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, 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) 372-0500
(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, 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 $361,000. February 28, 1997 was the
date of the last trade before delisting by the American Stock Exchange.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ IN THOUSANDS)
March 31, December 31,
1997 1996
(UNAUDITED) (AUDITED)
----------- ------------
Investments:
Fixed maturities available for sale
at fair value (Cost: 1997-$9,329;
1996-$9,915) $ 9,100 $ 9,682
Equity securities, at fair value
(Cost: 1997-$1,311; 1996-$997) 1,944 942
Short-term investments, at cost which
approximates fair value 2,591 2,862
Real estate at cost less depreciation 2,564 2,581
Mortgage loans on real estate, at
aggregate outstanding principal balance 150 154
Other invested assets, at cost which
Approximates fair value 99 120
------ ------
Total investments 16,448 16,341
Cash and cash equivalents 821 943
Accrued investment income 110 159
Accounts receivable (Net of allowance
for doubtful accounts of $0 in 1997
and 1996) 5,629 5,279
Reinsurance recoverable 700 1,695
Reinsurance receivable 4,027 3,891
Prepaid reinsurance premiums 804 243
Deferred policy acquisition costs 39 64
Property and equipment, net 11 11
Other assets 1,099 1,075
------ ------
Total assets $29,688 $29,701
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
($ IN THOUSANDS)
March 31, December 31,
1997 1996
(UNAUDITED) (AUDITED)
---------- ----------
Liabilities:
Reserves for losses and loss
adjustment expenses $24,777 $26,441
Unearned premiums 1,079 719
Reinsurance balances payable 4,175 3,401
Other liabilities 2,107 1,940
------- -------
Total liabilities 32,138 32,501
------- -------
Contingencies and commitments - -
Minority interest - -
--- ---
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) 396 (226)
Accumulated deficit (42,726) (42,454)
------ ------
Total stockholders' deficiency (2,450) (2,800)
------ ------
Total liabilities and
stockholders' deficiency $29,688 $29,701
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 1996
---- ----
Revenues:
Net premiums earned $ 696 $ 1,156
Net investment income 219 631
Realized gains (losses) on investments 1 733
----- -----
Total revenues 916 2,520
Operating expenses:
Losses and loss adjustment expenses 334 820
Policy acquisition expenses 227 246
Other operating expenses 621 460
----- -----
Total operating expenses 1,182 1,526
----- -----
Operating income (loss) (267) 994
----- -----
Income before income taxes (267) 994
----- -----
Income tax expense (benefit) 5 (14)
----- -----
Net income before minority interest ( 272) 1,008
Minority interest - 159
----- -----
Net income $ (272) $ 849
=== ===
Average shares outstanding 14,121 14,121
====== ======
Per share data:
Net income (loss)per share $(0.02) $ 0.06
==== ====
See accompanying notes to consolidated financial statements.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 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 - - - (272) (272)
Change in
net
unreal-
ized
gains
(losses) - - 622 - 632
--- ------ ----- ------ ------
Balance at
3/31/97 $141 $39,739 $ 396 $ (42,726) $ (2,450)
=== ====== === ====== =====
See accompanying notes to consolidated financial statements.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31,
($ IN THOUSANDS)
1997 1996
---- ----
Net cash and cash equivalents
(used) by operating activities $ (616 ) $(6,006)
Investing activities:
Proceeds on redemptions
of long-term investments:
Fixed maturities available for sale 512 -
Other 25 4
Proceeds on sale of equity securities - 733
Purchase of long-term investments:
Fixed maturities available for sale - 3,431)
Equity securities (314) -
Other - (185)
(Increase) decrease in short-term
investments 271 5,808
----- ------
Net cash and cash equivalents
provided or (used) by
investing activities 494 2,929
----- ------
Financing activities:
Receivable from Alpha Trust - -
----- ------
Increase (decrease) in cash
and cash equivalents (122) (3,077)
Cash and cash equivalents-beginning
of period 943 5,688
----- ------
Cash and cash equivalents-end
of period $ 821 $2,611
==== ====
Supplemental disclosure of cash
flow information:
Cash paid during period for
income taxes $ 40 $ -
=== ===
See accompanying notes to consolidated financial statements.
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
- --------------
LAWRENCE INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. URIC and Global, which are property and casualty
insurance companies, had been in run-off since early 1994. Global resumed
writing business during the fourth quarter 1996. Senate is an accident and
health insurer doing business almost exclusively in New York. SNLIC and
Syndicate are inactive.
