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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 0-023183
CONNING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1719355
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
700 MARKET STREET
ST. LOUIS, MISSOURI 63101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(314) 444-0498
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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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
--- ---
COMMON STOCK OUTSTANDING ($.01 PAR VALUE) AS OF APRIL 30, 1999:
13,533,803 SHARES
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CONNING CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I - FINANCIAL INFORMATION
------------------------------
1 Financial Statements 1
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Income (Unaudited)
Three month periods ended March 31, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three month periods ended March 31, 1999 and 1998 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4-6
2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II - OTHER INFORMATION
---------------------------
1 Legal Proceedings 12
5 Other Information 12
6 Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
CONNING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,168,623 $ 31,343,314
Short-term investments 19,845,336 28,288,155
Accounts receivable, net 10,540,732 11,165,200
Marketable equity securities, at fair value 724,580 278,222
Prepaid expenses and other current assets 438,158 481,455
---------------- ----------------
Total current assets 65,717,429 71,556,346
Non-marketable investments at value 3,538,005 2,737,147
Equipment and leasehold improvements, at cost, net of
accumulated depreciation 1,387,534 1,451,653
Deferred income taxes 2,950,808 3,199,812
Goodwill 40,142,132 40,706,020
Other assets 4,721,027 2,827,145
---------------- ----------------
Total assets $118,456,935 $122,478,123
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Compensation payable $ 2,880,101 $ 12,794,850
Deferred revenue 3,926,392 3,792,762
Due to affiliates 4,698,449 2,338,918
Income taxes payable 2,295,901 284,441
Accounts payable and other accrued expenses 16,856,383 19,554,667
---------------- ----------------
Total current liabilities 30,657,226 38,765,638
Accrued rent 3,137,157 3,215,897
Other payables 280,000 320,000
---------------- ----------------
Total liabilities 34,074,383 42,301,535
---------------- ----------------
Common stock 136,927 135,714
Additional paid-in capital 76,083,141 74,975,681
Retained earnings 14,559,972 11,462,681
Treasury stock (6,397,488) (6,397,488)
---------------- ----------------
Total shareholders' equity 84,382,552 80,176,588
---------------- ----------------
Total liabilities and shareholders' equity $118,456,935 $122,478,123
================ ================
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
1
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<TABLE>
CONNING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
REVENUES:
Asset management and related fees $18,173,871 $14,685,364
Research services 4,401,854 4,167,687
Other income 470,625 827,402
--------------- ---------------
Total revenues 23,046,350 19,680,453
--------------- ---------------
EXPENSES:
Employee compensation and benefits 10,617,219 9,631,723
Occupancy and equipment costs 1,520,508 1,145,232
Marketing and production costs 1,844,698 1,558,151
Professional services 670,095 551,588
Amortization of goodwill and other 648,888 707,847
Other operating expenses 1,344,662 1,067,710
--------------- ---------------
Total expenses 16,646,070 14,662,251
--------------- ---------------
Operating income 6,400,280 5,018,202
Interest expense 59,552 65,975
--------------- ---------------
Income before provision for income taxes 6,340,728 4,952,227
Provision for income taxes 2,574,912 2,120,290
--------------- ---------------
Net income $ 3,765,816 $ 2,831,937
=============== ===============
Weighted average diluted shares outstanding 14,037,341 14,174,574
Earnings per share:
Basic $ 0.28 $ 0.21
Diluted $ 0.27 $ 0.20
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
2
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<TABLE>
CONNING CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,765,816 $ 2,831,937
Adjustment for items not affecting cash:
Depreciation 178,240 187,452
Amortization of goodwill and other 655,071 707,847
Net unrealized appreciation on non-marketable
investments (303,540) (193,952)
Net change in marketable equity securities (446,358) (73,181)
Accretion of discounts on short-term investments (237,873) (105,405)
Changes in:
