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 September 30, 1997
[ ] 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 November 7, 1997
----- ----------------------------
Common Stock, Par Value $.10 7,462
This Form 10-QSB contains a total of 15 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 - September 30, 1997 (Unaudited) 3
Condensed Consolidated Statements of
Operations - Nine Months Ended
September 30, 1997 and 1996 (Unaudited) 5
Condensed Consolidated Statements
of Operations - Three Months Ended
September 30, 1997 and 1996 (Unaudited) 6
Condensed Consolidated Statements of
Cash Flows - Nine Months Ended
September 30, 1997 and 1996 7
Notes to Condensed Consolidated
Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Part II. Other Information:
Item 6. Exhibit 27-Financial Data Schedule 15
<PAGE>
PART I. ITEM 1. FINANCIAL INFORMATION
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
ASSETS
Investments:
Fixed maturities available for sale $ 34,074,677
Mortgage loans 2,199,938
Real estate 1,414,070
Policy loans 6,193,799
Short-term investments 485,317
___________
Total investments 44,367,801
Accrued investment income 562,402
Reinsurance receivable 56,409,221
Accounts receivable (less allowance
for uncollectible accounts of $88,428) 213,667
Deferred acquisition costs 1,590,711
Property and equipment
(less accumulated depreciation of $545,110) 182,675
Costs in excess of net assets of
acquired business (less accumulated
amortization of $892,213) 1,781,563
Other assets 1,251,326
___________
$106,359,366
===========
See accompanying notes to consolidated financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997
----
Liabilities:
Policy liabilities:
Future policy benefits $ 91,008,976
Contract claims 852,053
__________
Total policy liabilities 91,861,029
Other policyholders' funds 1,862,437
Deferred tax liability 1,650,282
Deferred gain on reinsurance 2,250,233
Note payable 875,000
Other liabilities 1,302,699
___________
Total liabilities 99,801,680
===========
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
8,754 shares 876
Additional paid-in capital 6,259,189
Accumulated deficit (1,966,929)
Treasury stock, at cost, 1,288 shares (445,681)
Net unrealized investment gains, net of
taxes of $341,060 860,231
-----------
Total stockholders' equity 6,557,686
-----------
$106,359,366
===========
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
Revenues:
Premiums and other considerations $2,141,165 2,041,019
Net investment income 1,118,428 975,118
Net realized investment gains 3,423 224,097
Reinsurance expense allowance 1,481,912 1,434,389
Amortization of deferred gain on reinsurance 160,005 152,140
Other income 40,233 43,343
--------- ---------
Total revenues 4,945,166 4,870,106
--------- ---------
Benefits and expenses:
Death benefits 848,967 613,554
Other benefits 1,198,548 1,365,870
Commissions and general expenses 2,012,492 1,847,035
Interest expense 69,103 85,332
Amortization of deferred acquisition costs 73,442 87,288
Amortization of costs in excess of net
acquired business 179,747 78,069
_________ _________
Total benefits and expenses 4,382,299 4,077,148
_________ _________
Income before federal income tax expense 562,867 792,958
Federal income tax expense (benefit)
Current 115,348 47,499
Deferred (117,018) 10,019
--------- --------
Net income $ 564,537 735,440
========= =========
Earnings per share:
Primary $ 56.18 71.07
Fully diluted $ 47.66 71.07
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
Revenues:
Premiums and other considerations $ 893,731 837,541
Net investment income 503,237 234,863
Net realized investment gains 6,540 222,155
Reinsurance expense allowance 468,127 535,327
Amortization of deferred gain on reinsurance 57,252 51,752
Other income 12,152 12,208
--------- ---------
Total revenues 1,941,039 1,893,846
--------- ---------
Benefits and expenses:
Death benefits 379,101 183,735
Other benefits 393,799 473,615
Commissions and general expenses 715,264 596,339
Interest expense 22,486 27,076
Amortization of deferred acquisition costs 24,503 22,813
Amortization of costs in excess of net
acquired business 59,916 26,023
--------- ---------
