<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 82,768
<DEBT-CARRYING-VALUE> 15,262
<DEBT-MARKET-VALUE> 0
<EQUITIES> 7,912
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 106,235
<CASH> 1,186
<RECOVER-REINSURE> 2,317
<DEFERRED-ACQUISITION> 14,739
<TOTAL-ASSETS> 145,404
<POLICY-LOSSES> 9,991
<UNEARNED-PREMIUMS> 32,439
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 12,500
<COMMON> 24
0
0
<OTHER-SE> 38,717
<TOTAL-LIABILITY-AND-EQUITY> 145,404
16,719
<INVESTMENT-INCOME> 866
<INVESTMENT-GAINS> 67
<OTHER-INCOME> 0
<BENEFITS> 5,389
<UNDERWRITING-AMORTIZATION> 7,932
<UNDERWRITING-OTHER> 3,395
<INCOME-PRETAX> 936
<INCOME-TAX> 9
<INCOME-CONTINUING> 927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 927
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<RESERVE-OPEN> 8,900
<PROVISION-CURRENT> 793
<PROVISION-PRIOR> 4,679
<PAYMENTS-CURRENT> 1,831
<PAYMENTS-PRIOR> 2,550
<RESERVE-CLOSE> 9,991
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
UNITED STATES
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 March 31, 1995
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: 1-9580
AMWEST INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2672141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6320 Canoga Avenue, Suite 300
Woodland Hills, California 91367
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 704-1111
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 _.
As of May 15, 1995, 2,352,839 shares of common stock, $.01 par value,
were outstanding.
<PAGE>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
INDEX
Part I. FINANCIAL INFORMATION:
Item 1
Consolidated Statements of Operations for the
three months ended March 31, 1995 and 1994 3
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994
4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 6
Notes to Interim Consolidated Financial Statements 8
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION:
Item 1
Legal Proceedings 13
Item 2
Changes in Securities 13
Item 3
Defaults Upon Senior Securities 13
Item 4
Submission of Matters to a Vote of Security Holders 13
Item 5
Other Information 13
Item 6
Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
Three months ended
March 31,
--------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Underwriting revenues:
Premiums written $ 16,209 $ 15,223
Premiums ceded (1,251) (810)
----------- -----------
Net premiums written 14,958 14,413
Change in unearned premiums:
Direct 1,251 (177)
Ceded 510 (192)
----------- -----------
Net premiums earned 16,719 14,044
----------- -----------
Underwriting expenses:
Losses and loss adjustment expenses 5,444 2,436
Reinsurance (recoveries) refunds (55) 303
----------- -----------
Net losses and loss adjustment expenses 5,389 2,739
Policy acquisition costs 7,932 6,996
General operating costs 3,395 3,270
----------- -----------
Total underwriting expenses 16,716 13,005
----------- -----------
Underwriting income 3 1,039
Interest expense (280) (174)
Collateral interest expense (445) (491)
Net investment income 1,591 1,271
Net realized investment gains (losses) 67 (104)
----------- -----------
Income before income taxes 936 1,541
----------- -----------
Provision for income taxes:
Current 248 228
Deferred (239) 179
----------- -----------
Total provision for income taxes 9 407
----------- -----------
Net income $ 927 $ 1,134
=========== ===========
Earnings per common share:
Net income $ 0.39 $ 0.47
=========== ===========
Weighted average number of common
shares outstanding 2,382 2,409
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
March 31, December 31,
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Investments:
Fixedmaturities, at amortized cost (market value of $15,163 and $14,469 at March
31, 1995 and December 31, 1994, respectively)
$ 15,262 $ 15,120
Fixedmaturities, at market value (amortized cost of $84,203 and $88,056 at March
31, 1995 and December 31, 1994,
respectively) 82,768 84,503
Common equity securities, at market value (cost of $4,955 and $4,814 at March
31, 1995 and December 31, 1994, respectively)
6,059 5,300
Preferred equity securities, at market value (cost of $1,837 and $1,500 at March
31, 1995 and December 31, 1994, respectively)
1,853 1,417
Other invested assets 268 -
Short-term investments 25 25
----------- -----------
Total investments 106,235 106,365
Cash and cash equivalents 1,186 3,948
Accrued investment income 1,420 1,450
Agents balances and premiums receivable (less allowance for doubtful accounts of
$375 at March 31, 1995 and December 31,
1994) 8,197 7,000
Reinsurance recoverable:
Paid loss and loss adjustment expenses 1,167 1,352
Unpaid loss and loss adjustment expenses 1,150 1,267
Ceded unearned premiums 2,176 1,666
Deferred policy acquisition costs 14,739 15,250