Accounts receivable 624,468 1,899,194
Prepaid expenses and other assets (1,941,768) 45,870
Accounts payable and other accrued expenses (2,738,284) 3,037,772
Income taxes payable 2,097,872 2,245,495
Due to affiliates 2,359,531 1,882,943
Deferred tax asset 249,004 (78,855)
Deferred revenue 133,630 1,110,714
Accrued rent (78,740) (64,052)
Compensation payable (9,914,749) (7,997,732)
---------------- ----------------
Net cash provided by (used in) operating activities (5,597,680) 5,436,047
---------------- ----------------
INVESTING ACTIVITIES:
Purchases of non-marketable investments (661,408) -
Distribution from non-marketable investment 164,090 94,933
Purchases of equipment and other assets, net (114,121) (127,465)
Purchases of short-term investments (27,052,748) (13,592,148)
Maturities of short-term investments 35,733,440 17,187,915
---------------- ----------------
Net cash provided by investing activities 8,069,253 3,563,235
---------------- ----------------
FINANCING ACTIVITIES:
Issuance of common stock 1,022,261 -
Dividends on common stock (668,525) (530,000)
---------------- ----------------
Net cash provided by (used in) financing activities 353,736 (530,000)
---------------- ----------------
Net change in cash and cash equivalents 2,825,309 8,469,282
Cash and cash equivalents, beginning of period 31,343,314 43,085,406
---------------- ----------------
Cash and cash equivalents, end of period $ 34,168,623 $ 51,554,688
================ ================
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
3
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CONNING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited, interim condensed consolidated financial
statements of Conning Corporation and subsidiaries (the "Company") have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the financial information reflects adjustment,
consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position of the Company and its
subsidiaries as of March 31, 1999 and their results of operations and their
cash flows for the three month periods ended March 31, 1999 and 1998.
Operating results for the three month period ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. These unaudited financial statements
should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
NOTE 2 - DIVIDENDS
The Company has paid cash dividends of $0.05 per share totaling $668,525
on its common stock through March 31, 1999 compared to $0.04 per share
totaling $530,000 for the same period during 1998. During April, 1999
the Company declared a $0.05 per share quarterly cash dividend on the
Company's common stock, payable on June 11, 1999 to shareholders of
record on May 21, 1999.
NOTE 3 - MORTGAGE SERVICING OPERATIONS
During January, 1998, the Company assumed certain mortgage servicing
functions for its clients which include acting as an agent in the
collection and processing of principal and interest loan payments and
escrow items. As of March 31, 1999 and December 31, 1998, the Company
maintained approximately $11.8 million and $14.1 million, respectively,
in escrow balances off-balance sheet as the amounts were not considered
to be owned or operated by the Company.
NOTE 4 - INDUSTRY SEGMENT
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial statements
issued to shareholders.
4
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CONNING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Segment information on the Company for the three month periods ended
March 31, 1999 and 1998 are as follows, dollars in thousands:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSET MANAGEMENT
Revenues $11,848 $ 9,933
Pre-tax income $ 3,066 $ 2,508
MORTGAGE LOAN & REAL ESTATE
Revenues $ 6,325 $ 4,752
Pre-tax income $ 2,140 $ 1,353
RESEARCH
Revenues $ 4,402 $ 4,168
Pre-tax income $ 1,135 $ 1,091
COMBINED OPERATING SEGMENTS
Revenues $22,575 $18,853
Pre-tax income $ 6,341 $ 4,952
RECONCILIATION OF COMBINED OPERATING
SEGMENT REVENUES TO CONSOLIDATED REVENUES
Combined operating segment revenue $22,575 $18,853
Other income 471 827
------- -------
Consolidated revenue $23,046 $19,680
======= =======
</TABLE>
As of March 31, 1999, there are no differences in the basis of measuring
segment profit as compared to the Company's Annual Report for the year ended
December 31, 1998.
In addition to the disclosures above, SFAS 131 requires certain
disclosures pertaining to assets by segments if those measures are used
by management to make operating decisions, assess performance and
allocated resources. Management does not consider these items by
operating segment when making operating decisions, assessing performance
or allocating resources.
