
tangible assets net of assumed liabilities. Goodwill at June 30, 1996 of $1,961
is made up of $1,110 relating to the Company's purchase of UBLIC to be amortized
over 20 years straight line and $851 relating the Company's purchase of NIA to
be amortized over 10 years straight line. Goodwill is net of $33 of amortization
expense of which $18 relates to UBLIC and $15 relates to NIA. Amortization of
Goodwill Expense of $33 is included in the Company's Condensed Consolidated
Statements of Operations in Depreciation and amortization for both 3 and 6
months ended June 30, 1996.
Page 7 of 22 Pages
<PAGE>
(4) Litigation Settlement
Effective February 12, 1996, the Loewen Group, Inc. and Loewen Group
International, Inc. (collectively "Loewen") agreed to settle certain litigation
with the Company by agreeing to pay on April 1, 1996 $3 million in cash and to
issue to the Company 718,519 shares of the common stock of Loewen to compensate
the Company for damages sustained. Also see Note 5. The settlement amounts to
approximately $14.6 million which is net of approximately $7.8 million of income
taxes and $7.6 million of counsel fees and costs.
(5) Marketable Securities at Cost
Marketable Securities at cost are the Company's 718,519 shares of
Loewen Group International, Inc. common stock acquired as a result of litigation
described in Note 4. These registered securities are classified as "available
for sale" and are therefore carried at fair market value.
(6) Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Prior to 1996,
the Company established a valuation allowance (approximately $2,800 at December
31, 1995) for deferred tax assets because of reasonable doubt as to their
realization.
During the first six months of 1996, the Company reduced the valuation
allowance to reflect the deferred tax assets utilized in 1996 to reduce current
income taxes (approximately $ .9 million) and to recognize a deferred tax asset
of approximately $.9 million. The recognized deferred tax asset is based upon
expected utilization of certain net operating loss carryforwards and reversal of
certain temporary differences and has been offset against the required deferred
tax liability at June 30, 1996. The remaining valuation allowance at June 30,
1996 amounts to approximately $1 million. The Company will continue to review
this valuation allowance and make adjustments as appropriate.
(7) Loans Receivable from Directors and Stockholders
During the second quarter of 1996 the Company entered into loans with 2
related parties. The Company lent Alvin H. Clemens who is Chairman of the Board,
CEO and a stockholder $300 in the form of promissory note at an annual rate of
interest of 5.33% collateralized by 100,000 shares of the Company's common stock
owned by Mr. Clemens. The note to Mr. Clemens is due in 1999. The company lent
John T. Gillin who is a member of the Board of Directors and a shareholder $140
in the form of promissory note at an annual rate of interest of 8.5%
collateralized by 20,000 shares of the Company's common stock owned by Mr.
Gillin. The note to Mr. Gillin is due in 1996.
Page 8 of 22 Pages
<PAGE>
(8) Earnings (loss) per share of common stock
Primary earnings (loss) per share has been computed by dividing net
income (loss) applicable to common stock, by the weighted average number of
common shares and equivalents outstanding. Common share equivalents included in
the computation represent shares issuable upon assumed exercise of stock options
which would have a dilutive effect in periods where there are earnings.
Equivalents were anti-dilutive in 1995.
There is no significant difference between earnings per share on a
primary and a fully diluted basis since the assumed conversion of the
outstanding convertible preferred stock is anti-dilutive.
(9) Reclassification
Certain prior year amounts have been reclassified to conform with the
current presentation.
Page 9 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company's principal business consists of the underwriting and
administration of life, annuities and accident and health insurance policies.
The insurance business is operated through the Company's wholly-owned
subsidiary, PILIC.
The Company is continuing the process of shifting its healthcare
insurance business to managed care plans. The Company presently has several
alliances with networks of doctors and hospitals and during 1996 expects to
expand this business by vigorously seeking additional alliances with various
doctor and hospital groups in the states where the Company is licensed to do
business. The formation of these alliances with favorable fee schedules and a
reputation for high quality medical care is allowing the Company to develop
attractive new small group health products and recruit high caliber distributors
for this market. These health products will be competitively priced flexible
managed care alternatives to the Blue Cross/Blue Shield and various Health
Maintenance Organization (HMO) products.
