UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number 0-14451
ACAP CORPORATION
(Exact name of small business issuer as specified in its charter)
State of Incorporation: IRS Employer Id.:
Delaware 25-1489730
Address of Principal Executive Office:
10555 Richmond Avenue
Houston Texas 77042
Issuer's telephone number: (713) 974-2242
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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. [x] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT AUGUST 14, 1996
Common Stock, Par Value $.10 8,516
This Form 10-QSB contains a total of 17 pages, including any
exhibits.<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
FORM 10-QSB
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet - June 30, 1996 (Unaudited) 3
Condensed Consolidated Statements of
Operations - Six Months Ended
June 30, 1996 and 1995 (Unaudited) 5
Condensed Consolidated Statements of
Operations - Three Months Ended
June 30, 1996 and 1995 (Unaudited) 6
Condensed Consolidated Statements of
Cash Flows - Six Months Ended
June 30, 1996 and 1995 (Unaudited) 7
Notes to Condensed Consolidated
Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II. Other Information:
Item 6. Exhibit 27-Financial Data Schedule 17<PAGE>
PART I. ITEM 1. FINANCIAL INFORMATION
---------------------------------------
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
ASSETS
Investments:
Fixed maturities available for sale $ 27,213,009
Equity securities (at market) 138,033
Mortgage loans 2,975,657
Real estate 1,484,313
Policy loans 6,326,702
Short-term investments 592,533
-----------
Total investments 38,730,247
Accrued investment income 558,139
Reinsurance receivable 60,431,103
Accounts receivable (less allowance
for uncollectible accounts of $82,961) 199,850
Deferred acquisition costs 1,714,582
Property and equipment
(less accumulated depreciation of $563,479) 104,977
Costs in excess of net assets of
acquired business (less accumulated
amortization of $524,848) 2,148,926
Other assets 1,261,491
---------
$105,149,315
============
See accompanying notes to consolidated financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1996
Liabilities:
Policy liabilities:
Future policy benefits $ 90,976,923
Contract claims 680,689
-----------
Total policy liabilities 91,657,612
Other policyholders' funds 1,988,737
Deferred tax liability 1,594,558
Deferred gain on reinsurance 2,314,834
Note payable 1,187,500
Other liabilities 867,841
-----------
Total liabilities 99,611,082
-----------
Stockholders' equity:
Series A preferred stock, par value
$.10 per share, authorized, issued
and outstanding 74,000 shares
(involuntary liquidation value $2,035,000) 1,850,000
Common stock, par value $.10 per share,
authorized 10,000 shares, issued
8,757 shares 876
Additional paid-in capital 6,259,069
Accumulated deficit (2,746,362)
Treasury stock, at cost, 241 shares (105,853)
Net unrealized investment gains, net of
taxes of $55,951 280,503
-----------
Total stockholders' equity 5,538,233
-----------
$105,149,315
===========
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
Revenues:
Premiums and other considerations $ 1,203,478 990,745
Net investment income 740,255 668,125
Net realized investment gains 1,942 5,859
Reinsurance expense allowance 899,062 971,272
Amortization of deferred gain on reinsurance 100,388 281,491
Other income 31,135 57,993
----------- ----------
Total revenues 2,976,260 2,975,485
----------- ----------
Benefits and expenses:
Death benefits 429,819 208,138
Other benefits 892,255 912,693
Commissions and general expenses 1,250,696 1,346,307
Interest expense 58,256 101,423
Amortization of deferred acquisition costs 64,475 56,739
Amortization of costs in excess of net
acquired business 52,046 52,048
----------- ----------
Total benefits and expenses 2,747,547 2,677,348
----------- ----------
Income before federal income tax expense 228,713 298,137
Federal income tax expense (benefit)
Current 19,784 1,018,864
Deferred 3,750 (999,115)
----------- ----------
Net income 205,179 278,388
=========== =========
Net income per common share $ 12.69 21.01
=========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
Revenues:
Premiums and other considerations $ 857,589 544,251
Net investment income 440,119 307,275