5
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CONNING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - EARNINGS PER SHARE
The following table represents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations:
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999:
Income Shares Per Share
(numerator) (denominator) Amount
--------------- ----------------- -------------
<S> <C> <C> <C>
BASIC EPS:
Net income $3,765,816 13,330,332 $0.28
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EFFECT OF DILUTIVE SECURITIES:
Stock options 707,009
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DILUTED EPS:
Net income $3,765,816 14,037,341 $0.27
========== ========== =====
<CAPTION>
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1998:
Income Shares Per Share
(numerator) (denominator) Amount
--------------- ----------------- -------------
<S> <C> <C> <C>
BASIC EPS:
Net income 2,831,937 13,250,000 $0.21
---------- =====
EFFECT OF DILUTIVE SECURITIES:
Stock options 924,574
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DILUTED EPS:
Net income $2,831,937 14,174,574 $0.20
========== ========== =====
</TABLE>
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
- --------
Conning Corporation revenues consist of asset management and related
fees, research services, and other income.
The Company's asset management and related revenues are derived from three
sources: asset management fees, private equity fund management fees, and
fees related to the Company's mortgage and real estate activities. Asset
management fees primarily reflect fees for discretionary asset management
services provided to insurance company clients, including GenAmerica
Corporation ("GenAmerica"), its subsidiaries and its affiliates. Asset
management fees are generally a function of the overall fee rate charged
to each account and the level of assets under management. A portion of
these revenues is generated when the Company provides investment advisory
services as well as when the Company provides investment accounting and
reporting services on a stand-alone basis. Assets under management can be
affected by the addition of new client accounts or client contributions to
existing accounts, withdrawals of assets from or terminations of client
accounts, and investment performance which may depend on general market
conditions.
The Company's private equity fund management revenues represent annual
management fees based on a percentage of committed capital and a
participation in certain specified net gains of the funds.
The Company's commercial mortgage fees primarily reflect fees associated
with loan originations, which approximate .75-1.0% of the loan balance, as
well as fees associated with ongoing servicing and management fees with
respect to loans originated in portfolios managed by the Company. In
addition to loans for GenAmerica subsidiaries and affiliates, the Company
originates mortgage loans for unaffiliated insurance and pension clients
and for securitized offerings by investment banking firms from time to
time.
Conning's assets under discretionary management were $29.4 billion as of
March 31, 1999, an increase of $1.9 billion from $27.5 billion under
management at March 31, 1998. The net increase in assets during the
twelve-month period is due to an increase in assets from new and existing
clients. Total assets serviced increased $5.1 billion since March 31,
1998 to $90.6 billion at March 31, 1999. New client activity in investment
advisory assets serviced was the primary result of this increase,
accompanied by stable growth in the Company's core assets under
discretionary management.
7
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RESULTS OF OPERATIONS
- ---------------------
Statement of income for the three months ended March 31, 1999 compared to
the three months ended March 31, 1998
Total revenues increased 17% to $23.0 million for the three months ended
March 31, 1999 versus $19.7 million for the same period in 1998. This
increase was primarily attributable to the increase in asset management
and related fees resulting from the growth in assets managed for
existing clients and net additions of new clients. Approximately 28% of
the increase stems from increased mortgage origination activity which is
largely a function of the timing of loan closings. Research service
revenues increased 6% to $4.4 million for the three months ended March
31, 1999 from $4.2 million for the same period in 1998 as a result of
continued strong core research fees. Underwriting fees, included in
research service revenues, decreased by approximately 93% from $647,000
for the three months ended March 31, 1998 to $47,000 for the same period
in 1999, which was offset by the 24% increase in core research fees for
the comparable periods. Other income for the three months ended March
31, 1999 decreased approximately $357,000, compared to the same period
for 1998 primarily due to utilization of cash reserves for acquisitions
during the later portion of 1998.