Total benefits and expenses 1,595,069 1,329,601
--------- ---------
Income before federal income tax expense 345,970 564,245
Federal income tax expense (benefit)
Current 65,329 27,715
Deferred (26,333) 6,269
--------- ---------
Net income $ 306,974 530,261
========= =========
Earnings per share:
Primary $34.61 61.02
Fully diluted $28.36 61.02
See accompanying notes to consolidated financial statements.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
INCREASE (DECREASE) IN CASH (UNAUDITED)
1997 1996
---- ----
Cash flows from operating activities:
Net income from operations $ 564,537 735,440
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 193,875 95,901
Realized gains on investments (3,423) (224,097)
Deferred federal income tax benefit
(expense) (117,018) 10,016
Decrease in reinsurance receivables 1,195,973 924,994
Decrease in accrued investment income (2,797) (228,940)
Increase in accounts receivable (81,284) (77,280)
Increase in other assets (812,538) (996,521)
Increase (decrease) in future policy
benefit liability (395,898) 317,011
Decrease in contract claim liability (23,157) (221,936)
Decrease in other policyholders' funds
liability (57,123) (92,375)
Increase (decrease) in other liabilities 244,310 (123,898)
---------- --------
Net cash provided by operating activities 705,457 118,315
---------- --------
Cash flows from investing activities:
Proceeds from sales of investments
available for sale and principal
repayments on mortgage loans 3,551,071 3,514,868
Purchases of investments available for sale (7,706,889)(22,731,274)
Net (increase) decrease in policy loans (2,797) 471,800
Net decrease in short-term investments 1,184,099 605,874
Purchase of property and equipment (78,512) (117,336)
Assumption reinsurance acquisition, net
of cash acquired 2,854,226 19,371,962
Proceeds from sales of real estate -- 338,845
---------- ----------
Net cash provided by (used in) investing
activities (198,802) 1,454,739
---------- ----------
Cash flows from financing activities:
Principal payments on note payable (187,500) (187,500)
Deposits on policy contracts 1,294,546 878,575
Withdrawals from policy contracts (1,506,679) (1,825,161)
Preferred dividends paid (143,375) (144,531)
---------- ----------
Net cash used in financing activities (543,008) (1,278,617)
---------- ----------
Net decrease in cash (36,353) 294,437
Cash at beginning of year 36,353 123,613
---------- ----------
Cash at end of period $ -- 418,050
========== ==========
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 September 30, 1997 and the
condensed consolidated statements of operations and cash flows for the nine
month periods ended September 30, 1997 and 1996, 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 September 30, 1997 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, 1996 Annual Report to Stockholders. The results of operations
for the nine month periods ended September 30, 1997 and 1996 are not
necessarily indicative of the operating results for the full year.
2. ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share." SFAS No. 128, which must be adopted for both interim and fiscal
periods ending after December 15, 1997, specifies the computation,
presentation, and disclosure requirements for earnings per share ("EPS")
for entities with publicly held common stock or potential common stock. It
replaces the presentation of primary EPS with a presentation of basic EPS
and fully diluted EPS with a diluted EPS.
If SFAS No. 128 had been in effect, basic EPS at September 30, 1997 and
1996 would have been $56.18 and $71.07, respectively. Basic EPS for the
quarters ended September 30, 1997 and 1996 would have been $34.61 and
$61.02, respectively. Diluted EPS at September 30, 1997 and 1996 would
have been $47.66 and $71.07, respectively. Diluted EPS for the quarters
ended September 30, 1997 and 1996 would have been $28.36 and $61.02,
respectively.
3. EARNINGS PER SHARE
Earnings per common share is computed by dividing net income (less
dividends paid on preferred stock of $143,375 and $144,531 for
September 30, 1997 and 1996, respectively) by the weighted average common
shares outstanding (7,497 at September 30, 1997 and 8,315 at September 30,
1996).