In addition to alliances with doctors, the Company has expanded its
healthcare insurance and managed care business through recent acquisitions. With
the NIA acquisition the Company acquired a 3,500 customer inforce book of
business representing approximately $6.5 million of annualized premium. This
book is made up of indemnity medical insurance policy plans and "HealthQuest"
which is a managed care one-life PPO product, recently introduced and marketed
through 1,000 agents in 8 states similar to the Company's "Provident Solution"
Plan. The Company also gains access to over 3,000 agents selling in nearly 30
states.
The Company acquired UBLIC which has since been renamed Provident
American Life and Health Insurance Company (PAHLIC) for the purpose of expanding
the number of available states which the company is licensed to sell life and
health insurance. PAHLIC is licensed in 40 states while PILIC is licensed in 25
states and the District of Columbia. Together the Company can write business in
42 states. The Company is in the process of obtaining regulatory approval to
sell life and health plans in various states to be marketed by Provident's MGA,
NIA and other distribution channels.
The Company acquired all of the outstanding shares of REF Associates in order to
obtain full control and the rights to the Company's "Provident Solution" plans
and eliminates future commission expense between the Company and REF Associates.
The Company has entered into agreements pursuant to which options to
purchase shares of the Company's common stock will be granted to various agents
licensed by PILIC as they achieve certain production quotas and performance
levels. The Company believes the granting of options to purchase its common
stock will provide an incentive for its agents in the production of premiums
from the sale of insurance products in the future.
Page 10 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
Alliances combined with recent acquisitions reflects the Company's
commitment to broadening and strengthening its strategic position in the ever
changing managed health care business.
Results of Operations
For three months ended June 30, 1996 the Company's Consolidated
Statement of Operations was impacted by the NIA Acquisition and 2 non-recurring
transactions. The Company's recapture of reinsurance ceded on certain multi-pay
pre-need life insurance policies resulted in a one time pre-tax loss of
approximately $1 million reserved in the first quarter but significantly
impacting revenue and expense amounts in the second quarter described later. In
addition, the Company incurred a one time expense of $0.3 million resulting from
the Company terminating its plans to acquire Medical Resources described later.
On a positive note, Premium Revenue increased as a result of the sales growth
and the NIA Acquisition also described later.
During the three months ended June 30, 1996, net premium revenues were
$12.8 million compared to $8.9 million for the three months ended June 30, 1995.
Accident and health premium increased $2.5 million, to $7.6 million, group life
premium decreased $0.6 million and individual life insurance, consisting
primarily of pre-need and final expense business, increased by $1.7 million to
$4.6 million. Accident and health policy benefits represent 60.4% of accident
and health earned premium for the three months ended June 30, 1996 compared to
63.1% for the three months ended June 30, 1995. The reported loss ratio for the
year ended December 31, 1995 was 62.5%.
During the three months ended June 30, 1996 the Company's acquisition of
approximately 3,500 inforce "HealthQuest" medical policies originally
underwritten by MAM and its subsidiaries as a result of the NIA acquisition
discussed in Notes to Condensed Consolidated Financial Statements, (2)
Acquisitions accounted for the following amounts in; Accident and Health
Premiums net of reinsurance ceded $1.1 million, Benefits net of reinsurance $0.6
million, Commissions, net of ceding allowance $0.3 and Other operating expenses
$0.3.
During the three months ended June 30, 1996 the Company recaptured
reinsurance ceded on certain multi-pay pre-need life insurance policies in order
to retain future profits. The pre-tax impact of $1 million was reserved as of
March 31, 1996 but the Recapture accounted for the following amounts in 3 months
ended June 30, 1996 results in Ceded Premium $2.4 Million, Death and other
policy benefits, Life $0.2 million, Commission net of ceding allowance $0.4 and
Increase in liability for future policy benefits $2.2 million.