Net realized investment gains (losses) 1,428 (388)
Reinsurance expense allowance 444,273 497,119
Amortization of deferred gain on reinsurance 46,861 147,536
Other income 17,062 43,744
----------- -----------
Total revenues 1,807,332 1,539,537
----------- -----------
Benefits and expenses:
Death benefits 301,200 66,426
Other benefits 609,763 572,525
Commissions and general expenses 704,823 616,583
Interest expense 29,351 36,788
Amortization of deferred acquisition costs 37,422 28,998
Amortization of costs in excess of net
acquired business 26,025 26,024
----------- -----------
Total benefits and expenses 1,708,584 1,347,344
----------- -----------
Income before federal income tax expense 98,748 192,193
Federal income tax expense
Current 9,784 8,288
Deferred 15,790 216,686
----------- -----------
Net income (loss) $ 73,174 (32,781)
=========== ===========
Net income (loss) per common share $ 3.03 (9.82)
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
INCREASE (DECREASE) IN CASH (UNAUDITED)
1996 1995
Cash flows from operating activities:
Net income from operations $ 205,179 278,388
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 59,861 (139,947)
Realized gains on investments (1,942) (5,859)
Deferred federal income tax expense
(benefit) 3,753 (999,113)
Decrease in reinsurance receivables 1,131,972 959,504
Decrease (increase) in accrued
investment income (332,078) 56,221
Increase in accounts receivable (69,832) (160,994)
Decrease (increase)in other assets (946,509) 3,220
Increase (decrease) in future policy
benefit liability 40,014 (105,235)
Decrease in contract claim liability (248,705) (73,718)
Increase (decrease) in other
policyholders' funds liability (134,338) 24,526
Increase in other liabilities 166,766 307,675
------------ ---------
Net cash used in (provided by)
operating activities (125,859) 144,668
Cash flows from investing activities:
Proceeds from sales of investments
available for sale and principal
repayments on mortgage loans 2,796,829 1,074,964
Purchases of investments available for sale (21,927,454) (3,725,420)
Net decrease in policy loans 402,000 125,416
Net decrease in short-term investments 450,728 11,436,715
Purchase of property and equipment (62,767) (24,746)
Purchase of subsidiary, net of cash acquired -- (1,952,300)
Assumption reinsurance acquisition,
net of cash acquired 19,371,962 --
------------ ---------
Net cash provided by investing activities 1,031,298 6,934,629
------------ ---------
Cash flows from financing activities:
Proceeds from issuance of note payable -- 1,500,000
Principal payments on notes payable (125,000) (8,362,500)
Deposits on policy contracts 573,435 641,340
Withdrawals from policy contracts (1,380,362) (1,143,417)
Preferred dividends paid (97,125) (99,440)
------------ ---------
Net cash used in financing activities (1,029,052) (7,464,017)
------------ ---------
Net decrease in cash (123,613) (384,720)
Cash at beginning of year 123,613 384,720
------------ ---------
Cash at end of period $ -- --
============ ==========
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of June 30, 1996 and the
condensed consolidated statements of operations and cash flows for the
six month periods ended June 30, 1996 and 1995, have been prepared by
Acap Corporation (the "Company"), without audit. In the opinion of
management, all adjustments (which, except as may be noted below,
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations, and changes in cash
flows at June 30, 1996 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's December 31, 1995 Annual Report to Stockholders. The
results of operations for the six month periods ended June 30, 1996 and
1995 are not necessarily indicative of the operating results for the
full year.
2. EARNINGS PER SHARE
The earnings per common share is computed by dividing net income (less
dividends paid on preferred stock of $97,125 and $99,440 for June 30,
1996 and 1995, respectively) by the weighted average common shares
outstanding (8,516 at June 30, 1996 and June 30, 1995).
3. STOCKHOLDERS' EQUITY
During the six months ended June 30, 1996, stockholders' equity changed
for the following items: Reduction in net unrealized investment gains
of $831,224; net income of $205,179; and cash dividends paid on
preferred stock of $97,125.