Total expenses increased 14% to $16.6 million for the three months ended
March 31, 1999 from $14.7 million for the same period in 1998, due
primarily to increased employee compensation and benefits expenses as well
as an increase in occupancy and equipment, marketing and production and
certain other expenses associated with the growth in revenues. Total
compensation and benefits increased 10% to $10.6 million from $9.6 million
for the three months ended March 31, 1999 and 1998, respectively, and
represents approximately 50% of the total increase in expenses for the
period. The increase is due primarily to staffing increases for Company
growth and the recognition of a $250,000 expense in the first quarter of
1999 associated with the recording of compensation expense over the vesting
periods of awards under the Company's 1998 long-term incentive compensation
program. The ratio of employee compensation and benefits to total revenue
decreased from 48.9% in the first quarter of 1998 to 46.1% during the
first quarter of 1999 reflecting the Company's ability to leverage its
resources as the Company grows. Occupancy and equipment costs increased 33%
from $1.1 million for the three months ended March 31, 1998 to $1.5 million
for the three months ended March 31, 1999 due to the addition of office space
associated with 1998 acquisitions and additional technology expenses associated
with the Company's growth.
Provision for income taxes increased by approximately 21% to $2.6 million
for the three month period ended March 31, 1999 from $2.1 million for the
three month period ended March 31, 1998 as a result of higher taxable
income. The effective tax rate has decreased from 42% during 1998 to 41%
during 1999 reflecting a decrease in certain state income tax rates.
As a result of all of the above, net income increased 33% to $3.8 million
during the three month period ended March 31, 1999 compared to $2.8
million for the same period in 1998.
8
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's business is not capital-intensive. Historically, working
capital requirements for the Company have been provided almost
exclusively by operating cash flow. Management believes that the
Company's existing capital, together with operating cash flow, will
provide the Company with sufficient resources to meet its present and
foreseeable future cash needs.
On March 26, 1999, the Company announced a definitive agreement had been
reached with The TCW Group, Inc. ("TCW") in which the Company will acquire
TCW's insurance company high-grade fixed income management business,
which represents approximately $2.5 billion in discretionary assets
under management and assets serviced. Subject to certain adjustments,
the purchase price for the acquired business is excepted to equal
approximately 1.5 times annual management fees relating to this
business. A maximum of $3.0 million will be paid at closing with the
remainder, up to $2.3 million, over the next two years, subject to
successful retention of acquired client relationships and meeting
certain revenue targets on the acquired business. The acquisition will
be treated as an asset purchase and is expected to close during the
second quarter of 1999.
The Company utilized approximately $5.6 million in cash flow from
operations during the three months ended March 31, 1999. The Company
uses its cash flow for existing operations, working capital, to pay
dividends to shareholders, and for general corporate purposes. The
Company invests excess cash in deposits with major financial
institutions and short-term securities. The Company had no outstanding
debt as of March 31, 1999 or December 31, 1998.
The Company's subsidiary, Conning & Company, is subject to the net
capital requirement imposed on registered broker-dealers under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). At
March 31, 1999, Conning & Company had net capital of approximately $13.0
million, which was approximately $12.3 million in excess of the
regulatory minimum.
The Company has a revolving subordinated loan agreement with a
commercial bank for $2.0 million that expires on December 31, 1999.
Subject to certain financial criteria and approval by the National
Association of Securities Dealers regional office, borrowings qualify as
capital for purposes of the Exchange Act's net capital rules. During
the three months ended March 31, 1999, the Company exceeded all the
associated financial criteria, but did not utilize the revolving
agreement.
The Company or a subsidiary acts as a general partner of certain private
equity funds and maintains a 1% general partner's capital interest in
such funds. The Company may also invest as a limited partner in future
funds it may organize. Interests in such private equity funds are
generally illiquid.
9
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IMPACT OF INFLATION
- -------------------
The Company does not believe that inflation has had a significant impact
on the Company's consolidated operations.