Page 11 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
Net investment income remained steady at approximately $0.8 million. The
gross average yield on investments owned has increased from 6.5% at June 30,
1995 to 6.6% at June 30, 1996.
Operating expenses, including commissions, depreciation and amortization
and other operating expenses, amounted to $5.3 million and $4 million for the
three months ended June 30, 1996 and 1995, respectively. Such expenses for the
three months ended June 30, 1996 and 1995 are net of ceding commissions on
reinsurance agreements of approximately $2.1 million and $1.1 million,
respectively. Excluding the previously mentioned one time expense charges of
$0.3 million relating to Medical Resources and $0.4 million Recapture of
reinsurance, Operating Expenses, including commissions, depreciation and
amortization and other operating expenses net of reinsurance would have been
approximately $4.6 million which represents approximately 38.4% of earned
premium before reinsurance ceded which is down substantially from and 40.3% for
3 months ended June 30, 1995. The reduction is the result of Premium growth from
the NIA Acquisition and new business growth.
The percentage increase in 1996 expenses results primarily from
increased first year commissions on the small group medical business, the one
time expense relating to the Company's recapture of reinsurance and one time
legal and related expenses related to the Company's terminated plans to acquire
Medical Resources and commissions and operating expenses related to the book of
business acquired as a result of the NIA acquisition.
Net income applicable to common stock for the three months ended June
30, 1996, was a loss of $0.7 million ($0.08 per share) compared to a loss of
$756 thousand ($.05 per share) for the three months ended June 30, 1995.
The Company called and converted all of its Series B cummulative
convertible preferred stock into common stock during three months ended June 30,
1996.
For six months ended June 30, 1996 the Company's Consolidated Statement
of Operations was favorably impacted by Litigation Settlement amounting to $22.4
million as described in Note 4. Results were unfavorably impacted by the
Company's recapture of reinsurance ceded on certain multi-pay pre-need life
insurance policies which resulted in a one time pre-tax loss of approximately $1
million reserved in the first quarter but significantly impacting revenue and
expense amounts in the second quarter.
Page 12 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
During the six months ended June 30, 1996, premium revenues were $22.2
million compared to $17.8 million for the six months ended June 30, 1995.
Accident and health premium increased $3.4 million, to $14.1 million, group life
premium decreased $0.5 million to $1.1 million and individual life insurance,
consisting primarily of pre-need and final expense business, increased by $1.5
million to $7 million. Accident and health policy benefits represent 60.0% of
accident and health earned premium for the three months ended June 30, 1996
compared to 61.2% for the six months ended June 30, 1995. The reported loss
ratio for the year ended December 31, 1995 and the quarter ended March 31, 1996
was 62.5% and 59.4%, respectively.
Net investment income increased approximately $0.1 million. The average
gross yield on investments owned has increased from 6.5% at June 30, 1995 to
6.6% at June 30, 1996.
At June 30, 1996 and 1995, annualized accident and health premium
amounted to $59 million and $37.4 million, respectively, consisting of
approximately 29,000 and 16,000 certificate holders, respectively. The net
increase in annualized premium resulted from an increase in business of $14.0
million (consisting of new business amounting to approximately $49.1 million net
of lapses amounting to approximately $35.1 million) plus premium rate increases
of approximately $0.5 million, plus the book of business acquired as a result of
the NIA acquisition consisting of approximately $7.1 million annual premium and
4,300 certificate holders.