Furniture, equipment and improvements, net 2,065 1,853
Other assets 7,069 6,562
----------- -----------
Total assets $ 145,404 $ 146,713
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Liabilities:
Unpaid losses and loss adjustment expenses $ 9,991 $ 8,900
Unearned premiums 32,439 33,689
Funds held as collateral 43,982 46,926
Current Federal income taxes 173 313
Deferred Federal income taxes 2,959 2,014
Bank indebtedness 12,500 12,500
Amounts due to reinsurers 192 183
Other liabilities 4,427 6,194
----------- ------------
Total liabilities 106,663 110,719
----------- ------------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized; issued and outstanding: none - -
Common stock, $.01 par value, 10,000,000
shares authorized, issued and outstanding: 2,350,589 at
March 31, 1995 and 2,334,089 at December 31, 1994 24 24
Additional paid-in capital 9,390 9,221
Net unrealized appreciation (depreciation) of investments
carried at market, net of income taxes (197) (2,080)
Retained earnings 29,524 28,829
----------- ------------
Total stockholders' equity 38,741 35,994
----------- ------------
Total liabilities and stockholders' equity $ 145,404 $ 146,713
=========== ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
Three months ended
March 31,
-----------------------------------
1995 1994
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 927 $ 1,134
Adjustments to reconcile net income to cash provided by operating
activities:
Change in agents' balances and premiums receivable and
unearned premiums (2,447) (689)
Change in accrued investment income 30 172
Change in unpaid losses and loss adjustment expenses 1,091 60
Change in reinsurance recoverable on paid and unpaid losses and loss
adjustment expenses and ceded unearned premiums
(208) 654
Change in amounts due to reinsurers 9 11
Change in reinsurance funds held, net - (1,259)
Change in other assets and other liabilities (2,274) 552
Change in income taxes, net (165) 121
Change in deferred policy acquisition costs 511 (620)
Net realized (gain) loss on sale of fixed maturities (80) (8)
Net realized (gain) loss on sale of equity securities 13 37
Net realized loss on sale of fixed assets 4 -
Provision for depreciation and amortization 303 367
--------- ---------
Net cash provided (used) by operating activities (2,286) 532
Cash flows from investing activities:
Cash received from investments sold, matured, called or repaid:
Investments held-to-maturity 32 -
Investments available-for-sale 10,559 23,832
Cash paid for investments acquired:
Investments held-to-maturity - (149)
Investments available-for-sale (6,895) (30,067)
Amortization of discount on bonds (646) 257
Capital expenditures, net (519) (190)
--------- ----------
Net cash provided (used) by investing activities 2,531 (6,317)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
Three months ended
March 31,
-----------------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of common stock 169 8
Amortization of bank indebtedness - -
Change in funds held as collateral (2,944) 6,154
Dividends paid (232) (213)
--------- ---------
Net cash provided (used) by financing activities (3,007) 5,949
--------- ---------
Net increase (decrease) in cash and cash equivalents (2,762) 164
Cash and cash equivalents at beginning of period 3,948 6,723
--------- ---------
Cash and cash equivalents at end of period $ 1,186 $ 6,887
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 725 $ 666
Income taxes 388 285
Cash received during the period on:
Investments sold prior to maturity $ 10,559 $ 23,713
Investments held to maturity 32 119
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
The interim consolidated financial statements presented herein are
unaudited and, in the opinion of management, reflect all adjustments
necessary for a fair presentation of results for such periods. All such
adjustments are of a normal, recurring nature. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
(2) Reclassifications
Certain reclassifications have been made from amounts reported in prior
years in order to be consistent with the current year's presentation.
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Premiums written increased 7% from $15,223,000 for the three months
ended March 31, 1994 to $16,209,000 for the three months ended March
31, 1995. The increase in premiums written is attributable to the
contract performance product line.
Net premiums earned increased 19% from $14,044,000 for the three months
ended March 31, 1994 to $16,719,000 for the three months ended March
31, 1995. The larger increase in net premiums earned is reflective of
the significant increase in written premiums during the last nine
months of 1994. The Company generally earns premiums ratably over the
assigned bond terms.