(a) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of LIG and all
wholly owned subsidiaries (collectively, the Company). All significant
intercompany transactions have been eliminated in consolidation.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company incurred substantial
losses in 1993 and 1994 and 1996 and even though UCIC's stockholder's
deficiency has been eliminated, the Company's subsidiaries continue to be
adversely impacted by UCIC's demise.
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 financial goals included increasing
statutory surplus to $8 million at December 31, 1995. The statutory surplus
as filed with the TDI at December 31, 1995 was $6.6 million and $3.6 million
at December 31, 1996. These amounts did not include the effect of the loss and
LAE adjustments of approximately $7 million and $4 million at December 31,
1996 and 1995, respectively, described under (e) of Note 1. 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. Under Texas insurance regulations an insurance company can
remain in conservatorship 180 days before other action must be taken.
Subsequent to the filing of URIC's 1996 Statutory financial statement which
reflected policyholder surplus of $3.5 million, the Company received reports
from its actuary that the loss and LAE reserves related to pooling with UCIC
could be between $6 million and $8 million higher than reported on URIC's
statutory statement. This information has been received by the TDI. Based
on minimum capital requirements and insolvency provisions of the Texas
insurance law, the TDI has indicated that unless these reserves can be commuted
or otherwise modified at an amount significantly less than presently stated the
alternative would be to place URIC in liquidation.
Senate and SNLIC were placed under supervision of the State of Arizona
Department of Insurance (ADI) on September 19, 1996 as a result of Senate's
purchase of real estate from Barbara Lawrence (a former director and owner of
the Company) and concern over whether the ultimate parent (LGI) obligations
could be met without utilizing the assets of Senate and SNLIC. They remain
under supervision.
In addition, liquidity for the parent company has deteriorated significantly
and is expected to remain in that condition as its principal source of cash
was dividends from its subsidiaries.
Company management continues to work with the respective insurance
departments on these and other issues and during the fourth quarter of 1996
Global was permitted to resume writing business. In addition, the Company
has also filed suit against 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.
The accompanying consolidated financial statements are presented in
accordance with generally accepted accounting principles, which differ 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.
(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.
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, 1997 AND 1996
Earned premium decreased approximately $460,000 reflecting
primarily a favorable adjustments in URIC's retrospectively rated
premiums in 1996 for which there was no counterpart in 1997 and
a reduction in premiums earned by Senate. These decreases were
partially offset by higher premiums earned by Global as it resumed
writing new business during the fourth quarter of 1996.
Investment income decreased by $412,000 due primarily to non
payment of rental and interest income from several affiliated companies.
These companies filed for bankruptcy on February 28, 1997.
Realized gains for 1996 represented a gain from the disposition of the
Company's investment in Mechanical Technologies, Inc. which was
sold to Lawrence Group, Inc.
Loss and LAE decreased by $486,000 compared with 1996. This
decrease was offset by adjustments to premiums earned.
Policy acquisition expenses decreased by $19,000 reflecting the lower
level of earned premiums in 1997.
Operating expenses increased by $161,000 with the increase
attributable largely to the completion of amortization of negative goodwill
related to the acquisition of URIC in 1989.
Minority interest was $0 for 1997 and $159,000 for 1996..
Income tax expense represents state income taxes as the
Company, which files a consolidated federal return, has a NOL
carry forward.
As a result of the above, the Company recorded a net loss of
$272,000 for the first quarter of 1997 compared with net income
of $849,000 for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
AS OF MARCH 31, 1997
For the quarter ended March 31, 1997, the Company used cash
for operations of $616,000. The use of cash was attributable largely
ongoing operations plus the impact of running off prior year loss reserves.
It is anticipated that cash outflows will continue negative until such
time as new business begins to generate more cash than is used in
the runoff of prior year claims. It is likely that operations will be partially
funded by proceeds from the disposition of investments. Net cash generated
from investing activities totaled $494,000 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.
LAWRENCE INSURANCE GROUP, INC.
SIGNATURES
MARCH 31, 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
<TABLE> <S> <C>
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<CIK> 0000805266
<NAME> LAWRENCE INSURANCE GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 9,143
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,944
<MORTGAGE> 149
<REAL-ESTATE> 2,564
<TOTAL-INVEST> 16,490
<CASH> 821
<RECOVER-REINSURE> 700
<DEFERRED-ACQUISITION> 39
<TOTAL-ASSETS> 29,330
<POLICY-LOSSES> 24,397
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0
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696
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</TABLE>
