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, 1996
- 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 April 1, 1996, there were 14,121,482 shares of common
stock, $.01 par value, issued and outstanding. The aggregate
market value on April 1, 1996 of voting stock held by non-
affiliates of the registrant was $723,000.
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LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
March 31, December 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities available for sale
at fair value (Cost: 1996-$7,306;
1995-$3,875) $ 7,291 $ 3,921
Equity securities, at fair value
(Cost: 1996 and 1995-$997) 938 941
Short-term investments, at cost which
approximates fair value 6,090 11,898
Mortgage loans on real estate, at
aggregate outstanding principal balance 167 171
Other invested assets, at fair value:
(Cost: 1995-$189; 1995-$4) 189 4
------ ------
Total investments 14,675 16,935
Cash and cash equivalents 2,611 5,688
Accrued investment income 484 475
Accounts receivable (Net of allowance
for doubtful accounts of $0 in 1996
and 1995) 5,751 10,777
Reinsurance recoverable 5,551 5,690
Reinsurance receivable 4,093 5,764
Deferred policy acquisition costs 41 68
Property and equipment, net 18 23
Other assets 1,830 1,082
------ ------
Total assets $35,054 $46,502
====== ======
See accompanying notes to consolidated financial statements.
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<PAGE>
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
($ IN THOUSANDS)
March 31, December 31,
1996 1995
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $27,243 $30,974
Unearned premiums 312 505
Reinsurance balances payable 3,587 11,526
Other liabilities 2,394 2,923
------- -------
Total liabilities 33,536 45,928
------- -------
Contingencies and commitments - -
Minority interest 574 429
--- ---
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) (58) (8)
Receivable from Alpha Trust (11,004) (11,004)
Accumulated deficit (27,874) (28,723)
------ ------
Total stockholders' equity 944 145
------ ------
Total liabilities and
stockholders' deficiency $35,054 $46,502
====== ======
See accompanying notes to consolidated financial statements.
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<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1995
---- ----
Revenues:
Net premiums earned $1,156 $ 392
Net investment income 631 789
Realized gains (losses) on investments 733 -
----- -----
Total revenues 2,520 1,181
Operating expenses:
Losses and loss adjustment expenses 820 309
Policy acquisition expenses 246 393
Other operating expenses 460 362
----- -----
Total operating expenses 1,526 1,064
----- -----
Operating income (loss) 994 117
Equity in earnings of
non-consolidated subsidiary - 37
----- -----
Income before income taxes 994 154
----- -----
Income tax expense (benefit) (14) 49
----- -----
Net income before minority interest 1,008 105
Minority interest 159 -
----- -----
Net income $ 849 $ 105
===== =====
Average shares outstanding 14,121 14,121
====== ======
Per share data:
Net income per share $0.06 $ 0.01
==== ====
See accompanying notes to consolidated financial statements.
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<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
($ 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
1/1/96 $141 $39,739 $ (8) $(11,004) $(28,723) $ 145
Net income - - - - 849 849
Change in
net
unreal-
ized
gains
(losses) - - (50) - - (50)
--- ------ ----- ------ ------ ------
Balance at
3/31/96 $141 $39,739 $ (58) $(11,004) $(27,874) $ 944
=== ====== ===== ====== ====== ======
See accompanying notes to consolidated financial statements.
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<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31,
($ IN THOUSANDS)
1996 1995
---- ----
Net cash and cash equivalents
(used) by operating activities $ (6,006) $(3,220)
Investing activities:
Proceeds on redemptions
of long-term investments:
Fixed maturities available for sale - 3,255
Other 4 219
Proceeds on sale of equity securities 733 -
Purchase of long-term investments:
Fixed maturities available for sale (3,431) (688)
Other (185) -
(Increase) decrease in short-term
investments 5,808 (157)
----- ------
Net cash and cash equivalents
provided or (used) by
investing activities 2,929 2,629
----- ------
Financing activities:
Receivable from Alpha Trust - -
----- ------
Increase (decrease) in cash
and cash equivalents (3,077) (591)
Cash and cash equivalents-beginning
of period 5,688 2,500
----- ------
Cash and cash equivalents-end
of period $2,611 $ 1,909
===== ======
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ - $ -
===== ======
See accompanying notes to consolidated financial statements.