Net losses and loss adjustment expenses increased 97% from $2,739,000
for the three months ended March 31, 1994 to $5,389,000 for the three
months ended March 31, 1995. The loss ratio for the three months ended
March 31, 1994 was 20% as compared to 32% for the three months ended
March 31, 1995. The increase in the loss ratio is the result of
increased loss severity in the contract performance product line.
Policy acquisition costs decreased as a percentage of net premiums
earned from 50%,or $6,996,000 for the three months ended March 31,
1994 to 47%, or $7,932,000 for the three months ended March 31, 1995.
The decrease in the ratio reflects efficiencies in the Company's branch
distribution system in servicing increased production, partially offset
by higher commissions paid by the Company to its independent agents.
General operating costs decreased as a percentage of net premiums
earned from 23% (or $3,270,000) for the three months ended March 31,
1994 to 20% (or $3,395,000) for the three months ended March 31, 1995.
The improvement in the general and administrative expense ratio is
reflective of the Company's ability to service increased writings
without corresponding increases in home office expenses.
Underwriting income decreased from $1,039,000 for the three months
ended March 31, 1994 to $3,000 for the three months ended March 31,
1995. The combined ratio was 93% for the three months ended March 31,
1994 as compared to 100% for the three months ended March 31, 1995, due
to a combination of the factors cited above.
Interest expense increased 61% from $174,000 for the three months ended
March 31, 1994 to $280,000 for the three months ended March 31, 1995.
This increase is attributable to an increase in the interest rate on
the bank indebtedness to an average of 8.3% for the three months ended
March 31, 1995 from an average rate of 5.6% for the three months ended
March 31, 1994. Collateral interest expense decreased 9% from $491,000
for the three months ended March 31, 1994 to $445,000 for the three
months ended March 31, 1995. Average funds held as collateral decreased
from $47,467,000 for the three months ended March 31, 1994 to
$45,454,000 for the three months ended March 31, 1995. Collateral rates
are adjusted at various times throughout the year in accordance with
general market conditions.
<PAGE>
Net investment income and realized investment gains (losses) increased
42% from $1,167,000 for the three months ended March 31, 1994 to
$1,658,000 for the three months ended March 31, 1995. The increase is
generally due to higher investment yields received due to general
increases in interest rates during 1994. Net realized investment gains
recognized increased from a loss of $104,000 for the three months ended
March 31, 1994 to a gain of $67,000 for the three months ended March
31, 1995. The investments sold during the three months ended March 31,
1995 were primarily fixed income investments including mortgage-backed
and municipal bond securities.
Income before income taxes decreased from $1,541,000 for the three
months ended March 31, 1994 to $936,000 for the three months ended
March 31, 1995 due to the factors outlined above.
The effective tax rate was 26% for the three months ended March 31,
1994 as compared to an effective rate of 1% for the three months ended
March 31, 1995. The lower effective tax rate is primarily due to a
higher proportion of the income before income taxes attributable to tax
advantaged investments in 1995 versus 1994, as well as a reduction in
the Company's deferred tax asset valuation allowance of $50,000. The
reduction in the valuation allowance was made because of continuing
favorable development regarding the Company's ability to retain the
full tax benefits of the salvage and subrogation fresh start
adjustment.
Net income decreased from $1,134,000 for the three months ended March
31, 1994 to $927,000 for the three months ended March 31, 1995 due to
the factors outlined above.
Liquidity and Capital Resources
As of March 31, 1995, the Company held total cash and cash equivalents
and invested assets of $107,421,000. This amount includes an aggregate
of $43,982,000 in funds held as collateral which is shown as a
liability on the Company's consolidated balance sheets. As of March 31,
1995, the Company's invested assets consisted of $15,262000 in fixed
maturities, held at amortized cost, $82,768,000 in fixed maturities,
held at market value, $6,059,000 in common equity securities,
$1,853,000 in preferred equity securities, $268,000 in other invested
assets and $25,000 in short-term investments, including certificates of
deposit with original maturities less than one year.
