SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 No. 2-8381-NY
ARISTA INVESTORS CORP.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2957684
---------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 John Street, New York, N.Y. 10038
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)964-2150
Indicate by check mark whether the registrant 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____
The aggregate number of Registrant's outstanding shares on August 10, 1995 was
1,930,600 Class A Common Stock, $0.01 par value and 47,400 Class B Common Stock,
$0.01 par value.
<PAGE>
ARISTA INVESTORS CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
-----
Item 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1995 3
(Unaudited) and December 31, 1994
Consolidated Statements of Operations (Unaudited) for 5
the three months and six months ended June 30, 1995
and 1994
Consolidated Statements of Changes in Stockholders' 6
Equity, for the six months ended June 30, 1995
(Unaudited) and the year ended December 31,
1994
Consolidated Statements of Cash Flows (Unaudited) 7
for the six months ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements 8
(Unaudited)
Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations:
Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1 through Item 6 13
Signatures 14
<PAGE>
PART I. FINANCIAL INFORMATION
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
------------ ------------
(unaudited)
ASSETS
------
Investments:
Held to maturity:
Bonds and long-term U. S. Treasury
obligations at amortized cost (market
value - $2,700,529 at June 30, 1995
and $2,490,986 at December 31, 1994) $2,661,099 $2,667,259
Short-term U. S. Treasury, at amortized cost
obligations (market value $421,060 at
June 30, 1995 and $207,818 at December
31, 1994) 421,060 207,818
Available-for-sale securities:
Redeemable preferred stocks, at market value
(amortized cost of $141,345 at June 30,
1995 and $143,581 at December 31, 1994) 122,264 113,304
Trading security, at market (cost of $3
at June 30, 1995 and December 31, 1994) 1,018 1,018
-------------- ------------
Total investments 3,205,441 2,989,399
Cash and equivalents 2,894,934 2,724,864
Premiums receivable, net 2,592,000 3,164,250
Deferred policy acquisition costs, net 1,154,633 794,988
Intangible assets 322,812 385,053
Furniture and office equipment, at cost, net of
accumulated depreciation of $628,126 at June
30, 1995 and $604,230 at December 31, 1994 140,475 120,642
Prepaid and refundable income taxes 806,917 817,289
Other assets 1,134,096 922,550
------------ ------------
$12,251,308 $11,919,035
============ ============
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Payable to reinsurers $ 117,736 $ 80,393
Net claims liabilities 2,356,704 2,460,723
Net unearned premiums 822,576 679,183
Net commissions payable 1,677,266 1,319,211
Accounts payable and accrued expenses 909,580 1,089,262
Deferred income taxes 269,273 279,042
------------ ------------
Total liabilities 6,153,135 5,907,814
------------ ------------
Commitments and contingencies: (Note 2)
Stockholders' equity:
Class A common stock, $.01 par value;
9,950,000 shares authorized; 1,940,600 issued 19,406 19,406
Common stock, Class B, $.01 par value; 50,000
shares authorized, 47,400 shares issued and
outstanding 474 474
Additional paid-in capital 4,193,354 4,193,354
Retained earnings 1,930,760 1,855,005
Net unrealized loss on marketable securities (19,081) (30,278)
------------ ------------
6,124,913 6,037,961
Less 10,000 shares Class A common stock in
treasury, at cost (26,740) (26,740)
------------ ------------
Total stockholders' equity 6,098,173 6,011,221
------------ ------------
$12,251,308 $11,919,035
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE><CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------------- -------------------------------
1995 1994 1995 1994
----------- ------------- ------------ ------------
Revenue:
<S> <C> <C> <C> <C>
Gross premiums earned (Note 2) $ 6,521,075 $ 6,765,164 $ 13,070,553 $ 13,018,516
Ceded premiums earned (Note 2) 3,260,537 3,382,582 6,535,276 6,509,258
--------- --------- ------------ ------------
Net premiums earned 3,260,538 3,382,582 6,535,277 6,509,258
Net realized investment losses 0 0 (137) (2,342)
Investment income 51,669 53,818 108,045 104,868
Other income 82,884 24,222 127,562 95,603
--------- --------- ------------ ------------
Total revenue 3,395,091 3,460,622 6,770,747 6,707,387
--------- --------- ------------ ------------
Expenses:
Underwriting (Note 2):