4. ACQUISITION
Effective June 1, 1996, American Capitol Insurance Company ("American
Capitol"), a wholly-owned subsidiary of Acap Corporation entered into a
Reinsurance and Assumption Agreement with World Service Life Insurance
Company of America ("World Service") and South Texas Bankers Life
Insurance Company ("South Texas Bankers"), a wholly-owned subsidiary of
World Service. Pursuant to the agreement, American Capitol assumed all
of the insurance in force of World Service and South Texas Bankers,
approximately 24,000 policies, for cash of approximately $1.9 million.
The assets transferred to American Capitol were $21.3 million in cash,
approximately $1.9 million of mortgage loans, a receivable of
approximately $1.4 million and other assets of approximately $2.0
million. American Capitol's source of the $1.9 million in cash is from
a reinsurer in the form of the initial ceding allowance under a
coinsurance agreement (see "Reinsurance" below).<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consideration is subject to certain post-closing price adjustments.
Following the recent calculation of certain of the post-closing price
adjustments, World Service and South Texas Bankers indicated an
unwillingness to complete the transaction as currently structured.
American Capitol is presently in negotiations with World Service and
South Texas Bankers to find an acceptable resolution to the situation.
While the parties appear to be close to agreement on a solution that
would convert the transaction from assumption reinsurance to
coinsurance and reduce the purchase price to approximately $1.6
million, there can be no assurance that such an agreement will be made.
If an agreement cannot be made, possible outcomes include a rescission
of the transaction or litigation.
The nature and amount of the consideration paid were arrived at on the
basis of arm's-length negotiations and American Capitol's consideration
of various factors, including an actuarial valuation of the insurance
in force and judgments with regard to the prospects and future of the
acquired policies.
5. REINSURANCE
Effective June 30, 1996, American Capitol reinsured the acquired
business on a 100% coinsurance basis by amending an existing
reinsurance agreement with an unaffiliated reinsurer. American Capitol
retained the administration of the policies, for which it will receive
an expense allowance from the reinsurer. An experience refund formula
in the coinsurance allowance returns to American Capitol 50% of the
profits generated by the reinsured policies above a specified
threshold. Also, at American Capitol's option, the reinsured policies
may be recaptured at a price determined by the experience formula.
This transaction increased reinsurance receivables by approximately
$24.1 million to a carrying value of $57.1 million that were associated
with a single reinsurer, Crown Life Insurance Company ("Crown"). At
December 31, 1994, Crown had assets in excess of $7 billion and
stockholders' equity of approximately $0.4 billion. Crown is rated
"Excellent" by A.M. Best Company, an insurance company rating
organization.
6. REAL ESTATE
Effective July 1, 1996 American Capitol signed a lease agreement
whereby an unaffiliated third party agreed to lease the remainder of
the rentable space of the home office building (approximately 34,919
square feet). The term of the lease is five years and the rental rate
is $9.50 per square foot. A purchase option agreement was signed with
the same tenant. The purchase option expires on September 30, 1997.
The option purchase price of the home office building is $1,200,000.
If the option is exercised the purchase price will be financed 73.5% by
American Capitol at an interest rate of 10.5%.
On May 14, 1996, an earnest money contract was signed for the sale of
50,000 square feet of home office land to an unaffiliated third party.
The sale price is $7.25 per square foot, which, if the transaction
closes, will result in a pretax gain of approximately $200,000.
7. SUPPLEMENTAL INFORMATION REGARDING CASH FLOWS
Cash payments of $32,071 and $558,924 for federal income taxes were
made for the six months ended June 30, 1996 and 1995, respectively.
Cash payments of $61,218 and $348,262 for interest expense were made
during the six months ended June 30, 1996 and 1995, respectively.
The following reflects assets acquired and liabilities assumed relative
to the acquisition of Oakley-Metcalf by the Company, the consideration
given for such acquisition and the net cash flow relative to such
acquisition on February 2, 1995.