Because the Company depends primarily on dividends from its insurance
subsidiaries for its net cash flow requirements, absent other sources
of cash flow, the Company cannot pay dividends materially in excess of
the amount of dividends that could be paid by the insurance
subsidiaries to the Company. The Company's insurance subsidiaries are
subject to state regulations which restrict the amount of stockholder
dividends which may be paid within any one year without the approval of
the California Department of Insurance. The California Insurance Code
provides that amounts may be paid as dividends on an annual
noncumulative basis without prior approval up to a maximum of the
greater of (1) statutory net income for the preceding year or (2) 10%
of statutory surplus as regards policyholders as of the preceding
December 31.
On August 6, 1993, the Company entered into a revolving credit
agreement with Union Bank for $12,500,000. The bank loan has a variable
rate based upon fluctuations in the London Interbank Offered Rate
(LIBOR) with amortizing principal payments beginning July 15, 1995 and
maturing July 15, 1999. The annual interest rate at March 31, 1995 was
8.4%.
<PAGE>
On April 24, 1995, the debt agreement was amended to increase the
amount available under the revolving line of credit from $12,500,000 to
$15,000,000. The repayment schedule was also revised to extend the
principal payments until the year 2000 from 1999. The first principal
payment in the amount of $2,500,000 is still due on July 15, 1995.
Certain changes were also made to the interest rate calculation as well
as various financial convenants of the debt agreement which are not
currently significant, but could ultimately result in a decrease in the
margin paid on the revolving line of credit.
The Company is a party to a lease with Trillium/Woodland Hills
regarding its corporate headquarters. Such lease contains provisions
for scheduled lease charges and escalations in base rent over the lease
term. The Company's minimum lease commitment for the remainder of 1995
is approximately $1,408,000. This lease expires in July 1998.
Other than the Company's obligations with respect to funds held as
collateral and the Company's obligation to pay claims as they arise,
the Company's commitments to pay principal and interest on the bank
debt and the payment of lease expenses as noted above, the Company has
no significant cash commitments.
The Company believes that its cash flows from operations and other
present sources of capital are sufficient to sustain its needs for at
least the remainder of 1995.
The Company generated $532,000 in cash from operating activities for
the three months March 31, 1994 as compared to using $2,286,000 for the
three months ended March 31, 1995. The Company used $6,317,000 in cash
for investing activities for the three months ended March 31, 1994 as
compared to generating $2,531,000 for the three months ended March 31,
1995. The Company generated $5,949,000 in cash from financing
activities for the three months ended March 31, 1994 as compared to
using $3,007,000 for the three months ended March 31, 1995.
The table on the next page shows, for the periods indicated, the net
premiums written, net premiums earned, net losses and loss adjustment
expenses and loss ratios for the Company's five major types of bonds:
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
SUMMARY OF PREMIUMS AND LOSSES BY PRODUCT LINE
(Dollars in thousands)
Three months ended Year ended
March 31, December 31,
---------------------------- --------------------------
Type of Bond 1995 1994 1994 1993
------------ ---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Contract performance
Net premiums written $ 11,164 $ 9,595 $ 46,638 $ 35,503
Net premiums earned 12,556 9,290 41,937 31,744
Net losses and loss adjustment expenses 4,913 1,784 11,098 9,397
Loss ratio 39% 19% 27% 30%
Court
Net premiums written $ 1,992 $ 2,055 $ 9,531 $ 7,930
Net premiums earned 1,984 2,020 9,183 7,387
Net losses and loss adjustment expenses 19 525 1,114 218
Loss ratio 1% 26% 12% 3%
Contractor's license
Net premiums written $ 447 $ 534 $ 2,154 $ 1,722
Net premiums earned 488 431 1,833 1,680
Net losses and loss adjustment expenses 99 286 477 364
Loss ratio 20% 66% 26% 22%
SBA
Net premiums written $ 236 $ 182 $ 1,213 $ 1,796
Net premiums earned 309 405 1,416 1,938
Net losses and loss adjustment expenses 196 (21) 145 614
Loss ratio 63% (5%) 10% 32%
Miscellaneous
Net premiums written $ 1,119 $ 2,047 $ 7,439 $ 7,380
Net premiums earned 1,382 1,898 7,460 7,341
Net losses and loss adjustment expenses 162 165 1,261 1,316
Loss ratio 12% 9% 17% 18%
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
Item 1: LEGAL PROCEEDINGS
California voters passed Proposition 103, an insurance initiative which
required a rollback in insurance rates for policies (and bonds) written
or renewed during the twelve month period beginning November 8, 1988
and provided that changes in insurance premiums after November 8, 1988
must be submitted for approval of the California Insurance Commissioner
prior to implementation. While the Proposition has the most significant
impact on automobile insurance, its provisions, as written, also apply
to other property and casualty insurers including surety insurers.
