UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1995
- or -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9460
LAWRENCE INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3370656
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Fifth Avenue, New York, New York 10110
(Address of principal executive offices)
(212) 944-8242
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days: Yes X No
As of May 13, 1994, there were 14,121,482 shares of common
stock, $.01 par value, issued and outstanding. May 13, 1994, was
the date trading was suspended on the American Stock Exchange. The
stock has not been traded since that date.
Page 1 of 12
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
March 31, December 31,
1995 1994
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities held to maturity at
amortized cost (Fair value:
1995-$4,533; 1994-$7,684) $4,432 $7,698
Fixed maturities available for sale
at fair value (Cost: 1995-$6,886;
1994-$6,228) 6,642 5,784
Equity in common stock of investee
(Cost: 1995-$103; 1994-$103) - -
Equity securities, at fair value
(Cost: 1995-$997; 1994-$997) 933 917
Short-term investments, at cost which
approximates fair value 11,680 11,523
Collateral loans, at fair value 1,033 1,033
Mortgage loans on real estate, at
aggregate outstanding principal balance 183 186
Other invested assets, at fair value:
(Cost: 1995-$679; 1994-$853) 673 853
------ ------
Total investments 25,576 27,994
Cash and cash equivalents 1,909 2,500
Accrued investment income 543 668
Accounts receivable (Net of allowance
for doubtful accounts of $0 in 1995
and 1994 and commissions owed to
affiliates of $0 in 1995 and 1994) 11,939 12,467
Reinsurance recoverable on paid losses 15,805 13,708
Reinsurance receivable 7,471 7,320
Deferred policy acquisition costs 120 289
Property and equipment, net 43 52
Other assets 2,028 2,043
------ ------
Total assets $65,434 $67,041
====== ======
See accompanying notes to consolidated financial statements.
Page 2 of 12
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
($ IN THOUSANDS)
March 31, December 31,
1995 1994
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $44,421 $47,165
Deficit of non-consolidated
subsidiary 56,887 56,879
Unearned premiums 1,074 1,384
Reinsurance balances payable 14,693 13,316
Other liabilities 4,340 4,549
------- -------
Total liabilities 121,415 123,293
------- -------
Contingencies and commitments - -
Stockholders' deficiency:
Preferred stock, $.01 par value;
2,000,000 shares authorized; no
shares outstanding - -
Common stock, $.01 par value;
20,000,000 shares authorized;
14,121,482 shares issued and
outstanding 141 141
Additional paid-in-capital 39,739 39,739
Net unrealized gains (losses)
on investments (net of deferred
income tax of $0 in 1995 and 1994) (2,498) (2,664)
Receivable from Alpha Trust (27,000) (27,000)
Accumulated deficit (66,363) (66,468)
------ ------
Total stockholders' deficiency (55,981) (56,252)
------ ------
Total liabilities and
stockholders' deficiency $65,434 $67,041
====== ======
See accompanying notes to consolidated financial statements.
Page 3 of 12
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
1995 1994
---- ----
Revenues:
Net premiums earned $ 392 $3,277
Net investment income 789 774
Realized gains (losses) on investments - (6)
----- -----
Total revenues 1,181 4,045
Operating expenses:
Losses and loss adjustment expenses 309 3,659
Policy acquisition expenses 393 1,003
Other operating expenses 362 177
----- -----
Total operating expenses 1,064 4,839
----- -----
Operating income (loss) 117 (794)
Equity in earnings (loss) of
non-consolidated subsidiary 37 (6,270)
Equity in loss of investee - (103)
----- -----
Income (loss) before income taxes 154 (7,167)
----- -----
Income tax expense (benefit):
Current 49 27
Deferred - -
----- -----
Total income tax expense
(benefit) 49 27
----- -----
Net income (loss) $ 105 $(7,194)
===== =====
Per share data:
Average shares outstanding 14,121,482 14,121,482
========== ==========
Net income (loss) per share $0.01 $(0.51)
==== ====
See accompanying notes to consolidated financial statements.
Page 4 of 12
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED MARCH 31, 1995
($ IN THOUSANDS)
Net
unreal-
Addi- ized
tional gains Receiv- Total
paid- (losses) able Accum- stock-
Com- in on from ulated holders'
mon cap- invest- Alpha def- def-
stock ital ments Trust ciency ciency
- -----------------------------------------------------------------
Balance at
1/1/95 $141 $39,739 $(2,664) $(27,000) $(66,468) $(56,252)
Net income
(loss) - - - - 105 105
Change in
net
unreal-
ized
gains
(losses) - - 166 - - 166
--- ------ ----- ------ ------ ------
Balance at
3/31/95 $141 $39,739 $(2,498) $(27,000) $(66,363) $(55,981)
=== ====== ===== ====== ====== ======
See accompanying notes to consolidated financial statements.