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<PAGE>
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
- --------------
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 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. United Community Insurance Company (UCIC) is
no longer considered a subsidiary of the Company as a result of the
Order of Rehabilitation issued on July 7, 1994 which transferred
management and control to the New York Insurance Department
(NYID) and the subsequent Order of Liquidation entered on
November 10, 1995 by the New York Supreme Court, Schenectady
County.
(a) BASIS OF PRESENTATION
The consolidated financial statements for 1996 and 1995,
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
management no longer exercises any decision making authority
or control over UCIC. These functions are 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".
As a result of the Order of Liquidation, UCIC's 21.4% ownership
of URIC which had been included in the accounts described above, is
now included in "Minority interest" in the financial statements of
the Company.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. While the
Company reported a net income of $849,000 for the quarter ended
March 31, 1996, liquidity for the parent company has deteriorated
and is expected to remain in that condition for the foreseeable
future. In addition, URIC was under a confidential order of
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supervision by the Texas Department of Insurance (TDI) since June,
1994 until its release on August 25, 1995. As a condition to the
release of the order the Company agreed to achieving certain
financial goals. The financial goals included increasing statutory
surplus to $8.0 million at December 31, 1995. The statutory
surplus filed with the TDI at December 31, 1995 and March 31, 1996
was $6.6 million and $7.6 million, respectively. These amounts do
not include the effect of approximately $4 million in loss and loss
adjustment expense (LAE) related to a reinsurance pooling agreement
with UCIC which have not been recorded on the statutory statements
for December 31, 1995 and March 31, 1996. UCIC had provided the
Company with an estimate of URIC's share of its reserve for loss
and LAE under the pooling agreement of approximately $12 million as
of December 31, 1995. The Company has included this amount in the
accompanying balance sheet. The Company filed URIC's December 31,
1995 statutory financial statements that included a reserve for
loss and LAE expenses under the pooling arrangement of
approximately $8 million. The Company's independent actuary
certified URIC's loss and LAE reserves at December 31, 1995 of
which this was a part. The TDI could place URIC under
conservatorship. Under conservatorship, the TDI assumes all
control and decision making authority during the rehabilitation
period. Under conservatorship, URIC would be accounted for as a
non-consolidated subsidiary. The 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, 1995.
(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.
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<PAGE>
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, 1996 AND 1995
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 which includes UCIC's share of URIC's operations for the
three months ended March 31, 1995 are included in "Equity in
earnings (loss) of non-consolidated subsidiary", based upon the
equity method of accounting. Subsequent to November 10, 1995,
UCIC's share of URIC's results are included in "Minority interest".
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 increased approximately $764,000 reflecting
primarily the favorable adjustments in URIC's retrospectively
rated premiums compared with 1995 when the adjustments were
negative. The increase in premium was partially offset by higher
loss and LAE related to these contracts.
Investment income decreased by $158,000 due to the impact of
lower average invested assets.
Realized gains represents a gain from the disposition of the
Company's investment in Mechanical Technologies, Inc. which was
sold to Lawrence Group, Inc.
Loss and LAE increased by $511,000. This increase was offset
by adjustments to premiums earned.
Policy acquisition expenses decreased by $147,000 as 1995 was
adversely impacted by commission adjustments on reinsurance
assumed.
Operating expenses increased by $98,000 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 representing UCIC's minority interest in URIC for 1995.
For 1996, this is reflected as minority interest and totaled
$159,000.
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<PAGE>
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
$849,000 for the first quarter of 1996 compared with net income
of $105,000 for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
AS OF MARCH 31, 1996
For the quarter ended March 31, 1996, the Company used cash
for operations of $6,006,000. The significant use of cash was
attributable largely to the commutation and settlement of several
large reinsurance contracts during the quarter. These commutations
had a favorable impact on 1995 and 1996 operations. It is not
expected that this level of cash outflows will continue although 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. Cash generated from investing
totaled $2,929,000 during the quarter.
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. It is anticipated that URIC will be able to meet
its projected cash requirements as will the subsidiaries owned by
URIC.
LAWRENCE INSURANCE GROUP, INC.
SIGNATURES
MARCH 31, 1996
_____________________________
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/ ALBERT F. KILTS
---------------------------------
Albert F. Kilts, President
/s/ FLOYD N. ADAMS
--------------------------
Floyd N. Adams, Treasurer
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