On August 26, 1991, The State of California enacted Insurance Code
Section 1861.135 ("Section 1861.135") exempting surety insurance from
the rate rollback and prior approval provisions of Proposition 103.
Section 1861.135 does not affect Proposition 103's prohibition against
excessive, inadequate or discriminatory rates. Due to the enactment of
Section 1861.135, the Company terminated a previously established
reserve for potential premium rebates.
Subsequently, the Department of Insurance ("Department") and Voter
Revolt brought a motion for writ of mandate challenging the validity of
Section 1861.135. On March 21, 1992, the Los Angeles Superior Court
concluded that Section 1861.135 did not violate the California
Constitution or the provisions of Proposition 103. The Department and
Voter Revolt appealed. On December 7, 1994, the Second District Court
of Appeal overturned Section 1861.135 by a 2-1 vote. On February 24,
1994, the California Supreme Court agreed to hear the Company's
petition for review, thereby staying the Court of Appeals opinion. Such
hearing has not yet been held. The outcome of this appeal cannot be
predicted; however, if this appeal is not successful, it could have a
significant impact on the Company's earnings but is not expected to
have a material adverse impact on the Company's financial position.
Items 2-5: CHANGE IN SECURITIES, DEFAULTS UPON SENIOR SECURITIES,
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS, OTHER INFORMATION
None
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See the Exhibit Index on page 15.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during
the three months ended March 31, 1995.
<PAGE>
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.
AMWEST INSURANCE GROUP, INC.
Date: May 12, 1994 by: /s/ JOHN E. SAVAGE
-------------------
John E. Savage
President, Co-Chief Executive
Officer
and Chief Operating Officer
(Principal Executive Officer)
by: /s/ STEVEN R. KAY
------------------
Steven R. Kay
Senior Vice-President,
Chief Financial Officer,
Treasurer and Director
(Principal Financial and
Principal Accounting Officer)
<PAGE>
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Number
Description Location
2 Plan of acquisition, reorganization, arrangement,
liquidation or succession
None
4 Instruments defining the rights of securityholders,
including indentures Not required
11 Statement re computation of per share earnings Page 16
15 Letter re unaudited interim financial information None
18 Letter re change in accounting principles None
19 Previously unfiled documents
Exhibit 19.1
First Amendment to Revolving Credit Agreement Page 18
20 Report furnished to security holders None
23 Published report regarding matters submitted to
vote of security holders None
24 Consents of experts and counsel None
25 Power of attorney None
28 Additional exhibits None
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Primary (2) Fully diluted (3)
earnings per share earnings per share
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ----------
<S> <C> <C> <C> <C>
Average shares outstanding for the three month
period ending March 31, 2,334,789 2,358,383 2,334,789 2,358,383
Incremental shares resulting from conversion
of common stock equivalents:
Options to purchase shares of common stock
at an exercise price of $5.37- $15.675
(261,975 and 245,450 options at March 31, 1994
and 1995, respectively) (1) 47,605 50,648 54,039 50,648
---------- ---------- ---------- ----------
Total incremental shares resulting from
conversion of common stock equivalents
at March 31, 47,605 50,648 54,039 50,648
---------- ---------- ---------- ----------
Total shares and incremental shares resulting from
conversion of common stock equivalents at March 31, 2,382,394 2,409,031 2,388,828 2,409,031
========== ========== ========== ==========
Percentage of incremental shares resulting from
conversion of common stock equivalents at March 31,
2.00% 2.10% 2.26% 2.10%
========== ========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 11, (continued)
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(1) Outstanding options and warrants to purchase common stock.