Assets of acquired subsidiary $ 4,393,403
Liabilities of acquired subsidiary (1,833,887)
----------
Cost of acquisition $ 2,559,516
==========
Cash paid for acquisition $ 2,559 516
==========
Net cash from acquisition:
Cash of acquired company $ 607,216
----------
Cash paid for acquisition (2,559,516)
----------
Net cash used by acquisition $(1,952,300)
==========
The following reflects assets acquired and liabilities assumed relative
to the assumption reinsurance of the policies of World Service and
South Texas Bankers by the Company, the consideration given for such
acquisition and the net cash flow relative to such assumption
reinsurance on June 1, 1996.
Assets acquired $ 26,580,285
Liabilities acquired (24,680,285)
-----------
Cost of acquisition $ 1,900,000
===========
Cash paid for acquisition $ 1,900,000
===========
Net cash from acquisition:
Cash acquired $ 21,271,962
-----------
Cash paid for acquisition (1,900,000)
-----------
Net cash provided by acquisition $ 19,371,962
===========
The following reflects assets and liabilities transferred in connection
with a coinsurance treaty whereby all policies assumed from World
Service and South Texas Bankers were 100% ceded to an unaffiliated
reinsurer, the ceding commission received and the net cash flow related
to the coinsurance treaty on June 30, 1996.
Assets transferred $ 22,343,982
Liabilities transferred 24,243,982
----------
$(1,900,000)
----------
Ceding commission received $ 1,900,000
----------
Net cash provided on the transfer of
assets and liabilities 0
==========
On January 4, 1995, Family Life Insurance Company of Texas ("Family"),
a wholly-owned subsidiary of the Company increased the amount of
reinsurance on each of its life policies in force from 20% to 100%. On
February 2, 1995, Oakley-Metcalf entered into a reinsurance agreement
whereby Oakley-Metcalf ceded 100% of each life policy with an
unaffiliated life insurance company. These transactions were both non-
cash transactions. The Company transferred assets of $2,020,065 and
liabilities of $3,259,418 and recognized a deferred gain on the
reinsurance of $1,239,353 to be amortized over the life of the
policies.<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT TRANSACTIONS
ACQUISITIONS
Effective June 1, 1996, American Capitol Insurance Company ("American
Capitol"), a wholly-owned subsidiary of Acap Corporation, entered into
a Reinsurance and Assumption Agreement with World Service Life
Insurance Company of America ("World Service") and South Texas Bankers
Life Insurance Company ("South Texas Bankers"), a wholly-owned
subsidiary of World Service. Pursuant to the agreement, American
Capitol assumed all of the insurance in force of World Service and
South Texas Bankers, approximately 24,000 policies, for cash of
approximately $1.9 million. The assets transferred to American Capitol
were $21.3 million in cash, approximately $1.9 million of mortgage
loans, a receivable of approximately $1.4 million and other assets of
approximately $2.0 million. American Capitol's source of the $1.9
million in cash is from a reinsurer in the form of the initial ceding
allowance under a coinsurance agreement (see "Reinsurance" below).
The consideration is subject to certain post-closing price adjustments.
Following the recent calculation of certain of the post-closing price
adjustments, World Service and South Texas Bankers indicated an
unwillingness to complete the transaction as currently structured.
American Capitol is presently in negotiations with World Service and
South Texas Bankers to find an acceptable resolution to the situation.
While the parties appear to be close to agreement on a solution that
would convert the transaction from assumption reinsurance to
coinsurance and reduce the purchase price to approximately $1.6
million, there can be no assurance that such an agreement will be made.
If an agreement cannot be made, possible outcomes include a rescission
of the transaction or litigation.
The nature and amount of the consideration paid were arrived at on the
basis of arm's-length negotiations and American Capitol's consideration
of various factors, including an actuarial valuation of the insurance
in force and judgments with regard to the prospects and future of the
acquired policies.
REINSURANCE
Effective June 30, 1996, American Capitol reinsured the acquired
business on a 100% coinsurance basis by amending an existing
reinsurance agreement with an unaffiliated reinsurer. American Capitol
retained the administration of the policies, for which it will receive
an expense allowance from the reinsurer. An experience refund formula
in the coinsurance allowance returns to American Capitol 50% of the
profits generated by the reinsured policies above a specified
threshold. Also, at American Capitol's option, the reinsured policies
may be recaptured at a price determined by the experience formula.