Page 5 of 12
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31,
($ IN THOUSANDS)
1995 1994
---- ----
Net cash and cash equivalents
provided or (used) by
operating activities $(3,220) $(725)
Investing activities:
Proceeds on redemptions
of long-term investments:
Fixed maturities held to maturity 3,255 600
Other 219 145
Purchase of long-term investments:
Fixed maturities available for sale (688) (12,997)
Equity securities - (503)
Other - (1,724)
(Increase) decrease in short-term
investments (157) 14,256
----- ------
Net cash and cash equivalents
provided or (used) by
investing activities 2,629 (223)
----- ------
Financing activities:
Receivable from Alpha Trust - 14,000
----- ------
Increase (decrease) in cash
and cash equivalents (591) (13,498)
Cash and cash equivalents-beginning
of period 2,500 16,882
----- ------
Cash and cash equivalents-end
of period $1,909 $ 3,384
===== ======
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ - $ 123
===== ======
See accompanying notes to consolidated financial statements.
Page 6 of 12
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
- --------------
NOTE 1 - GENERAL
Lawrence Insurance Group, Inc. (the Company or LIG) was
incorporated in Delaware on June 30, 1986, as an insurance
holding company which is presently 93% owned by Lawrence Group,
Inc. (Lawrence Group).
Subsidiaries of the Company include United Community
Insurance Company (UCIC), United Republic Insurance Company
(URIC), Global Insurance Company (Global), Senate Insurance
Company (Senate), Senate National Life Insurance Company (SNLIC),
and Senate Syndicate, Inc. (Syndicate). Senate and Global are
wholly owned subsidiaries of URIC. SNLIC is a wholly owned
subsidiary of Senate.
(a) BASIS OF PRESENTATION
The consolidated financial statements for 1995 and 1994,
include the accounts of LIG and all of its wholly owned
subsidiaries (collectively, the Company) except as noted below.
On July 7, 1994, UCIC, with the consent of UCIC management, was
placed in Rehabilitation by court order. Consequently, LIG and
UCIC management no longer exercise any decision making authority
or control over UCIC. These functions are presently the
responsibility of the New York Insurance Department (NYID).
As a result of this loss of control, the Company has included the
financial results of UCIC only through the date of the Order of
Rehabilitation and then on an unconsolidated basis. ie. results
of operations are reflected as "Equity in earnings (loss) of
non-consolidated subsidiary" and the Company's investment as
"Deficit of non-consolidated subsidiary".
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. While the
Company reported a net income of $105,000 for the quarter ended
March 31, 1995, it has a stockholders' deficiency of $55,981,000
at March 31, 1995. In addition, URIC has been under a
confidential order of supervision by the Texas Department of
Insurance (TDI) since June, 1994. The basis for this order was
related primarily to URIC's loan to a business trust (Alpha
Trust). The TDI is seeking to have this loan by URIC to be
prepaid. Negotiations between URIC and TDI are continuing.
Unless TDI is convinced that prepayment can occur within an
acceptable period of time, it is likely that URIC will be placed
into conservatorship. Under conservation, the TDI assumes all
Page 7 of 12
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
- --------------
NOTE 1 - GENERAL, continued
control and decision making authority during the rehabilitation
period. Under conservatorship, in 1995, URIC would be accounted
for as a non-consolidated subsidiary. The Company's parent,
Lawrence Group, is seeking funds that will enable it to, among
other things, prepay the Alpha Trust loan as well as to provide
additional improvement in the Company's stockholders' equity.
However, there can be no guarantee that these actions will be
successful. The 1995 financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The accompanying consolidated financial statements are
presented in accordance with generally accepted accounting
principles, and in the opinion of Management, reflect all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and
results of operations for the interim periods. Results of
interim periods are not necessarily indicative of results for the
full year.
These consolidated financial statements should be read in
conjunction with the following notes and with the Notes to
Consolidated Financial Statements included in the Company's Form
10-K for the year ended December 31, 1994.
(b) CASH AND CASH EQUIVALENTS
The Company considers cash to be funds held in checking and
money market accounts. Non-negotiable certificates of deposit
are considered to be cash equivalents.
(c) PER SHARE DATA
Net income per share is calculated by dividing net income by
the weighted average number of common shares outstanding during
the period.
Page 8 of 12
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
As discussed in Note 1, UCIC has been placed under the
control and management of the NYID and as a consequence, has not
been consolidated with the Company's results. The operating
results up to July 7, 1994 are included in "Equity in earnings
(loss) of non-consolidated subsidiary", based upon the equity
method of accounting. UCIC has a stockholder's deficit and the
Company's net investment is recorded as "Deficit of
non-consolidated subsidiary". It should be noted that the first
quarter 1995 10-Q has been prepared on the premise that UCIC's
difficulties would be borne financially by the Company. In
management's opinion, it is unlikely that this deficiency would be
imposed on the Company.