Options to purchase shares of common stock as of March 31, 1995 and
1994, respectively:
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Grant price: $5.37 11,000 11,000
Grant price: $9.875 10,750 13,250
Grant price: $10.625 13,250 16,250
Grant price: $11.125 14,750 18,250
Grant price: $9.375 1,125 10,125
Grant price: $11.375 7,500 7,500
Grant price: $14.25 12,750 15,750
Grant price: $15.675 8,500 8,500
Grant price: $9.213 8,500 8,500
Grant price: $8.375 20,500 26,250
Grant price: $8.375 18,750 19,400
Grant price: $10.75 34,875 37,500
Grant price: $11.825 10,000 10,000
Grant price: $10.375 3,000 3,000
Grant price: $13.875 70,200 56,700
------- -------
245,450 261,975
======= =======
</TABLE>
(2) Calculation of incremental shares resulting from conversion of common
stock equivalents, using the Treasury Stock Method for calculating
primary earnings per share, is based on the average of the closing
prices, for the three months and nine months ended March 31, 1995 and
1994, as reported on the American Stock Exchange.
(3) Calculation of incremental shares resulting from conversion of common
stock equivalents, using the Treasury Stock Method for calculating
fully diluted earnings per share, is based on the greater of the
average ending ask price or the closing ask price on March 31, 1995 and
1994, as reported on the American Stock Exchange.
EXHIBIT 19.1
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment")
is entered into as of this 24th day of April, 1995, by and between AMWEST
INSURANCE GROUP, INC. ("Borrower") and UNION BANK ("Bank"), in view of the
following:
WHEREAS, Borrower and Bank have previously entered into that certain
Revolving Credit Agreement dated as of August 6, 1993 (the "Agreement"); and
WHEREAS, Borrower has requested Bank to amend certain terms and
conditions of the Agreement, as more fully elaborated hereinbelow; and
WHEREAS, Bank is prepared to so amend the Agreement upon the terms and
conditions set forth hereinbelow;
NOW, THEREFORE, in view of the foregoing and in consideration of the
mutual covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiently of which is acknowledged, Borrower
and Bank agree as follows:
1. Capitalized Terms. All capitalized terms not specifically defined
herein shall have the meanings given thereto in the Agreement.
2. Section and Paragraph Numbers. Unless otherwise provided, all
references herein to section and paragraph numbers shall be to the Agreement.
3. Amendments to Agreement.
3.1 Amendments to Defined Terms in Article I.
3.1.1 The last sentence of the definition of "Applicable Base
Lending Rate Margin" and "Applicable Eurodollar Lending Rate
Margin" is deleted in its entirety. The interest rate grid
immediately following the definition is deleted and the
following grid substituted therefor:
<TABLE>
<CAPTION>
Applicable Applicable
Base Lending Eurodollar Lending
Leverage Ratio Rate Margin Rate Margin
----------------- ------------- ------------------
<S> <C> <C>
greater than 0.30 0.50 2.00%
from 0.25 to 0.30 0.25% 1.75%
from 0.20 to 0.25 0.00% 1.50%
from 0.15 to 0.20 0.00% 1.25%
less than 0.15 0.00% 1.00%
</TABLE>
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<PAGE>
3.1.2 There shall be added a new defined term "Fixed Charge
Coverage Ratio" as follows:
"Fixed Charge Coverage Ratio means, as of the end of any
fiscal quarter, the ratio of (a) the sum of (i) the amount of
cash, Cash Equivalents and Investments of the Borrower, on a
non-consolidated basis, as of the end of such fiscal quarter,
plus (ii) the estimated interest expense related to the
Surplus Note over the subsequent four (4) consecutive
quarters, plus (iii) the greater of (1) statutory net income
of Borrower's insurance Subsidiaries, determined on a combined
statutory basis for the four (4) consecutive fiscal quarters
ending on such day, or (2) 10% of the statutory surplus of the
most recently ended fiscal quarter, plus (iv) cash received
from stock options exercised for the four (4) previous
consecutive fiscal quarters, plus (v) unused amounts available
to be drawn under this Agreement, to (b) the sum of (i)
aggregate payments of principal and interest on all Debt of
the Borrower and its Subsidiaries required to be paid during
the following four (4) consecutive fiscal quarters, plus (ii)
the total amount of common stock dividends to be paid over the
next four (4) consecutive fiscal quarters, plus (iii) the
total amount of common share repurchases over the next four
(4) consecutive fiscal quarters, plus (iv) total capital
expenditures incurred by Borrower (inclusive of permitted
acquisition payments made) over the next four (4) consecutive
fiscal quarters."
3.1.3 The definition of "Leverage Ratio" is deleted in its
entirety and the following substituted therefor:
"Leverage Ratio" means the ratio of (a) funded Debt to Union
Bank to (b) Tangible Net Worth, measured as of the last day of
each fiscal quarter.