Earnings per common share on a fully diluted basis is computed by dividing
net income (less dividends paid on preferred stock of $143,375 and $144,531
for September 30, 1997 and 1996, respectively and less the income statement
<PAGE>
effect of the stock options as if exercised of $58,976 and $0 for
September 30, 1997 and 1996, respectively) by the weighted average common
shares outstanding as if the stock options were exercised (7,599 at
September 30, 1997 and 8,383 at September 30, 1996).
4. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1997, stockholders' equity
changed for the following items: Increase in net unrealized investment
gains of $260,930; net income of $564,537; cash dividends paid on preferred
stock of $143,375; and a net increase in treasury stock of $19,262.
5. WORLD SERVICE TRANSACTION
Effective June 1, 1996, American Capitol Insurance Company ("American
Capitol"), a wholly-owned subsidiary of Acap Corporation, assumed through
reinsurance 93.6% of all of the policies of World Service Life Insurance
Company of America ("World Service") pursuant to a coinsurance agreement
(the "Coinsurance Agreement"). American Capitol paid World Service an
initial ceding commission of approximately $1.7 million. The assets
transferred to American Capitol were approximately $19.4 million in cash,
approximately $1.9 million of mortgage loans and other assets of
approximately $.1 million.
Contemporaneous with the signing of the Coinsurance Agreement, the parties
executed an administrative agreement (the "Administration Agreement")
whereby American Capitol agreed to provide specified administrative
functions for the 18,000 World Service policies as well as approximately
8,000 policies owned by World Service's subsidiary, South Texas Bankers
Life Insurance Company ("South Texas Bankers"), and the preneed funeral
contracts associated with the South Texas policies.
Effective June 30, 1996, American Capitol retroceded all of the World
Service policies in force at June 1, 1996 on a 100% coinsurance basis by
amending an existing reinsurance agreement (the "Crown Agreement") with an
unaffiliated reinsurer. American Capitol retained the coinsurance on all
policies issued by World Service subsequent to June 1, 1996. American
Capitol also retained the administration of the policies, for which it
received an expense allowance from the reinsurer.
On January 31, 1997, World Service assumed all of the policies of South
Texas with a retroactive effective date of June 1, 1996. Under the terms
of World Service's coinsurance agreement with American Capitol, World
Service's assumption of the South Texas policies automatically made the
South Texas policies subject to the Coinsurance Agreement and adjusted the
coinsurance percentage relative to all of the World Service policies to
91.4%. American Capitol paid World Service an initial ceding commission of
approximately $100,000 related to the South Texas policies. At the same
time, the South Texas policies also automatically became subject to the
Crown Agreement. In anticipation of the assumption by World Service and
the resulting coinsurance to American Capitol, South Texas had transferred
$6.8 million in assets to American Capitol in 1996.
Effective July 31, 1997, American Capitol acquired through assumption
reinsurance all of the World Service policies (the "Assumption
Transaction"). While 91.4% of the acquired policies continue to be
coinsured under the Crown Agreement, American Capitol did not coinsure the
balance of the policies following the Assumption Transaction. World
Service transferred to American Capitol $3 million in cash and $.1 million
<PAGE>
in other assets in connection with the Assumption Transaction.
6. SUPPLEMENTAL INFORMATION REGARDING CASH FLOWS
Cash payments of $80,779 and $43,972 for federal income taxes were made for
the nine months ended September 30, 1997 and 1996, respectively.
Cash payments of $70,949 and $88,984 for interest expense were made during
the nine months ended September 30, 1997 and 1996, respectively.
7. REAL ESTATE SALE
In May, 1997, American Capitol had signed an earnest money contract to sell
its home office building to an unaffiliated third party. However, the
prospective buyer was not able to close the transaction. American Capitol
received $50,000 held as earnest money on August 15, 1997.