In addition, the financial statement exhibits monies due UCIC
and URIC from the Alpha Trust as if they do not exist. This is
because of the accounting treatment which is accorded them at the
moment.
In the absence of the accounting treatment stated above, the
stockholders' equity would be approximately $15,640,000.
Nonetheless, the 1995 financial figures in this 10-Q do not include
these adjustments.
URIC and Global voluntarily ceased writing new and renewal
business during the first quarter of 1994 and the fourth quarter
of 1993, respectively. Earned premiums and associated losses and
expenses for these subsidiaries, relate primarily to business
generated prior to 1994.
Earned premium decreased approximately $2,885,000 reflecting
the impact of the moratorium on URIC and Global and a reduction
in Senate's business. Senate has been impacted by publicity
related to the financial condition of LIG and to changes in
customer needs for stop loss insurance which is Senate's primary
product.
Investment income increased by $15,000 as higher rates
offset the impact of lower average invested assets.
Loss and loss adjustment expense (LAE) decreased by
$3,350,000 as the first quarter of 1994 was adversely impacted by
the Northbridge California earthquake.
Page 9 of 12
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Policy acquisition expenses decreased by $610,000 and was
related primarily to the decrease in earned premium partially
offset by commission adjustment on reinsurance assumed.
Operating expenses increased by $185,000 with the increase
attributable largely to costs associated with defending the
Company's subsidiaries in disputes with state insurance
departments.
Equity in earnings of non-consolidated subsidiary was
$37,000 compared with a loss of $6,270,000 in the first
quarter 1994. Subsequent to June 1994, the Company no longer
included UCIC's results of operations and the 1995 amount
represents only the UCIC's share of URIC's operations.
Equity in loss of investee was $0 for the first quarter 1995
compared with a loss of $103,000 in the same period last year.
The amount for 1994 represented the amount charged to operations
to reduce LIG's carrying value for MTI to $0.
Income tax expense represents state income taxes as the
Company, which files a consolidated federal return, has a NOL
carryforward.
As a result of the above, the Company recorded net income of
$105,000 for the first quarter of 1995 compared with a net loss
of $7,194,000 for the same period in 1994. The 1994 first
quarter loss was restated by $3,633,000 compared with the
Company's results reported on its first quarter 1994 10Q. The
restatement was attributable primarily to the write off of an
income tax recoverable by UCIC of approximately $3,416,000 and
the write off of the remaining equity in MTI.
Page 10 of 12
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
AS OF MARCH 31, 1995
For the quarter ended March 31, 1995, the Company used cash
for operations of $3,220,000. This was partially offset by cash
provided by investing operations. To the extent that URIC and
Global continue in a run off situation, it is likely that
operations will be partially funded by proceeds from the
disposition of investments.
The Company obtains the majority of its cash from dividends
paid by its two insurance subsidiaries. Due to regulatory
restrictions, those subsidiaries currently can not pay dividends
to the parent. However, it is anticipated that it can meet its
cash needs for the foreseeable future out of its current assets.
It is anticipated that URIC will be able to meet its projected
cash requirements as will the subsidiaries owned by URIC.
Page 11 of 12
LAWRENCE INSURANCE GROUP, INC.
SIGNATURES
MARCH 31, 1995
_____________________________
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LAWRENCE INSURANCE GROUP, INC.
/s/ ALBERT W. LAWRENCE
-----------------------------------------
Albert W. Lawrence, Chairman of the Board
/s/ F. HERBERT BRANTLINGER
---------------------------------
F. Herbert Brantlinger, President
/s/ ALBERT F. KILTS
--------------------------
Albert F. Kilts, Treasurer
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 6,642
<DEBT-CARRYING-VALUE> 4,432
<DEBT-MARKET-VALUE> 4,533
<EQUITIES> 933
<MORTGAGE> 183
<REAL-ESTATE> 0
<TOTAL-INVEST> 25,576
<CASH> 1,909
<RECOVER-REINSURE> 15,805
<DEFERRED-ACQUISITION> 120
<TOTAL-ASSETS> 65,434
<POLICY-LOSSES> 44,421
<UNEARNED-PREMIUMS> 1,074
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 141
0
0
<OTHER-SE> (56,122)
<TOTAL-LIABILITY-AND-EQUITY> 65,434
392
<INVESTMENT-INCOME> 789
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 309
<UNDERWRITING-AMORTIZATION> 393
<UNDERWRITING-OTHER> 362
<INCOME-PRETAX> 154
<INCOME-TAX> 49
<INCOME-CONTINUING> 105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<RESERVE-OPEN> 47,165
<PROVISION-CURRENT> 540
<PROVISION-PRIOR> (232)
<PAYMENTS-CURRENT> 314
<PAYMENTS-PRIOR> 2,607
<RESERVE-CLOSE> 44,421
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