This transaction increased reinsurance receivables by approximately
$24.1 million to a carrying value of $57.1 million that were associated
with a single reinsurer, Crown Life Insurance Company ("Crown"). At
December 31, 1994, Crown had assets in excess of $7 billion and
stockholders' equity of approximately $0.4 billion. Crown is rated
"Excellent" by A.M. Best Company, an insurance company rating
organization.
RESULTS OF OPERATIONS
Premiums and other considerations were 21% higher during the first half
of 1996 in comparison to the first half of 1995. Premiums and other
considerations were 58% higher in the second quarter of 1996 in
comparison to the second quarter of 1996. Premiums for the first half
of 1996 include one month of premiums (approximately $500,000) from the
acquisition of the World Service and South Texas Bankers policies.
Premiums for the first half of 1995 include approximately $500,000 in
single premiums related to the conversion of three trust-funded prepaid
funeral service plans to an insurance-funded plan. Excluding these two
unusual items, premiums and other considerations were 40% higher during
the first half of 1996 in comparison to the first half of 1995. The
increase in premiums is attributable to an expansion of the Company's
marketing of final expense life insurance and insurance-funded prepaid
funeral service contracts.
Net investment income increased 11% in the first half of 1996 in
comparison to the first half of 1995 and increased 43% during the
second quarter of 1996 in comparison to the second quarter of 1995.
The increase in net investment income is primarily due to the one month
of net investment income earned on the assets acquired from World
Service and South Texas Bankers.
The amortization of the deferred gain on reinsurance decreased by
$181,103 in the first half of 1996 in comparison to the first half of
1995 and by $100,675 in the second quarter of 1996 in comparison to the
second quarter of 1995. The deferred gain on reinsurance is being
amortized based upon the amount of insurance in force under the
reinsurance treaties to which the deferred gain relates. During the
first half of 1995, the reinsured policies experienced an unusually
high level of terminations. This resulted in a higher than expected
amortization of the deferred gain during that period.
The Company receives an expense allowance for administering certain
blocks of reinsured policies. The expense allowance received during
the first half of 1996 was 7% less than the expense allowance received
during the first half of 1995. The expense allowance received during
the second quarter of 1996 was 11% less than the expense allowance
received during the second quarter of 1995. The decrease is due to
normal policy attrition of the reinsured policies.
Total policy benefits (i.e., death benefits and other benefits) were
44% of total revenue for the first half of 1996 compared to 38% of
total revenue for the first half of 1995. Total policy benefits were
50% of the total revenue for the second quarter of 1996 compared to 42%
of total revenue for the second quarter of 1995. The higher ratio of
total policy benefits to total revenue in 1996 is attributable to one
month of death claims in the amount of approximately $200,000 from the
acquisition of the World Service and South Texas Bankers policies.
Total expenses (i.e., total benefits and expenses less total policy
benefits) were 48% of total revenue for the first quarter of 1996
compared to 52% of total revenue for the first half of 1995. Total
expenses were 44% of total revenue for the second quarter of 1996
compared to 46% for the second quarter of 1995. General expenses for
the first half of 1995 included approximately $72,000 in non-recurring
actuarial charges related to consultations on the Company's acquisition
program and approximately $35,000 in expense related to the settlement
of a policy dispute. General expenses for the second quarter of 1996
include a $40,000 charge related to the settlement of a long-standing
agent commission dispute.
As a result of a 1995 transaction that increased the reinsurance from
20% to 100% on each of the life policies in force in a life insurance
subsidiary acquired August 31, 1994, the Company incurred current (in
1995) federal income taxes of approximately $920,000. Offsetting the
increase in the current federal income tax expense, the reinsurance
transaction noted above resulted in a deferred federal income tax
benefit. The benefit related to the reinsurance transaction was the
majority of the total deferred federal income tax benefit recorded in
the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
In connection with an acquisition, the Company borrowed $1.5 million
from a bank on January 31, 1995. The note matured April 30, 1996. The
bank granted a new note maturing April 30, 1997 under identical terms
as the original note. The note bears interest at a rate equal to the
base rate of a bank plus 1%. Principal payments on the note of $62,500
are due quarterly. The note had a principal balance of $1,187,500 at
June 30, 1996. The note is secured by a pledge of all of the
outstanding shares of American Capitol owned by the Company. The loan
agreement contains certain restrictions and financial covenants.