The group accident and health insurance premium lapse ratios for the
twelve months ended June 30, 1996 and 1995 were 78.9% and 61%, respectively. The
group accident and health lapse ratios include small group medical plans which
by their nature have higher lapsation. The small group medical business amounts
to approximately 80% and 59%, respectively, of the group accident and health
business. The lapse ratios continue to reflect the results of continued premium
rate increases as well as the continuing trend away from traditional healthcare
insurance to managed care plans. The Company is continuing the process of
shifting its healthcare insurance business to managed care plans. In order to
further reduce the lapse ratio, the Company continues to follow the practice of
pooling claim experience for re-rating of all cases with less than 25
participants. In addition, the Company has a conservation program which, as part
of the renewal process, offers alternative types of insurance products. While
some policy-holders have switched to less expensive insurance plans, the Company
does not believe the plans are less profitable.
The individual life insurance premium lapse ratios on an annualized
basis for the six months ended June 30, 1996 and 1995 were 10.2% and 8.8%,
respectively. The higher 1996 lapse ratio results primarily from an increase in
the non-renewal of final expense policies.
Page 13 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
Operating expenses, including commissions, depreciation and amortization
and other operating expenses, amounted to $9.5 million and $7.7 million for the
six months ended June 30, 1996 and 1995, respectively. Such expenses for the six
months ended June 30, 1996 and 1995 are net of ceding commissions on reinsurance
agreements of approximately $3.9 million and $2.3 million, respectively.
Excluding the previously mentioned one time expense charges of $0.3 million
relating to Medical Resources and $0.4 million Recapture of reinsurance,
Operating Expenses, including commissions, depreciation and amortization and
other operating expenses net of reinsurance would have been approximately $8.8
million which represents approximately 39.6% of earned premium before
reinsurance ceded which is up from and 38.9% for six months ended June 30, 1995.
The percentage increase in 1996 expenses results primarily from increased first
year commissions on the small group medical business.
Net income applicable to common stock for the six months ended June 30,
1996, was a gain of $14.3 million ($1.38 per share) compared to a loss of $1.2
million ($.14 per share) for the three months ended June 30, 1995. The six
months ended June 30, 1996 includes a litigation settlement of $14.6 million
($1.41 per share).
Liquidity and Capital Resources
A major objective of the Company is to continue to strengthen its
financial position with sufficient liquidity to fund growth and fulfill
statutory requirements. Liquidity in the insurance business generally relates to
the insurer's ability to meet all cash requirements with funds generated from
the cash flow of normal operations.
The primary sources of cash are premiums and investment income. The
primary uses of cash are operating costs and benefit payments to policyholders.
Cash flow from operations is transferred to the investment portfolio where it is
available for future cash needs. The Company anticipates that it will continue
to fund surrenders and benefit payments through cash flow of normal operations,
scheduled investment maturities, interest income and the liquidation of
short-term investments.
During the first six months of 1996 the Company's Consolidated
Statements of Cash Flows was favorably impacted by Litigation Settlement and
cash was utilized to finance the Company's acquisition of NIA and UBLIC along
with the Company's recapture of reinsurance.
The Litigation Settlement with Loewen as described in Note 4 provided a
significant source of cash and invested assets. The settlement contributed $14.6
million to Net Income which is net of $7.8 million of unpaid income taxes for a
$22.4 million increase in cash and
Page 14 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
invested assets. $19.4 million of the settlement was in the form of Loewen
common stock and is included in "Marketable securities received from
litigation". Unpaid income taxes of approximately $7.8 million is included in
"Change in other assets, current and deferred income taxes and other
liabilities". The Company has liquidated a portion of the Loewen stock since
June 30, 1996 for payment of income taxes and reinvestment purposes.
The cash impact from the acquisitions of UBLIC and NIA as described in
Notes to Condensed Consolidated Financial Statements, (2) Acquisitions is
included in "Acquisition of business, net of cash received". The Company's
acquisition of UBLIC included a high quality bond portfolio whose market and
book value was approximately $3.6 million as of the date of acquisition and at
June 30, 1996.
