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 June 30, 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, $.01 par value, issued and outstanding. May 13, 1994, was
the date trading was suspended on the American Stock Exchange. The
stock has not been traded since that date.
Page 1 of 14
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities held to maturity at
amortized cost (Fair value:
1995-$4,659; 1994-$7,684) $4,439 $7,698
Fixed maturities available for sale
at fair value (Cost: 1995-$6,830;
1994-$6,228) 6,843 5,784
Equity in common stock of investee
(Cost: 1995-$103; 1994-$103) - -
Equity securities, at fair value
(Cost: 1995-$997; 1994-$997) 940 917
Short-term investments, at cost which
approximates fair value 11,035 11,523
Collateral loans, at fair value 1,033 1,033
Mortgage loans on real estate, at
aggregate outstanding principal balance 179 186
Other invested assets, at fair value:
(Cost: 1995-$494; 1994-$853) 488 853
------ ------
Total investments 24,957 27,994
Cash and cash equivalents 1,340 2,500
Accrued investment income 596 668
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) 10,471 12,467
Reinsurance recoverable on paid losses 13,855 13,708
Reinsurance receivable 7,546 7,320
Deferred policy acquisition costs 102 289
Property and equipment, net 37 52
Other assets 1,890 2,043
------ ------
Total assets $60,794 $67,041
====== ======
See accompanying notes to consolidated financial statements.
Page 2 of 14
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
($ IN THOUSANDS)
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $40,120 $47,165
Deficit of non-consolidated
subsidiary 56,982 56,879
Unearned premiums 324 1,384
Reinsurance balances payable 15,239 13,316
Other liabilities 3,608 4,549
------- -------
Total liabilities 116,273 123,293
------- -------
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) (2,286) (2,664)
Receivable from Alpha Trust (27,000) (27,000)
Accumulated deficit (66,073) (66,468)
------ ------
Total stockholders' deficiency (55,479) (56,252)
------ ------
Total liabilities and
stockholders' deficiency $60,794 $67,041
====== ======
See accompanying notes to consolidated financial statements.
Page 3 of 14
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- ---------------
1995 1994 1995 1994
----- ----- ----- -----
Revenues:
Net premiums earned $1,147 $2,208 $1,539 $5,485
Net investment income 787 916 1,576 1,690
Realized gains (losses)
on investments - (884) - (890)
----- ----- ----- -----
Total revenues 1,934 2,240 3,115 6,285
----- ----- ----- -----
Operating expenses:
Losses and loss
adjustment expenses 836 1,314 1,145 4,973
Policy acquisition
expenses 286 720 679 1,723
Other operating expenses 550 379 912 556
----- ----- ----- -----
Total operating expenses 1,672 2,413 2,736 7,252
----- ----- ----- -----
Operating income (loss) 262 (173) 379 (967)
Equity in earnings (loss)
of non-consolidated
subsidiary (37) (676) - (6,946)
Equity in loss of investee - - - (103)
----- ----- ----- ------
Income (loss) before
income taxes 225 (849) 379 (8,016)
----- ----- ----- ------
Income tax expense (benefit):
Current (65) 27 (16) 54
Deferred - - - -
----- ----- ---- -----
Total income tax
expense (benefit) (65) 27 (16) 54
----- ----- ---- -----
Net income (loss) $ 290 $ (876) $ 395 $(8,070)
===== ===== ===== ======
Average shares
outstanding 14,121 14,121 14,121 14,121
====== ====== ====== ======
Net income (loss)
per share $ .02 $ (.06) $ .03 $ (.57)
====== ====== ===== ======
See accompanying notes to consolidated financial statements.
Page 4 of 14
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
SIX MONTHS ENDED JUNE 30, 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) - - - - 395 395
Change in
net
unreal-
ized
gains
(losses) - - 378 - - 378
--- ------ ----- ------ ------ ------
Balance at
6/30/95 $141 $39,739 $(2,286) $(27,000) $(66,073) $(55,479)
=== ====== ===== ====== ====== ======
See accompanying notes to consolidated financial statements.
Page 5 of 14
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30,
($ IN THOUSANDS)
1995 1994
------ -------
Net cash and cash equivalents
used by operating activities $(4,685) $(14,217)
------ -------
Investing activities:
Proceeds on sales of:
Fixed maturities
available for sale - 7,472
Proceeds on redemptions of:
Fixed maturities held to maturity 3,255 610
Other proceeds 470 334
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 488 19,970
----- ------
Net cash and cash equivalents
provided by investing activities 3,525 13,162
----- ------
Financing activities:
Receivable from Alpha Trust - (14,000)
----- ------
Increase (decrease) in cash
and cash equivalents (1,160) (15,055)
Cash and cash equivalents-beginning
of period 2,500 16,882
----- ------
Cash and cash equivalents-end
of period $ 1,340 $ 1,827
===== =======
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ - $ 225
===== =======
See accompanying notes to consolidated financial statements.