Without the written consent of the bank, Acap may not incur any debt,
pay common stock dividends or sell any substantial amounts of assets.
Also, American Capitol is subject to minimum statutory earnings and
capital and surplus requirements during the loan term. The Company and
American Capitol are in compliance with all the restrictions and
covenants of the loan.
During the first half of 1996, there was a decline in net unrealized
investment gains of $831,224. The decline in invested asset values was
primarily the result of an increase in market interest rates during the
quarter. It is not anticipated that the Company will need to liquidate
investments prior to their projected maturities in order to meet its
cash flow requirements.
FORTUNE LIQUIDATION
As discussed in the Company's Annual Report on Form 10-KSB, Fortune
National Corporation ("Fortune"), the owner of 63.7% of the Company's
outstanding common stock, expects to adopt a plan of dissolution and
liquidation at its annual stockholder meeting on August 26, 1996.
Under the plan, no fractional shares of the Company's common stock will
be issued. Fortune's stockholders will have the option of selling
their "odd lot" shares of Fortune common stock to the Company or buying
from the Company enough Fortune common stock to round up their
holdings.
The Company has entered into an agreement with Fortune to pay for
Fortune's operating expenses through the expiration of the plan of
dissolution and liquidation. In exchange for its services, the Company
received 55,323 shares of Fortune common stock during the first quarter
of 1996.
Fortune's liquidation will not result in a change in the management,
directors, or the ultimate control of the Company.
REAL ESTATE
On May 14, 1996, an earnest money contract was signed for the sale of
50,000 square feet of home office land to an unaffiliated third party.
The sale price is $7.25 per square foot, which, if the transaction
closes, will result in a pretax gain of approximately $200,000.
SUBSEQUENT EVENT
Effective July 1, 1996, American Capitol signed a lease agreement
whereby an unaffiliated third party agreed to lease the remainder of
the rentable space of the home office building (approximately 34,919
square feet). The term of the lease is five years and the rental rate
is $9.50 per square foot. A purchase option agreement was signed with
the same tenant. The purchase option expires on September 30, 1997.
The option purchase price of the home office building is $1,200,000.
If the option is exercised, the purchase price will be financed 73.5%
by American Capitol at an interest rate of 10.5%.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report of Form 10-QSB for
the quarter ended June 30, 1996 to be signed on its behalf by the
undersigned thereunto duly authorized.
ACAP CORPORATION
(Registrant)
Date: August 14, 1996 By:/s/ William F. Guest
----------------------------
William F. Guest, President
Date: August 14, 1996 By:/s/ John D. Cornett
----------------------------
John D. Cornett, Treasurer
(Principal Accounting Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 27,213,009
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 138,033
<MORTGAGE> 2,975,657
<REAL-ESTATE> 1,484,313
<TOTAL-INVEST> 38,730,247
<CASH> 0
<RECOVER-REINSURE> 60,431,103
<DEFERRED-ACQUISITION> 1,714,582
<TOTAL-ASSETS> 105,149,315
<POLICY-LOSSES> 90,976,923
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 680,689
<POLICY-HOLDER-FUNDS> 1,988,737
<NOTES-PAYABLE> 1,187,500
0
1,850,000
<COMMON> 876
<OTHER-SE> 3,687,357
<TOTAL-LIABILITY-AND-EQUITY> 105,149,315
1,203,478
<INVESTMENT-INCOME> 740,255
<INVESTMENT-GAINS> 1,942
<OTHER-INCOME> 31,135
<BENEFITS> 429,819
<UNDERWRITING-AMORTIZATION> 64,475
<UNDERWRITING-OTHER> 1,250,696
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</TABLE>