For the six months ended June 30, 1996, total cash and investments
increased by approximately $21.4 million, of which approximately $3.7 million
was provided by operating activities. Cash and investments decreased by
approximately $2 million as a result of the change in the aggregate market value
of debt securities, $1.1 million of withdrawals from deposit funds,
approximately $0.1 million used to pay dividends on preferred stock,
approximately $0.4 million exchanged for notes receivable and $0.3 million was
used for other purposes. The decrease in amounts due from reinsurers results
primarily from a reduction in amounts due under a life reinsurance agreement
resulting from the collection of a ceding allowance and recapture of the
reinsurance ceded offset by an increase in the backlog of policy claims. The
decrease in amounts due to reinsurers results primarily from the payment of
reinsurance premiums accrued at December 31, 1995. The increase in future policy
benefits results primarily from the continuing sales of new business and renewal
of existing policies. The liability for future policy benefits of annuities
decreased because of surrenders of deposit administration group annuities. The
increase in the liabilities for policy claims results from an increase in the
number of covered lives and number of unprocessed claims. The liability for
current income taxes results primarily from the significant increase in
operating results primarily from the litigation settlement. The decrease in
deferred income taxes results from a reduction in the prior year's valuation
allowance for deferred tax assets, the tax effect of the increase in the amount
of net unrealized losses on investments classified as "available for sale"
offset by an increase in deferred tax liabilities. Accrued commissions and
expenses increased primarily as a result of the timing of when payments, for
such expenses, are made. Other liabilities decreased primarily from a reduction
in the net liability to several insurance carriers for premium received, less
claims paid, on limited self funded business by Montgomery as Managing General
Underwriter.
Page 15 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
PILIC has approximately $3.4 million of deposit administration group
annuities which were originally sold in the late 1970s and may be surrendered by
contractholders. Practically all these contracts are subject to a 5% surrender
charge, a six month waiting period, a maximum withdrawal of $50 thousand per
month and reduction to 3% in the amount of interest which is credited during the
termination phase. During the six months ended June 30, 1996 and 1995 and for
the year ended December 31, 1995 group annuity surrenders amounted to
approximately $847, $626 and $1,100, respectively. Surrender benefits on all
other insurance products over the past several years have not been significant
and are not expected to be in the future. The pre-need and final expense
products presently being sold are relatively small and do not accumulate
significant surrender benefits.
The Company has classified all of its debt and equity securities as
"available for sale" and accordingly, at December 31, 1995 recorded as a
separate component of stockholders equity an unrealized gain amounting to
approximately $467, net of approximately $327 applicable to deferred federal
income taxes and approximately $140 applicable to life future policy benefits.
At June 30, 1996, the Company recorded an unrealized loss of approximately $711
on bonds net of approximately $382 applicable to deferred federal income taxes
and an unrealized gain of approximately $1,518 on Marketable stock securities,
net of approximately $817 applicable to deferred federal income taxes. The net
effect on shareholders' equity as a result of this fair market value accounting
method was to increase shareholders' equity by approximately $807 for the six
months ended June 30, 1996. The cumulative change in aggregate fair market
values of bonds is a direct result of the overall change in interest rates.
Management believes, under its present assessment of the Company's
insurance operations, that the Company has sufficient liquidity and capital to
meet the Company's short-term and long-term financial commitments. At June 30,
1996, the Company had shareholders' equity of $18.8 million with total assets of
$91.9 million. Total assets included cash and investments of $70.4 million which
consisted of $44.9 million in bonds issued by the U.S. Government or government
agencies, public utilities and other corporations, $21.7 million of Marketable
securities invested in Loewen common stock, $2.1 million invested in policy
loans, real estate and other invested assets and $1.7 million in cash and cash
equivalents. The market value of cash and investments was approximately $70.4
million at June 30, 1996. The $44.9 million of bonds are investment grade
securities ranging in maturity from one to twenty-nine years.
The Company and its subsidiaries historically have not and currently do
not invest in high yield debt instruments, defined as securities below
investment grade with interest rates or yields significantly above market rates.