3.1.4 The definition of "Maturity Date" as meaning July 30,
1999 is deleted and the date of July 15, 2000 is substituted
therefor.
3.1.5 The definition of "Revolving Commitment" is deleted in
its entirety and the following substituted therefor:
"Revolving Commitment" means Fifteen Million Dollars
($15,000,000); provided that on July 15, 1995 the Revolving
Commitment shall mean an amount which is reduced by the
Commitment Reduction for that date and by the same amount each
July 15 thereafter."
3.1.6 The definition of "Tangible Net-Worth" is amended by
adding the parenthetical phrase "(but excluding the effects of
FASB 115)" after the phrase "as determined in accordance with
generally accepted accounting principles consistently
applied".
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<PAGE>
3.2 Section 2.12 is deleted in its entirety and the following
substituted therefor:
"SECTION 2.12 Mandatory Commitment Reductions. The Revolving Commitment
shall be reduced annually, commencing July 15, 1995 in accordance with
this Section 2.12.
On each Revolving Commitment Reduction Date, the Revolving Commitment
shall be reduced by a Revolving Commitment Reduction Payment.
<TABLE>
<CAPTION>
Revolving Commitment Annual
Reduction Date Commitment Reduction
--------------------- --------------------
<S> <C>
July 15, 1995 $2,500,000
July 15, 1996 $2,500,000
July 15, 1997 $2,500,000
July 15, 1998 $2,500,000
July 15, 1999 $2,500,000
July 15, 2000 $2,500,000
(the Revolving Commitment shall be
reduced to Zero Dollars ($0))
</TABLE>
3.3 Sections 5.9 Liquidity Ratio and 5.10 Leverage Ratio are
deleted in their entirety. New Sections 5.9 and 5.10 are added to
read as follows:
"SECTION 5.9 Fixed Charge Coverage Ratio. On a consolidated basis,
Borrower and its Subsidiaries will not permit, as of the end of each
fiscal quarter, the Fixed Charge Coverage Ratio to be less than
1.10:1.00."
"SECTION 5.10 [Intentionally deleted]"
3. Effectiveness of this Amendment. This Amendment shall become effective as of
the date hereinabove stated when, and only when, Bank shall have received all of
the following, each in form and substance satisfactory to Bank:
(a) A counterpart of this Amendment, duly executed by the
Borrower;
(b) A new Revolving Note to evidence the increased Revolving
Commitment and to replace the existing Revolving Note;
(c) A fully earned, non-refundable facility fee in the amount of
Eighteen Thousand Seven Hundred Fifty Dollars ($18,750), payable by debiting
Borrower's demand deposit account with Bank or by incoming wire transfer of
immediately available funds; and
(d) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
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<PAGE>
4. Ratification.
(a) Except as specifically amended herein above, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed; and
(b) Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and be a reference to the Agreement
as amended by this Amendment and each reference in the Agreement to the
"Revolving Note" or words of like import referring to the Revolving Note shall
mean and be a reference to the replacement Revolving Note issued pursuant to
this Amendment.
5. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in
Section 3 of the Agreement, as hereby amended, is hereby reaffirmed as of the
date hereof, each as if set forth herein;
(b) The execution, delivery and performance of this Amendment are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restriction binding on Borrower;
(c) This Amendment is, and the replacement Revolving Note when
delivered for value received will be, the legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their terms; and
(d) No event has occurred and is continuing or would result from this
Amendment which constitutes an Event of Default under the Agreement, or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
6. Governing Law. This Amendment shall be deemed a contract under and
subject to, and shall be construed for all purposes and in accordance with, the
laws of the State of California.
7. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
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[NEXT PAGE IS SIGNATURE PAGE]
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WITNESS the due execution hereof as of the date first above written.
AMWEST INSURANCE GROUP, INC. UNION BANK
By: /s/ Steven R. Kay By: /s/ Robert C. Dawson
-------------------- -----------------------
Name: Steven R. Kay Name: Robert C. Dawson
-------------------- -----------------------
Title: Sr. V.P. & CFO Title: Vice President
-------------------- -----------------------
By: By:
-------------------- -----------------------
Name: Name:
-------------------- -----------------------
Title: Title:
-------------------- -----------------------
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