8. STOCK OPTION PLAN
Effective September 2, 1997, American Capitol adopted an incentive stock
option plan, the "1997 American Capitol Insurance Company Key Employee
Option Plan." The plan provides that the Board of Directors of American
Capitol or the Compensation Committee of the Board of Directors may grant
stock options to any employee determined to be a key employee. The stock
options may only be granted on shares of common stock of Acap owned by
American Capitol. The options enable the grantee to purchase the common
stock to which the options relate at the fair market value of the common
stock on the date of granting the options. The options vest five years
from the date of grant and must be exercised within ten years from the date
of grant. As of September 30, 1997, options to purchase 500 of the 518
shares of Acap common stock owned by American Capitol had been granted with
a weighted average option price of $245 per share.
9. SUBSEQUENT EVENT
On September 24, 1997, American Capitol signed an earnest money contract to
sell its home office building to another unaffiliated third party. On
October 21, 1997, the earnest money contract was amended to include the
sale of 2.3721 acres of undeveloped land adjacent to the home office
building. The feasibility study period provided for in the earnest money
contract expired on October 27, 1997. The closing of the transaction is
scheduled to occur no later than November 24, 1997. Upon closing, the
Company will realize an after-tax capital gain of approximately $500,000.
As part of the transaction, American Capitol will lease approximately one
quarter of the net rentable area of the building (the area it currently
occupies) for five years at an annual rental of approximately $122,000.
Should the transaction fail to close, American Capitol would be entitled to
the earnest money on deposit, $86,000.
<PAGE>
ACAP CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
WORLD SERVICE TRANSACTIONS
During 1996 and 1997 the Company entered into the transactions described
below that affect the comparability of information between the periods
reported on herein.
Effective June 1, 1996, American Capitol Insurance Company ("American
Capitol"), a wholly-owned subsidiary of Acap Corporation, assumed through
reinsurance 93.6% of all of the policies of World Service Life Insurance
Company of America ("World Service") pursuant to a coinsurance agreement
(the "Coinsurance Agreement"). American Capitol paid World Service an
initial ceding commission of approximately $1.7 million. The assets
transferred to American Capitol were approximately $19.4 million in cash,
approximately $1.9 million of mortgage loans and other assets of
approximately $.1 million.
Contemporaneous with the signing of the Coinsurance Agreement, the parties
executed an administrative agreement (the "Administration Agreement")
whereby American Capitol agreed to provide specified administrative
functions for the 18,000 World Service policies as well as approximately
8,000 policies owned by World Service's subsidiary, South Texas Bankers
Life Insurance Company ("South Texas Bankers"), and the preneed funeral
contracts associated with the South Texas policies.
Effective June 30, 1996, American Capitol retroceded all of the World
Service policies in force at June 1, 1996 on a 100% coinsurance basis by
amending an existing reinsurance agreement (the "Crown Agreement") with an
unaffiliated reinsurer. American Capitol retained the coinsurance on all
policies issued by World Service subsequent to June 1, 1996. American
Capitol also retained the administration of the policies, for which it
received an expense allowance from the reinsurer.
On January 31, 1997, World Service assumed all of the policies of South
Texas with a retroactive effective date of June 1, 1996. Under the terms
of World Service's coinsurance agreement with American Capitol, World
Service's assumption of the South Texas policies automatically made the
South Texas policies subject to the Coinsurance Agreement and adjusted the
coinsurance percentage relative to all of the World Service policies to
91.4%. American Capitol paid World Service an initial ceding commission of
approximately $100,000 related to the South Texas policies. At the same
time, the South Texas policies also automatically became subject to the
Crown Agreement. In anticipation of the assumption by World Service and
the resulting coinsurance to American Capitol, South Texas had transferred
$6.8 million in assets to American Capitol in 1996.
Effective July 31, 1997, American Capitol acquired through assumption
reinsurance all of the World Service policies (the Assumption
Transaction ). While 91.4% of the acquired policies continue to be
coinsured under the Crown Agreement, American Capitol did not coinsure the
balance of the policies following the Assumption Transaction. World
Service transferred to American Capitol $3 million in cash and $.1 million
<PAGE>
in other assets in connection with the Assumption Transaction.