Page 16 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
Because of the long-term nature of its life insurance and annuity
contracts, the Company expects to hold its bonds to maturity. However, all bonds
are considered to be "available for sale" and in order to maximize investment
income, Company policy presently is to purchase medium-term U.S. Treasury and
government agency bonds rather than purchasing short-term securities which would
provide for anticipated maturities up to 10 years. This policy necessitates
periodic sales of securities prior to maturity when cash flow from operations is
not sufficient to meet current obligations.
The sale of life insurance policies requires substantial capital due to
acquisition costs incurred in the initial year of issuance and the necessity to
maintain sufficient surplus levels for regulatory purposes. In general, the
Company anticipates meeting these demands from premiums on new business,
investment income and income from current business in force.
Under the terms of a Quota Share Reinsurance Agreement, PILIC presently
cedes 47.5% of the liability on the first $85,000 of claims per person, per
calendar year of its group accident and health insurance business. PILIC
receives a 31.5% ceding commission except on its small group medical business,
which for the six months ended June 30, 1996 and 1995 amounts to approximately
80% and 59%, respectively, of the Company's group accident and health business,
it receives ceding commissions of 41.5% on first year business and 26.5% on
renewal business. Effective January 1, 1996, the ceding allowance was increased
by 4% for both new and renewal business. For the six months ended June 30, 1996
and 1995 the combined ceding commissions amounted to approximately 38.5% and
31.7%, respectively. This agreement is unlimited as to duration, however, it may
be terminated on October 1, 1996 or any October 1 thereafter by either party
giving 120 days notice. In addition, the Company generally assumes 30% (up to
$150 per individual) of the liability on its limited self funded business, which
consists generally of policies issued to limit the claims expenses of employers
that self-insure group medical benefits with respect to any individual employee
and in the aggregate.
Unfavorable economic conditions have contributed to an increase in the
number of insurance companies that are under regulatory supervision. This is
expected to result in an increase in mandatory assessments by state guaranty
funds of solvent insurance companies to cover losses to policyholders of
insolvent or rehabilitated companies. Although PILIC is not able to reasonably
estimate the potential effect on it of any such assessments or voluntary
payments, such amounts are not expected to have a material adverse effect on
PILIC's financial condition. Guaranty fund assessments charged against
operations for the six months ended June 30, 1996 and 1995 and the year ended
December 31, 1995 amounted to $8, $74 and $105, respectively, and are net of
approximately $5, $54 and $68, respectively, which is estimated to be allowable
as a credit against future state premium taxes.
Page 17 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
The statutory capital and surplus of PILIC was approximately $10.1
million at June 30, 1996 which includes the benefits of certain permitted
practices but excludes approximately $6.5 million of the non admitted value of
Loewen stock. The minimum statutory capital and surplus requirement for life
insurance companies domiciled in Pennsylvania is currently $1,650.
Administrative rules and legal restrictions of state insurance departments
presently prevent payment of dividends by PILIC to its parent company without
regulatory approval. At December 31, 1995, PILIC calculated its "Risk Based
Capital" utilizing a formula required by the National Association of Insurance
Commissioners. The results of this computation indicate PILIC's adjusted
capital, amounting to approximately $6.7 million, exceeds the amount required by
approximately $1.5 million. In concept, Risk Based Capital standards are
designed to measure the acceptable amounts of capital an insurer should have
based on inherent and specific risks of the insurers business. This formula is
expected to be the primary measurement as to the adequacy of total capital and
surplus of life insurance companies.
Effective March 1, 1996 PILIC acquired all of the issued and
outstanding stock of Union Benefit Life Insurance Company, a Pennsylvania stock
life insurance company, ("UBLIC") for an amount equal to its adjusted capital
and surplus (approximately $3,750), $500 in cash, plus the issuance of 100,000
shares of the company's common stock. The shares issued are not currently
registered securities and will have trading restrictions attached. At the time
of the closing, UBLIC did not retain or operate any insurance business.