Gross claims incurred 3,770,974 4,504,432 8,485,320 8,616,556
Ceded claims incurred 1,885,487 2,252,216 4,242,660 4,308,278
--------- --------- ------------ ------------
Net claims incurred 1,885,487 2,252,216 4,242,660 4,308,278
--------- --------- ------------ ------------
Gross commissions incurred 1,069,874 1,107,790 2,176,105 1,932,845
Ceded commissions incurred 1,309,841 1,060,178 2,161,910 2,068,258
--------- --------- ------------ ------------
Net commissions incurred (earned) (239,967) 47,612 14,195 (135,413)
--------- --------- ------------ ------------
Total underwriting expenses 1,645,520 2,299,828 4,256,855 4,172,865
General and administrative expenses 1,155,835 1,276,977 2,347,405 2,276,612
--------- --------- ------------ ------------
Total expenses 2,801,355 3,576,805 6,604,260 6,449,477
--------- --------- ------------ ------------
Income (loss) before income taxes (benefits) 593,736 (116,183) 166,487 257,910
Provision for income taxes (benefits) (Note 4) 218,690 (41,330) 90,732 134,270
--------- --------- ------------ ------------
Net income (loss) 375,046 (74,853) 75,755 123,640
========= ========== ============ ============
Net income (loss) per common share $ 0.16 ($ 0.03) $ 0.03 $ 0.06
========= ========= ============= ============
Weighted average number of common
shares outstanding 2,330,977 2,233,191 2,318,404 2,248,407
========= ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE><CAPTION>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six months ended June 30, 1995 (unaudited) and year ended December 31, 1994
Class A Class B Cost of
Common Stock Common Stock Class A
----------------- ----------------- Unrealized Common
Number Par Number Par depreciation Stock Total
of value of value Paid-in Retained of equity held in stockholders'
Shares $.01 Shares $.01 capital earnings securities treasury equity
--------- ------- ------- ----- ----------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994 1,940,600 $19,406 47,400 $ 474 $ 4,193,354 $ 2,096,134 ($14,863) ($26,740) $6,267,765
Net loss -- -- -- -- -- (241,129) -- -- (241,129)
Net investment losses -- -- -- -- -- -- (15,415) -- (15,415)
--------- ------- ------ ------ ----------- ----------- --------- -------- ----------
Balance - December 31, 1994 1,940,600 19,406 47,400 474 4,193,354 1,855,005 (30,278) (26,740) 6,011,221
Net income (unaudited) -- -- -- -- -- 75,755 -- -- 75,755
Net investment gains
(unaudited) -- -- -- -- -- -- 11,197 -- 11,197
--------- ------- ------ ------ ----------- ----------- --------- -------- ----------
Balance - June 30, 1995
(unaudited) 1,940,600 $19,406 47,400 $ 474 $ 4,193,354 $ 1,930,760 ($19,081) ($26,740) $6,098,173
========= ======= ====== ====== =========== =========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1995 and 1994
(Unaudited)
<TABLE><CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 75,755 $ 123,640
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 23,896 32,721
Amortization of deferred acquisition costs 154,614 92,216
Amortization of intangible assets 62,241 70,800
Deferred income taxes/(benefit) (9,769) 13,505
(Increase) decrease in operating assets:
Premiums receivable 572,250 (313,237)
Prepaid and refundable income taxes 10,372 (408,237)
Other assets (211,546) (380,913)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (179,682) 508,918
Payable to reinsurer 37,343 7,168
Net claims liabilities (104,019) 30,163
Net unearned premiums 143,393 105,565
Commissions payable 358,055 (172,666)
------------ -------------
Net cash provided by (used in) operating activities 932,903 (290,357)
------------ -------------
Cash flows from investing activities:
Capital expenditures (43,729) (23,410)
Proceeds from sale of investments 2,237 765,370
Purchases of investments (207,082) (975,000)
Payments to acquire new insurance business (514,259) (402,000)
------------ -------------
Net cash used in investing activities (762,833) (635,040)
------------ -------------
Increase in cash and equivalents 170,070 (925,397)
Cash and equivalents:
Beginning of year 2,724,864 2,354,897
------------ -------------
June 30, $ 2,894,934 $ 1,429,500
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
(Unaudited)
Note 1 - Basis of presentation
-------------------------------
The accompanying consolidated financial statements are prepared on the basis of
generally accepted accounting principles ("GAAP"). GAAP differs from statutory
accounting principles ("SAP") used by insurance companies in reporting to state
regulatory agencies. In the opinion of the management of Arista Investors Corp.