RESULTS OF OPERATIONS
Premiums and other considerations were 5% higher during the nine month
period ended September 30, 1997 in comparison to the comparable period in
1996. Premiums and other considerations were 7% higher during the three
month period ended September 30, 1997 in comparison to the comparable
period in 1996. During the month of June, 1996, American Capitol retained
100% of the business assumed from World Service under the Coinsurance
Agreement noted above. This resulted in additional premiums in June 1996
of approximately $400,000. Excluding the June 1996 World Service premiums,
premiums and other considerations were 30% higher during the nine month
period ended September 30, 1997. The increase in premiums income in 1997
in comparison to 1996 (after deducting the June 1996 World Service
premiums) is attributable to several factors:
1. Pursuant to the Coinsurance Agreement, American Capitol assumed 91.4%
of all business produced by World Service on or after June 1, 1996.
American Capitol did not retrocede these policies. World Service
terminated writing new business on September 1, 1997. Thus, premium
income through September 30, 1997 includes American Capitol s portion
of the World Service new business up to September 1, 1997, whereas
premium income through September 30, 1996 includes American Capitol s
portion of the World Service new business from June 1, 1996 through
September 30, 1996.
2. As previously noted, effective July 31, 1997, American Capitol acquired
100% of the World Service policies through the Assumption Transaction.
While American Capitol cedes 91.4% of the business under the Crown
Agreement, American Capitol retains the 8.6% balance. Thus, premium
income through September 30, 1997 includes, from August 1, 1997 through
September 30, 1997, 8.6% of the premium income related to the policies
acquired from World Service.
3. Premiums in Texas Imperial Life Insurance Company ("Texas Imperial"),
the wholly-owned subsidiary of American Capitol through which the
Company markets final expense life insurance and insurance-funded
prepaid funeral service contracts, were approximately 21% higher during
the nine month period ended September 30, 1997 in comparison to the
comparable period in 1996 and were approximately 33% higher during the
three month period ended September 30, 1997 in comparison to the
comparable period in 1996.
Net investment income increased 15% during the nine month period ended
September 30, 1997 in comparison to the comparable period in 1996 and
increased approximately 114% during the three month period ended
September 30, 1997 in comparison to the comparable period in 1996. Net
investment income for June 1996 included the earnings on the World Service
policies that were subsequently retroceded through the Crown Agreement.
Net investment income for 1997 includes the investment income from the
assets acquired in the Assumption Transaction. Net investment income in
June 1997 includes investment expenses of approximately $27,000 related to
repairs on American Capitol's home office building made in preparing the
building for sale. Net investment income in August 1997 includes $50,000
in forfeited earnest money American Capitol received when a prospective
purchaser of the home office building could not complete the transaction.
The sale of the home office building is discussed in more detail in "Real
Estate Sale" below.
<PAGE>
On September 10, 1996, American Capitol sold 50,000 square feet of
undeveloped land to an unaffiliated third party. The Company realized a
pretax capital gain of $222,025 on the sale.
The Company receives an expense allowance for administering certain blocks
of reinsured policies. The expense allowance received during the nine
month period ended September 30, 1997 was 3% higher than the expense
allowance received during the comparable period in 1996. During the nine
months ended September 30, 1996, the World Service policies were included
in the Crown Agreement (and therefore the Company received an expense
allowance related to those policies) for only three months, whereas, the
Company received an expense allowance related to the World Service policies
for all of the nine months ended September 30, 1997. The expense allowance
received during the three month period ended September 30, 1997 was 13%
lower than the expense allowance received during the comparable period in
1996. The decline in the reinsurance expense allowance is due to normal
policy attrition of the reinsured policies.