Concurrently, the Company, UBLIC and PILIC entered into an agreement for the
purchase and sale of the UBLIC business with Life and Health Insurance Company
of America, a Pennsylvania insurer ("LHI"), pursuant to which all of the
insurance business of UBLIC was purchased by LHI immediately prior to or
concurrently with the purchase of the UBLIC stock by PILIC. The purchase price
payable by LHI to UBLIC for the purchase of the UBLIC business is $1,800. UBLIC
is licensed to transact life, accident and health insurance in forty (40) states
and the District of Columbia. After the closing, it is anticipated that UBLIC
will engage in the sale of life, accident and health insurance business, subject
to approval by the Pennsylvania Insurance Department and the availability of
adequate capital and surplus. This transaction, which will be accounted for as a
purchase, is not expected to have a material effect on the Company's
consolidated results of operations, total assets or stockholders' equity.
Ratio of Premiums Written to Capital and Surplus
Certain industry guidelines, including those of the National Association
of Insurance Commissioners, suggest that a life insurer's ratio of annual net
premiums written to statutory capital and surplus should not exceed 3 to 1 for
the accident and health segment of the industry, which currently accounts for
approximately 73% of the Company's business and between 7 and 10 to 1 for
annuities and ordinary
Page 18 of 22 Pages
<PAGE>
Item 2. Management's Discussion and Analysis - (Continued)
life, which currently accounts for approximately 16% of the Company's business.
For the year ended December 31, 1995, PILIC's overall ratio was 5.9 to 1. For
the six months ended June 30, 1996 the ratio on an annualized basis was 4.5 to
1. Although PILIC's statutory surplus is small compared to its competitors,
business in the areas in which it is focusing (pre-need funeral insurance and
accident and health insurance) will not be materially adversely affected by its
ratio of net premium written to statutory capital and surplus because those
products do not cause a material strain on surplus due to the single premium
basis on which a majority of such policies are sold. However, the Company
believes, the primary measurement as to the adequacy of capital and surplus will
be determined on the basis of the "Risk Based Capital" formula of the National
Association of Insurance Commissioners and adopted in Pennsylvania and a number
of other states where the Insurance Subsidiaries do business.
Other
Capital expenditures in 1996 are not expected to be significant.
Page 19 of 22 Pages
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In April of 1992, the Company and PILIC commenced an action in
the United States District Court for the Eastern District of
Pennsylvania (Civil Action No. CV92-1964) against The Loewen
Group, Inc. and Loewen Group International, Inc. (collectively
"Loewen") for breach of contract, fraud, conspiracy, negligence,
malicious interference with contractual relations, and breach of
the duty of good faith, and seeking compensatory damages in the
amount of $58.8 million dollars, together with punitive damages
against Loewen. This litigation was settled, effective as of
February 12, 1996, pursuant to the terms and conditions of a
Settlement Agreement and Mutual General Release ("Settlement
Agreement"). The Settlement Agreement provides that Loewen shall
make a cash payment in the amount of $3,000,000 on April 1,
1996, plus issue stock certificates representing One Million
(1,000,000) shares of the common stock, without par value, of
The Loewen Group, Inc. ("Settlement Shares"), allocated as
follows: (a) $500,000 and 77,500 Settlement Shares to compensate
the Company for damages sustained through its loss of goodwill
in the insurance industry as a result of litigation; (b)
$500,000 and 82,500 Settlement Shares to compensate the Company
for damages sustained through the loss in the value of the
shares of the common stock of PILIC as a result of the
litigation; (c) 279,260 Settlement Shares to PILIC to compensate
it for damages sustained as a result of the loss of unrealized
profits; (d) 123,630 Settlement Shares to PILIC in payment of
the overhead, administration and management expenses incurred by
PILIC during the period May 1, 1991 through January 31, 1992;
(e) $2,000,000 and 155,629 Settlement Shares to PILIC to
compensate PILIC for damages sustained as a result of the
claimed tortious conduct of Loewen; and (f) the balance of the
Settlement Shares allocated to counsel fees and costs. Pursuant
to the Settlement Agreement, Loewen is required to use its best
efforts to cause the Settlement Shares to be registered under
the Securities Act of 1933, as amended, in accordance with the
terms and conditions of the Settlement Agreement. For the
purposes of the Settlement Agreement, the value of a Settlement
Share is $27.00, and, to the extent that the value of a
Settlement Share, as of the end of the Determination Period (as
such term is described in the Settlement Agreement) is less than
$27.00 per share, Loewen has agreed to pay to Company or PILIC,
as the case may be, cash or additional shares of Loewen common
stock, without par value, as shall be equal to the difference
between $27.00 per share and the then NASDAQ market price of a
share of Loewen common stock. The settlement is subject to
Page 20 of 22 Pages
<PAGE>
other terms, conditions or restrictions as are set forth in the
Settlement Agreements.