Page 6 of 14
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 net income of $395,000 for the six months ended
June 30, 1995, it has a stockholders' deficiency of $55,479,000
at June 30, 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), which in turn loaned money to Lawrence Group. 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
Page 7 of 14
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
- -----------------------------------------------------
NOTE 1 - GENERAL, continued
conservation, the TDI assumes all 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
these uncertainties.
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 14
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 JUNE 30, 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 second 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 $16,142,000.
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, although Global continued to receive
assignments from the Georgia automobile assigned risk pool.
Results for the second quarter 1995 vs 1994 are as follows:
Earned premium for the second quarter decreased approximately
$1,061,000 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 decreased by $129,000 reflecting the lower
level of average invested assets partially offset by higher rates
on short term investments.
Realized gains were $0 compared with an $884,000 loss recorded
in 1994 which represented a loss on the sale of securities and a
write down of an investment in equity securities of $503,000.
Page 9 of 14
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 JUNE 30, 1995 AND 1994
Loss and loss adjustment expense (LAE) decreased by $478,000
primarily as a result of lower premium volume.
Policy acquisition expenses decreased by $434,000 and was
related primarily to the decrease in earned premium and commission
adjustments on reinsurance assumed.
Operating expenses increased by $171,000 with the increase
attributable largely to costs associated with defending the
Company's subsidiaries in disputes with state insurance
departments.
Equity in loss of non-consolidated subsidiary was $37,000
compared with a loss of $676,000 in the second quarter 1994.
Subsequent to June 1994, the Company no longer included UCIC's
results of operations and the 1995 amount represents only
UCIC's share of URIC's operations.
Income tax benefits represent adjustments for 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
$290,000 for the second quarter of 1995 compared with a net loss of
$876,000 for the same period in 1994.
Page 10 of 14
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Results for the six months ended June 30, 1995 compared with
the same period last year are as follows:
Earned premium for the six months decreased approximately
$3,946,000 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 decreased by $114,000 reflecting the impact
of lower average invested assets partially offset by higher
rates on short term investments. Realized gains were $0 as
compared with a $890,000 realized loss incurred in 1994.
Loss and loss adjustment expense (LAE) decreased by $3,828,000
as a result of lower premiums volume as well as 1994 being
adversely impacted by the Northbridge California earthquake.
Policy acquisition expenses decreased by $1,044,000 and was
related primarily to the decrease in earned premium partially
offset by commission adjustment on reinsurance assumed.
Operating expenses increased by $356,000 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
$0 compared with a loss of $6,946,000 in the first six
months of 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 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 benefits represent adjustments for state income
taxes as the Company, which files a consolidated federal return,
has a NOL carryforward.
Page 11 of 14
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
As a result of the above, the Company recorded net income of
$395,000 for the first six months of 1995 compared with a net loss
of $8,070,000 for the same period in 1994. The first six months of
1994 loss was restated by $4,230,000 compared with the Company's
results reported on its second quarter 1994 10-Q. The restatement
was attributable primarily to the write off of an income tax
recoverable by UCIC of approximately $3,416,000 and the write down
of several investments in the amount of $1,221,000. These were
partially offset by reductions in the net deficit of UCIC of
$407,000.
Page 12 of 14
LAWRENCE INSURANCE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
AS OF JUNE 30, 1995
For the six months ended June 30, 1995, the Company used cash
for operations of $4,685,000. 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 (UCIC and URIC). Due to
regulatory restrictions, those subsidiaries currently can not pay
dividends to the parent. However, it has been able to meet its
cash needs 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 13 of 14
LAWRENCE INSURANCE GROUP, INC.
SIGNATURES
JUNE 30, 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 14 of 14
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 6,843
<DEBT-CARRYING-VALUE> 4,439
<DEBT-MARKET-VALUE> 4,659
<EQUITIES> 940
<MORTGAGE> 179
<REAL-ESTATE> 0
<TOTAL-INVEST> 24,957
<CASH> 1,340
<RECOVER-REINSURE> 13,855
<DEFERRED-ACQUISITION> 102
<TOTAL-ASSETS> 60,794
<POLICY-LOSSES> 40,120
<UNEARNED-PREMIUMS> 324
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 141
0
0
<OTHER-SE> (55,620)
<TOTAL-LIABILITY-AND-EQUITY> 60,794
1,539
<INVESTMENT-INCOME> 1,576
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 1,145
<UNDERWRITING-AMORTIZATION> 679
<UNDERWRITING-OTHER> 912
<INCOME-PRETAX> 379
<INCOME-TAX> (16)
<INCOME-CONTINUING> 395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 395
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<RESERVE-OPEN> 47,165
<PROVISION-CURRENT> 1,265
<PROVISION-PRIOR> (120)
<PAYMENTS-CURRENT> 908
<PAYMENTS-PRIOR> 7,282
<RESERVE-CLOSE> 40,120
<CUMULATIVE-DEFICIENCY> (120)
</TABLE>
