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 September 30, 1997
- 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.)
430 State Street, Schenectady, New York 12309
(Address of principal executive offices)
(518) 372-0588
(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 September 30, 1997, there were 14,121,482 shares of common
stock, $.01 par value, issued and outstanding. The aggregate market value on
February 28, 1997 of voting stock held by non-affiliates of the registrant was
$361,000. February 28, 1997 was the date of the last trade before delisting by
the American Stock Exchange.
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
September 30, December 31,
1997 1996
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities available for sale
at fair value (Cost: 1996-$9,915) $ - $ 9,682
Equity securities, at fair value
(Cost: 1996-$997) - 942
Short-term investments, at cost which
approximates fair value - 2,862
Real estate at cost less depreciation - 2,581
Mortgage loans on real estate, at
aggregate outstanding principal balance - 154
Other invested assets, at cost which
Approximates fair value - 120
------ ------
Total investments - 16,341
Cash and cash equivalents 30 943
Accrued investment income - 159
Accounts receivable (Net of allowance
for doubtful accounts of $90 in 1996) - 5,279
Reinsurance recoverable - 1,695
Reinsurance receivable - 3,891
Prepaid reinsurance premiums - 243
Deferred policy acquisition costs - 64
Property and equipment, net - 11
Other assets - 1,075
------ ------
Total assets 30 $29,701
====== ======
See accompanying notes to consolidated financial statements.
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
($ IN THOUSANDS)
September 30, December 31,
1997 1996
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $ - $26,441
Unearned premiums - 719
Reinsurance balances payable - 3,401
Deficit of non-consolidated
subsidiaries 2,634 -
Other liabilities 464 1,940
------- -------
Total liabilities 3,098 32,501
------- -------
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 1997 and 1996) 427 (226)
Accumulated deficit (43,375 (42,454)
------ ------
Total stockholders' deficiency (3,068) (2,800)
------ ------
Total liabilities and
stockholders' deficiency $ 30 $29,701
====== ======
See accompanying notes to consolidated financial statements.
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months Nine months
Ended September 30 Ended September 30
---------------- ---------------
1997 1996 1997 1996
---- ---- ----- -----
Revenues:
Net premiums earned $ - $ 982 $ - $ 2,889
Net investment income - 341 1 1,554
Realized gains (losses) on investments - - - 659
----- ----- ----- ------
Total revenues - 1,323 1 5,102
Operating expenses:
Losses and loss adjustment expenses - 694 - 1,949
Policy acquisition expenses - 87 - 451
Other operating expenses 15 295 45 1,167
----- ----- ------ ------
Total operating expenses 15 1,076 45 3,567
----- ----- ------ ------
Operating income (loss) (15) 247 (44) 1,535
Equity in loss of non-consolidated
subsidiaries (352) - (875) -
----- ----- ------ ------
Income before income taxes (367) 247 (919) 1,535
----- ----- ------ ------
Income tax expense - 20 2 5
----- ----- ---- ------
Net income before minority interest ( 367) 227 (921) 1,530
Minority interest - 3 - 203
----- ----- ------ -------
Net income $ (367) $ 224 $(921) $ 1,327
=== === === ====
Average shares outstanding 14,121 14,121 14,121 14,121
==== ==== ==== ====
Per share data:
Net income(loss) per share $(0.03) $ 0.02 $(0.07) $0.09
==== ==== ==== ====
See accompanying notes to consolidated financial statements.
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
($ IN THOUSANDS)
Net
unreal-
Addi- ized
tional gains Total
paid- (losses) Accum- stock-
Com- in on ulated holders'
mon cap- invest- def- def-
stock ital ments ciency ciency
- -----------------------------------------------------------------
Balance at
1/1/97 $141 $39,739 $ (226) $(42,454) $ (2,800)
Net loss - - - (921) (921)
Change in
net
unreal-
ized
gains
(losses) - - 653 - 653
--- ------ ----- ------ ------
Balance at
9/30/97 $141 $39,739 $ 427 $ (43,375) $(3,068)
=== ====== === ====== =====
See accompanying notes to consolidated financial statements.
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30,
($ IN THOUSANDS)
1997 1996
---- ----
Net cash and cash equivalents
(used) by operating activities $ - $(5,623)
Investing activities:
Proceeds on redemptions
of long-term investments:
Fixed maturities available for sale - 951
Other - 16
Proceeds on sale of: Equity securities - 739
Fixed maturities available for sale - 2,037
Purchase of long-term investments:
Fixed maturities available for sale - (8,966)
Real estate - (2,600)
Other - (9)
Decrease in short-term investments - 8,288
----- ------
Net cash and cash equivalents
provided by investing activities - 456
----- ------
Financing activities:
Receivable from Alpha Trust - 907
----- ------
Decrease in cash and cash equivalents - (4,260)
Cash and cash equivalents-beginning of year 943 5,688
Cash and cash equivalents of non- consolidated
subsidiaries at December 31, 1996 (913) -
---- ------
Cash and cash equivalents-end
of period $ 30 $ 1,428
==== ====
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ - $ -
=== ===
See accompanying notes to consolidated financial statements.