MARKET RISK
- -----------
In the normal course of business, the financial position of the Company
is routinely subjected to a variety of risks, including market risk
associated with interest rate fluctuations. The Company may be exposed
to fluctuations in interest rates primarily in its cash, cash equivalent,
commercial paper and other investment transactions. The Company does not
use derivative financial investments to manage interest rate risk. Based
on the above, the Company does not believe that the effect of reasonably
possible near-term changes in interest rates on the Company's investing
activities would be material to the Company's financial position, results
of operations or cash flow taken as a whole.
Changes in economic and market conditions may adversely affect the
profitability and performance of and demand for the Company's services.
A significant portion of the Company's revenues is derived from asset
management fees, which are generally based on the market value of assets
under management. Consequently, the total value and composition of assets
under management and related cash inflows and outflows, and changes in
the investment patterns, policies and regulations of the Company's clients
may affect materially the amount of assets under management and thus the
Company's revenues and profitability.
YEAR 2000
- ---------
Many of the world's computer systems currently record years in a two-
digit format. If not addressed, such computer systems will be unable to
properly interpret dates beyond the year 1999, which could lead to
business disruptions in the U.S. and internationally (the "Year 2000" or
"Y2K" issue). The potential costs and uncertainties associated with the
Year 2000 issue will depend on a number of factors, including software,
hardware and the nature of the industry in which a company operates.
Additionally, companies must coordinate with other entities with which
they electronically interact. The Company has established a Year 2000
Compliance Team, with a charter to plan and execute a Y2K compliance
effort. The Team is made up of an existing staff of skilled and
experienced associates along with external consultants.
The Company has progressed through its awareness and assessment stages.
In addition to internal systems, the Company relies on external systems
and has included in the assessment and inventory those systems of
significant external parties such as vendors, banks, and broker-dealers.
Once the inventory was complete, the Compliance Team conducted a
thorough risk analysis, which covered both internal and external
systems. This analysis was submitted to Company management and formed
the foundation of the Y2K Compliance Plan.
The Company has completed remediation for internally supported systems,
which primarily involved enhancing software code. In addition to
remediation, compliance strategies include: upgrading hardware and
software to compliant versions, replacing non-compliant systems with
compliant systems, retiring non-compliant systems and securing Y2K
Compliance Statements from system vendors and significant external
business partners. Upgraded and replacement systems are being tested
along with remediated systems.
As of March 31, 1999, all compliance testing for Mission Critical
systems has been completed. The Company is also communicating with most
of its external business partners, suppliers and vendors in an effort to
determine their Y2K readiness. There is no known method to completely
determine compliance of external systems, but every reasonable effort is
being made to assure compliance of these external systems. The Y2K
external readiness evaluation is progressing on target and is scheduled
to be complete June 30, 1999. There are many companies that produce the
products and services that are supplied to the Company by these external
sources. In the event a particular supplier, vendor or business partner
is unable to provide products or services to the Company due to a Year
2000 failure, the Company believes it has adequate alternate sources for
such products or services. There can be no guarantee, however, that
similar or identical products or services would be available on the same
terms and conditions or that the Company would not experience some
adverse effect as a result of switching to such alternate sources.
The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities and
operations. Such failures could adversely affect the Company's results
of operations, liquidity and financial condition, particularly as a
result of the
10
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uncertainty of the Y2K readiness of third-party suppliers and clients.
The Company believes that, with the completion of the compliance effort,
the possibility of significant interruptions of normal operations will
be significantly reduced.
The Company has implemented control procedures so that once compliance
is established, non-compliant system changes or the introduction of non-
compliant new systems will not impact the Company's compliance status.
Another important part of the Company's Y2K compliance effort is
contingency planning. Reasonable and appropriate plans have been
formulated so that any disruption caused by the Year 2000 issue does not
materially affect the Company's business or results of operations. The
contingency plans were formulated in conjunction with the compliance
testing process and will continue to be updated throughout 1999.