(the "Company" or the "Registrant"), all adjustments (consisting of normal
recurring accruals only) have been reflected for a fair presentation of the
unaudited financial position as of June 30, 1995 and results of operations for
the six-month and three-month periods ended June 30, 1995 and 1994. The
operating results for the periods are not necessarily indicative of the results
to be expected for the entire year.
Note 2 - Reinsurance
--------------------
Effective October 1, 1992, Arista Insurance Company ("Arista") entered into a
stop loss reinsurance agreement ("Agreement") with its reinsurer. The Agreement
provides for Arista to cede 50% of its disability policies written to the
reinsurer, when Arista's loss ratio is equal to or greater than 75%, up to but
not to exceed 100% of earned premiums. The reinsurer is paid a fee based on
Arista's earned premiums. The Agreement is subject to cancellation by either
party on 90 days' prior written notice.
Effective October 1, 1993, Arista entered into a new agreement with NRG America
Reassurance Corporation (during 1994, its name was subsequently changed to
Harbourton Reinsurance, Inc., "Harbourton") whereby Arista will cede, by way of
reinsurance, a 50% quota share of Arista's liability with respect to New York
Statutory Disability benefits issued to policyholders. For this, Harbourton will
receive a fee based on premiums ceded.
A contingent liability exists with respect to reinsurance ceded which would
become a liability of Arista in the event that the reinsurer is unable to meet
its proportionate share of the obligations assumed under the Agreement.
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
(unaudited)
Note 3 - Related parties
------------------------
Bernard Kooper, President of the Company, Chairman of the Boards of Directors of
the Company and Arista and a Director of The Collection Group, Inc. and American
Accident and Health Insurance Company, beneficially owns 22.88% and 100% of the
outstanding shares of Class A and Class B Common Stock, respectively (including
30,400 shares of Class A Common Stock owned by Arlyne Kooper, wife of Bernard
Kooper, and 365,000 shares of Class A Common Stock issuable upon the exercise of
the warrant held by Mr. Kooper). This does not include securities and/or options
to purchase shares of Class A Common Stock owned by Andrew H. Kooper, son of Mr.
Kooper, or by Louis H. Saltzman, son-in-law of Mr. Kooper. Mr. Kooper is also
the owner of Bernard Kooper Life Agency, Inc. (the "Agency"), one of the general
agents of Arista. The Agency received approximately $111,000 and $124,000 in
commissions from Arista during the six months ended June 30, 1995 and 1994,
respectively. Of this amount, the Agency paid approximately $80,000 and $89,000
during the six months ended June 30, 1995 and 1994, respectively, to brokers,
which included certain members of the Board of Directors of the Company and
Arista. The amount paid to members of the Board of Directors of the Company
and/or Arista by the Agency was approximately $11,000 and $10,000 during the six
months ended June 30, 1995 and 1994, respectively.
Note 4 - Consolidated income taxes
----------------------------------
Consolidated income taxes paid aggregated $221,797 and $254,451 for the six
months ended June 30, 1995 and 1994, respectively.
Note 5 - Policy Acquisitions
----------------------------
Arista has incurred costs under various agreements it has entered into while
acquiring the right to offer New York State statutory disability benefits
coverage to former policyholders of other disability carriers. The costs
include professional fees and finder's fees as well as fees paid directly
to these disability carriers for such right. For financial statement
purposes, such costs are deferred and are being amortized to income over
five years. These costs, for all acquisitions, amounted to $2,194,159 and
$1,254,125 at June 30, 1995 and 1994, respectively. Accumulated amortization
was $1,039,526 and $710,295 at June 30, 1995 and 1994, respectively.
Amortization of deferred acquisition costs charged to operations aggregated
$154,614 and $92,216 for the six months ended June 30, 1995 and 1994,
respectively.
<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
(Unaudited)
Results of Operations
---------------------
The Company's net income after taxes for the six months of 1995 and 1994 were
approximately $76,000 and $124,000, respectively. For the second quarter ended
June 30, 1995, the Company had net income of approximately $375,000 as compared
to an after tax loss of approximately $75,000 for the same period of 1994.
Income before provision for income taxes for the first six months of 1995 was
approximately $166,000 as compared to $258,000 for the comparable period of
1994. The principal reasons for the increase in income from operations for the
second quarter of 1995 as compared to the comparable 1994 period were a decrease
in the incurred loss ratio as well as a decrease in general and administrative
expenses.