As a result of the above factors, total revenue was 2% higher during the
nine months and three months ended September 30, 1997 in comparison to the
comparable periods in 1996. Total revenue excluding realized capital gains
( Total Revenue ) was 6% higher during the nine months ended September 30,
1997 in comparison to the comparable period in 1996. Total Revenue was 16%
higher during the three month period ended September 30, 1997 in comparison
to the comparable period in 1996.
Total policy benefits (i.e., death benefits and other benefits) were 41% of
Total Revenue for the nine month period ended September 30, 1997 compared
to 43% of Total Revenue for the comparable period in 1996. Total policy
benefits were 40% of Total Revenue for the three month period ended
September 30, 1997 compared to 39% of Total Revenue for the comparable
period in 1996. Whereas the Company had experienced a lower than expected
level of death claims in the three months ended September 30, 1996, the
Company experienced a slightly higher than expected level of death claims
in the three months ended September 30, 1997.
Total expenses (i.e., total benefits and expenses less total policy
benefits) were 47% of Total Revenue for the nine month period ended
September 30, 1997 compared to 45% of Total Revenue for the comparable
period in 1996. Total expenses were 43% of Total Revenue for the three
month period ended September 30, 1997 compared to 40% of Total Revenue for
the comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, there was an increase in net unrealized
investment gains since December 31, 1996 of $260,930. The increase in
invested asset values was primarily the result of a decrease in market
interest rates during 1997. It is not anticipated that the Company will
need to liquidate investments prior to their projected maturities in order
to meet cash flow requirements.
REAL ESTATE SALE
In May, 1997, American Capitol had signed an earnest money contract to sell
its home office building to an unaffiliated third party. However, the
prospective buyer was not able to close the transaction. American Capitol
received $50,000 held as earnest money on August 15, 1997.
<PAGE>
On September 24, 1997, American Capitol signed an earnest money contract to
sell its home office building to another unaffiliated third party. On
October 21, the earnest money contract was amended to include the sale of
2.3721 acres of undeveloped land adjacent to the home office building. The
feasibility study period provided for in the earnest money contract expired
on October 27, 1997. The closing of the transaction is scheduled to occur
no later than November 24, 1997. Upon closing, the Company will realize an
after-tax capital gain of approximately $500,000. As part of the
transaction, American Capitol will lease approximately one quarter of the
net rentable area of the building (the area it currently occupies) for five
years at an annual rental of approximately $122,000. Should the
transaction fail to close, American Capitol would be entitled to the
earnest money on deposit, $86,000.
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 September 30, 1997 to be signed on its behalf by the
undersigned thereunto duly authorized.
ACAP CORPORATION
(Registrant)
Date: November 11, 1997 By: \s\William F. Guest
William F. Guest, President
Date: November 11, 1997 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
SEPTEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 34,074,677
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 2,199,938
<REAL-ESTATE> 1,414,070
<TOTAL-INVEST> 44,367,801
<CASH> 0
<RECOVER-REINSURE> 56,409,221
<DEFERRED-ACQUISITION> 1,590,711
<TOTAL-ASSETS> 106,359,366
<POLICY-LOSSES> 91,008,976
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 852,053
<POLICY-HOLDER-FUNDS> 1,862,437
<NOTES-PAYABLE> 875,000
0
1,850,000
<COMMON> 876
<OTHER-SE> 4,706,810
<TOTAL-LIABILITY-AND-EQUITY> 106,359,366
2,141,165
<INVESTMENT-INCOME> 1,118,428
<INVESTMENT-GAINS> 3,423
<OTHER-INCOME> 40,233
<BENEFITS> 2,047,515
<UNDERWRITING-AMORTIZATION> 73,442
<UNDERWRITING-OTHER> 2,012,492
<INCOME-PRETAX> 562,867
<INCOME-TAX> (1,670)
<INCOME-CONTINUING> 564,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 564,537
<EPS-PRIMARY> 56.18
<EPS-DILUTED> 0
<RESERVE-OPEN> 789,393
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 848,967
<PAYMENTS-PRIOR> 613,554
<RESERVE-CLOSE> 852,053
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