The Company estimates the total cost to the Company for its Y2K compliance
effort, including external and internal expenditures will be approximately
$400,000. The Company incurred actual costs of approximately $125,000 in
1998 with the remaining estimated $275,000 to be incurred in 1999. Based on
the activities described above, the Company does not believe that the Year 2000
issue will have a material adverse effect on the Company's business or results
of operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
- ---------------------------------------------------------
Certain statements contained in this report are or may constitute forward-
looking statements under the Private Securities Litigation Reform Act of
1995, including, without limitation, statements relating to the Company's
financial position, plans to increase revenues, competitive strengths,
business objectives or strategies, insurance industry trends and
expectations regarding GenAmerica's assets or activities. Because such
statements are subject to risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements or from historical results. The Company's business entails a
variety of additional risks, including Year 2000 issues as discussed
herein, which are set forth in documents the Company has filed or will
file from time to time with the SEC. Investors are cautioned not to place
undue reliance on such statements, which speak only as of the date hereof.
The Company undertakes no obligation to release publicly any revisions
which may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
11
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On July 8, 1997, a consolidated amended class-action complaint was
filed against SS&C Technologies, Inc. ("SS&C") in the United States
District Court, District of Connecticut, styled Marc A. Feiner, M.D., et
al. v. SS&C Technologies, Inc., et al. (Civil Action No. 397CV00656(JBA)
consolidated with Civil Action No. 397CV01077). On May 7, 1999, SS&C
announced that it entered into an agreement to settle the consolidated
securities class action lawsuit currently pending against SS&C. The
settlement provides for the dismissal of all claims against SS&C,
certain of its officers and directors and underwriters. Under the terms
of the settlement, SS&C will pay to the class $7.5 million in cash,
together with shares of SS&C common stock valued at $1.3 million. The
settlement is subject to certain customary conditions, including notice
to the class and approval by the Court. Conning was not a party to the
class action and the outcome did not have a material adverse effect upon
the Company's operations or financial statements.
ITEM 5. OTHER INFORMATION.
Shareholder proposals submitted under processes prescribed by the
Securities and Exchange Commission (in Rule 14a-8 of the Securities
Exchange Act) for presentation at the 2000 Annual Meeting must be
received by the Company by December 6, 1999 for inclusion in the
Company's proxy statement and proxy relating to that meeting. Upon
receipt of any such proposal, the Company will determine whether or not
to include such proposal in the proxy statement and proxy in accordance
with regulations governing the solicitation of proxies. Shareholder
proposals submitted outside the process of Rule 14a-8 must be submitted
to the Company by March 10, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits.
12
<PAGE>
<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.
CONNING CORPORATION
By: /s/ Leonard M. Rubenstein
-------------------------------
Leonard M. Rubenstein
Chairman, President and Chief
Executive Officer (Principal
Executive Officer)
/s/ Fred M. Schpero
-------------------------------
Fred M. Schpero
Senior Vice President and Chief
Financial Officer
13
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ ------------
3.1 Restated Articles of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to Form 10-K (File No.
0-023183) for the fiscal year ended December 31, 1997 filed March
23, 1998
3.2 Bylaws of the Company incorporated by reference to Exhibit 3.3 to
Registration Statement on Form S-1 (No. 333-35993) filed
September 19, 1997
27 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 54,013,959
<SECURITIES> 724,580
<RECEIVABLES> 10,677,317
<ALLOWANCES> 136,585
<INVENTORY> 0
<CURRENT-ASSETS> 65,717,429
<PP&E> 3,381,938
<DEPRECIATION> 1,994,404
<TOTAL-ASSETS> 118,456,935
<CURRENT-LIABILITIES> 30,657,226
<BONDS> 0
<COMMON> 136,927
0
0
<OTHER-SE> 84,245,625
<TOTAL-LIABILITY-AND-EQUITY> 118,456,935
<SALES> 22,575,725
<TOTAL-REVENUES> 23,046,350
<CGS> 15,997,182
<TOTAL-COSTS> 16,646,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,552
<INCOME-PRETAX> 6,340,728
<INCOME-TAX> 2,574,912
<INCOME-CONTINUING> 3,765,816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,765,816
<EPS-PRIMARY> .28
<EPS-DILUTED> .27
</TABLE>