Arista's gross premiums earned were approximately $13.1 million and $13.0
million for the first six months of 1995 and 1994, respectively. Gross premiums
earned for the second quarters of 1995 and 1994 were approximately $6.5 million
and $6.8 million, repectively. Under an Assumption Reinsurance Treaty with
American Medical and Life Insurance Company ("American Med"), effective January
1, 1995, Arista acquired the book of New York Statutory Disability Benefit
insurance that had been previously ceded by American Med to Arista (effective
October 1, 1994). This book of disability insurance increased gross premiums
earned by approximately $1.3 million for the first six months of 1995. This
increase was offset in part by a reduction in premiums earned on Arista's
existing book of disability insurance, which was attributable to a reduction in
the number of covered lives as well as in the number of policyholders covered.
Arista's gross claims incurred for the first six months of 1995 were
approximately $8.5 million, representing 64.9% of the gross premiums earned. For
the first six months of 1994, gross claims incurred were approximately $ 8.6
million, representing
<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
(Unaudited)
66.2% of gross premiums earned. For the second quarters of 1995 and 1994, the
ratios were 57.8% and 66.6%, respectively. It is not possible for management to
predict whether or not such short-range quarterly changes in the gross claims
incurred are indicative of any trend.
Consolidated investment income for the first six months of 1995 and 1994 were
approximately $108,000 and $105,000, respectively. For the second quarters of
1995 and 1994, consolidated investment income was approximately $52,000 and
$54,000 respectively.
Other income for the first six months of 1995 and 1994 were approximately
$127,000 and $95,000, respectively. For the second quarter of 1995 and 1994,
other income was approximately $83,000 and $24,000. The change in the second
quarter of 1995 as compared to 1994 was attributable to increased third party
administrative fees and to interest earned on a federal income tax refund.
Arista's gross commissions incurred as a percentage of gross premiums earned
were 16.7% and 14.9% for the first six months of 1995 and 1994, respectively. In
addition, the ratios of gross commissions incurred to gross premiums earned
during the second quarters of 1995 and 1994 were each 16.4%.
The consolidated general and administrative expenses for the first six months of
1995 and 1994 were each approximately $2.3 million. As a percentage of gross
premiums earned, the consolidated general and administrative expenses were 18.0%
and 17.5% for the six months ended June 30, 1995 and 1994, respectively. For the
second quarters of 1995 and 1994, these expenses were 17.7% and 18.9%,
respectively, of gross premiums earned.
<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
(Unaudited)
Liquidity and Capital Resources
-------------------------------
Retained earnings increased from $6,011,221 at December 31, 1994 to $6,098,173
at June 30, 1995 as a result of the Company's additional net income. Management
continues to believe that a further increase in statutory surplus would be
necessary for any appreciable increase in net in-force premiums.
<PAGE>
ARISTA INVESTORS CORP.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to report.
Item 2. Changes in Securities
Nothing to report.
Item 3. Defaults Upon Senior Securities
Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to report.
Item 5. Other Information
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: 27 - Financial Data Schedule.
b. Reports on Form 8-K: None
<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.
ARISTA INVESTORS CORP. (Registrant)
---------------------------------------
BY: /S/ BERNARD KOOPER
---------------------------------------
BERNARD KOOPER, President and
Chairman of the Board (principal
executive officer)
BY: /S/ SUSAN J. HALL
---------------------------------------
SUSAN J. HALL, Senior Vice President
and Treasurer (principal financial
and accounting officer)
August 11, 1995
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
ARISTA INVESTORS CORP.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
Six months ended June 30, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 421,060
<DEBT-CARRYING-VALUE> 2,667,259
<DEBT-MARKET-VALUE> 3,121,589
<EQUITIES> 123,282
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,205,441
<CASH> 2,894,934
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,154,633
<TOTAL-ASSETS> 12,251,308
<POLICY-LOSSES> 2,356,704
<UNEARNED-PREMIUMS> 822,704
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 19,880
0
0
<OTHER-SE> 6,078,293
<TOTAL-LIABILITY-AND-EQUITY> 12,251,308
6,535,277
<INVESTMENT-INCOME> 108,045
<INVESTMENT-GAINS> (137)
<OTHER-INCOME> 127,562
<BENEFITS> 4,242,660
<UNDERWRITING-AMORTIZATION> 154,614
<UNDERWRITING-OTHER> 4,368,896
<INCOME-PRETAX> 16,487
<INCOME-TAX> 90,732
<INCOME-CONTINUING> 75,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,755
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