Item 2. Change in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(11) Earnings Per Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K:
April 18, 1996 - Item 5 - Announcing the termination of
negotiations for the purchase of all of the outstanding
capital stock of Residential Healthcare Inc., trading as
Medical Resources, Ltd.
and a portion of two affiliated businesses.
May 20, 1996 - Item 6 - Announcing the resignation of
David R. Carr, Jr. as a director of the Registrant.
No other reports of Form 8-K were filed during the
quarter ended June 30, 1996.
Page 21 of 22 Pages
<PAGE>
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.
Provident American Corporation
By: /s/ Anthony R. Verdi
-------------------------------
Anthony R. Verdi, Treasurer and
Chief Financial Officer
Date: August 13, 1996
Page 22 of 22 Pages
<PAGE>
PROVIDENT AMERICAN CORPORATION EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
(In thousands except per share data) Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- ------
<S> <C> <C> <C> <C>
Primary Earnings (Loss) Per Share
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK: $ (701) $ (756) $14,277 $(1,206)
======= ====== ======= =======
WEIGHTED AVERAGE SHARES:
Common stock 8,825 8,484 8,686 8,484
Common stock equivalents applicable
to stock options and warrants * * 1,515 *
------- ------ ------- -------
Total 8,825 8,484 10.201 8,484
======= ====== ======= =======
NET INCOME (LOSS) PER SHARE: $ (0.08 $(0.09) $ 1.40 $ (0.14)
======= ====== ======= =======
Fully Diluted Earnings (Loss) Per Share
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK: $ (701) $ (756) $14,277 $(1,206)
======= ====== ======= =======
WEIGHTED AVERAGE SHARES:
Common stock 8,825 8,484 8,686 8,484
Common stock equivalents applicable
to stock options and warrants * * 1,688 *
------- ------ ------- -------
Total 8,825 8,484 10,374 8,484
======= ====== ======= =======
NET INCOME (LOSS) PER SHARE: $ (0.08) $(0.09) $ 1.38 $ (0.14)
======= ====== ======= =======
</TABLE>
* Anti-dilutive; therefore effects have been excluded.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 44,940
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 21,735
<MORTGAGE> 343
<REAL-ESTATE> 954
<TOTAL-INVEST> 68,692
<CASH> 1,738
<RECOVER-REINSURE> 9,877
<DEFERRED-ACQUISITION> 1,275
<TOTAL-ASSETS> 91,936
<POLICY-LOSSES> 37,234
<UNEARNED-PREMIUMS> 745
<POLICY-OTHER> 13,563
<POLICY-HOLDER-FUNDS> 7,345
<NOTES-PAYABLE> 605
0
580
<COMMON> 925
<OTHER-SE> 17,283
<TOTAL-LIABILITY-AND-EQUITY> 91,936
22,226
<INVESTMENT-INCOME> 1,480
<INVESTMENT-GAINS> 29
<OTHER-INCOME> 22,852
<BENEFITS> 16,542
<UNDERWRITING-AMORTIZATION> 52
<UNDERWRITING-OTHER> 10,296
<INCOME-PRETAX> 19,697
<INCOME-TAX> 5,300
<INCOME-CONTINUING> 14,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,397
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