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- --------------
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 included United Republic Insurance Company
(URIC), Global Insurance Company (Global), Senate Insurance Company (Senate),
Senate National Life Insurance Company (SNLIC), and Senate Syndicate, Inc.
(Syndicate) and United Community Insurance Company(UCIC). Senate and
Global are wholly owned subsidiaries of URIC. SNLIC is a wholly owned
subsidiary of Senate. 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 include the accounts of LIG
and its majority owned subsidiaries (collectively, the Company). All
significant intercompany transactions have been eliminated in consolidation.
As a result of the actions described below, 1997 financial results for URIC and
its subsidiaries have been included on a non-consolidated basis through August
22, 1997 under "Equity in loss of non-consolidated subsidiaries and "Deficit of
non-consolidated subsidiaries". At the point that URIC would be ordered to be
formally liquidated, the Company would reverse the deficit of non-consolidated
subsidiaries and record an extraordinary gain of $2,634,000.
URIC had been under a confidential order of 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 Company did not achieve these goals.
As a result, the TDI could have placed URIC under conservatorship at any time.
Under conservation, the TDI assumes all control and decision making authority
during the rehabilitation period. On February 28, 1997, as a result of the
bankruptcy filing by LIG's parent and eleven of its subsidiaries the TDI did
place URIC into conservatorship. On August 22, 1997, under its authority
emanating from a temporary injunction, the TDI removed the current officers and
Board of Directors of URIC and assumed direct control of URIC. On October 22,
1997, an order was entered in the District Court of Travis County, Texas, 126th
Judicial District granting a permanent injunction against URIC and appointing
the Commissioner of Insurance of the TDI as Permanent Receiver. The Permanent
Receiver is vested by operation of law with title to all property and assets of
URIC including but not limited to its stock of its wholly owned subsidiaries.
A status conference is scheduled for November 24, 1997.
It is problematical under what conditions the Company can continue, however,
the accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Under liquidation accounting the results
would essentially be the same. The Company incurred substantial losses in 1993,
1994,1996 and 1997 and even though UCIC's stockholder's deficiency has been
eliminated, the Company's subsidiaries continued to be adversely impacted by
UCIC's demise. Due in part to these losses, the Company has filed suit
against KPMG, its former outside accountant and actuary, seeking to recover
damages for breach of contract and inaccurate certifications of the Company's
1992 and prior loss and loss adjustment expense (LAE) reserves. The amount being
sought is $250 million. The litigation is in its early stages. Liquidity for
the parent company has deteriorated significantly, although the Company is
looking at several alternatives that will permit it to pursue its suit.
The accompanying consolidated financial statements are presented in
accordance with generally accepted accounting principles, which differed in
certain respects from those followed by subsidiaries of the Company in their
reports to regulatory authorities. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
(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.
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.
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 SEPTEMBER 30, 1997 AND 1996
LIG is a holding company and has no revenue producing operations of its
own. For the three months ended September 30, 1997 its miscellaneous loss
totaled $15,000 compared with $4,000 for the same period in 1996. The loss
from operations of its non-consolidated subsidiaries was $352,000 through
August 22, 1997 compared to net income of $228,000 for the three months ended
September 30, 1996.
As a result of the above, the Company recorded a net loss of $367,000 for
the third quarter of 1997 compared with a net income of $224,000 for the third
quarter 1996.
COMPARISON OF RESULTS OF OPERATIONS BETWEEN
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
For the nine months ended September 30, 1997 its miscellaneous loss
totaled $46,000 compared with $92,000 for the same period in 1996. The loss
from operations of its non- consolidated subsidiaries was $875,000 through
August 22, 1997 compared to net income of $1,419,000 for the nine months
ended September 30, 1996.
As a result of the above, the Company recorded a net loss of $921,000 for
the first nine months of 1997 compared with net income of $1,327,000 for the
same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
AS OF SEPTEMBER 30, 1997
For the nine months ended September 30, 1997, the Company used $0 cash
as its bank accounts have been frozen in connection with a judgement in a
lawsuit in which it, Lawrence Group, Inc. and Albert W. Lawrence were
defendants. Management is looking at several alternatives as a source of funds
but there is no assurance that it will be successful.
LAWRENCE INSURANCE GROUP, INC.
SIGNATURES
SEPTEMBER 30, 1997
_____________________________
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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