<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 1995
Commission file number: 0-16332
NATIONAL INSURANCE GROUP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 94-3031790
(State of Incorporation) (IRS Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
395 OYSTER POINT BOULEVARD, SUITE 500 94080
SOUTH SAN FRANCISCO, CA
(Address of principal executive office) (Zip Code)
</TABLE>
(415) 872-6772
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 XX NO
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 4,678,729 shares
as of March 31, 1995.
<PAGE> 2
NATIONAL INSURANCE GROUP
INDEX TO FORM 10-Q
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<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1 - Financial Statements:
Consolidated Balance Sheets-March 31, 1995 and 1
December 31, 1994.
Consolidated Statements of Earnings for the three- 2
month period ended March 31, 1995
and 1994.
Consolidated Statements of Shareholders' Equity 3
for three months ended March 31, 1995 and 1994.
Consolidated Statements of Cash Flows for the 4
three months ended March 31, 1995 and 1994.
Notes to Consolidated Financial Statements 5
Other Financial Information 6
Item 2 - Management's Discussion and Analysis of Financial 7-8
Condition and Operating Results
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings None
Item 2 - Changes in Securities None
Item 3 - Defaults Upon Senior Securities None
Item 4 - Other Information None
Item 5 - Exhibits and Reports on Form 8-K:
Reports on Form 8-K None
Exhibit 11 - Computation of Weighted
Average Shares Outstanding and Earnings 9
Per Share
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<PAGE> 3
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars,
except share amounts) March 31, December 31,
1995 1994
----------- ------------
ASSETS: (Unaudited)
- - - - - - -------
<S> <C> <C>
Investments:
- - - - - - ------------
Fixed maturities $ 21,676 $ 23,067
Equity securities 2,064 2,000
Short-term investments 14,518 13,890
--------- ---------
Total investments 38,258 38,957
Cash 617 155
Net Premiums and
accounts receivable 3,726 4,786
Property and equipment, net 5,541 5,918
Deferred acquisition costs 3,197 3,573
Deferred federal income taxes 153 298
Other assets 1,415 1,405
--------- ---------
Total assets $ 52,907 $ 55,092
========= =========
LIABILITIES:
- - - - - - ------------
Rseseve for losses and LAE $ 3,333 $ 3,360
Unearned premiums 6,951 7,768
Accrued expenses and other
liabilities 3,407 3,758
Drafts payable 165 374
Reserve for return premiums 1,948 2,542
--------- ---------
Total liabilities 15,804 17,802
--------- ---------
SHAREHOLDERS' EQUITY:
- - - - - - ---------------------
Common Stock, no par value;
authorized, 15,000,000 shares;
issued and outstanding 4,678,729
in 1995 and 1994. 23,066 23,065
Retained earnings 14,037 14,225
--------- ---------
Total shareholders' equity 37,103 37,290
--------- ---------
Total liabilities and
shareholders' equity $ 52,907 $ 55,092
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
- - - - - - --------------------------------------------------------------------------------
For the periods ended March 31, 1995 and 1994
(in thousands of dollars, except share amounts)
- - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Quarter
-------------
1995 1994
---- ----
<S> <C> <C>
Net premiums written $ 3,651 $ 5,405
Change in unearned premiums 817 446
--------- ---------
Net premiums earned 4,468 5,851
Flood inquiry fees 1,719 2,905
Tracking fees 997 705
Net commission income 198 62
Net investment income 510 484
--------- ---------
TOTAL REVENUES 7,892 10,007
--------- ---------
Loss and LAE incurred 1,873 2,589
Commissions paid to
nonaffiliates 680 1,331
Personnel expenses 3,330 3,585
All other expenses 2,346 2,042
--------- ---------
TOTAL EXPENSES 8,229 9,547
--------- ---------
Income(loss) before provision
for income taxes (337) 460
Provision for income taxes (108) 147
--------- ---------
NET INCOME (LOSS) $ (229) $ 313
========= =========
Weighted average common and
common equivalent shares
outstanding 4,678,729 5,204,496
========= =========
Per share results:
Net income (loss) per share $ (.05) $ .06
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
- - - - - - --------------------------------------------------------------------------------
For the three months ended March 31, 1995 and 1994
(in thousands of dollars, except share amounts)
- - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Stock Share-
--------------------- Retained holders'
Shares Amount Earnings Equity
- - - - - - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at
Dec. 31, 1993 5,063,729 $25,267 $16,682 $41,949
Secondary Offering 115,000 1,401 - 1,401
Dividends paid - - (414) (414)
Net income - - 313 313
Unrealized (loss), net
of deferred tax - - (52) (52)
---------- ------- ------- -------
Balance at
March 31, 1994 5,178,729 $26,668 $16,528 $43,196
========== ======= ======= =======
Balance at
Dec. 31, 1994 4,678,729 $23,066 $14,224 $37,290
Net loss - - (229) (229)
Unrealized gain, net
of deferred tax - - 42 42
---------- ------- ------- -------
Balance at
March 31, 1995 4,678,729 $23,066 $14,037 $37,103
========== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Increase (Decrease) in cash
- - - - - - --------------------------------------------------------------------------------
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<CAPTION>
- - - - - - --------------------------------------------------------------------------
Three months ended: March 31, 1995 March 31, 1994
(in thousands of dollars)
- - - - - - --------------------------------------------------------------------------
<S> <C> <C>
Net cash used in
operating activities $(182) $ (228)
Net cash provided by
<used in> investing activities 644 (1,131)
Net cash provided by
financing activities - 986
----- -------
Increase (decrease) in cash 462 (373)
Cash, beginning of period 155 702
----- -------
Cash, end of period $ 617 $ 329
===== =======
</TABLE>
There were no Federal or State income taxes paid during the three-months ended
March 31, 1995 or 1994.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Information
In the opinion of management, the financial information reflects all
adjustments (consisting only of normal recurring adjustments) which are
necessary to a fair presentation of financial position and results of
operations for the interim periods. The results for the three month
periods ended March 31, 1995 and March 31, 1994, are not necessarily
indicative of the results to be expected for the entire year.
These quarterly interim financial statements are unaudited.
5
<PAGE> 8
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
OTHER FINANCIAL INFORMATION
Summary Consolidated Financial Information
For the Periods Ended March 31, 1995 and 1994
(In Thousands of Dollars Except Share Amounts)
(Unaudited)
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<CAPTION>
First Quarter
----------------------------
1995 1994 % Change
------ ------ --------
<S> <C> <C> <C>
Income Statement Data:
Net premiums written $3,651 $5,405 (32.4)%
====== ======
Net premiums earned $4,468 $5,851 (23.6)
Flood inquiry fees 1,719 2,905 (40.8)
Tracking fees 997 705 41.4
Net commission income 198 62 219.4
Net investment income 510 484 5.3
------ ------
TOTAL REVENUES 7,892 10,007 (21.1)
------ ------
Loss and LAE incurred 1,873 2,589 (27.7)
Commissions paid to nonaffiliates 680 1,331 (48.9)
Personnel expenses 3,330 3,585 (7.1)
All other expenses 2,346 2,042 14.9
------ ------
TOTAL EXPENSES 8,229 9,547 (13.8)
------ ------
Income(loss) before provision for
income taxes (337) 460 (173.3)
Provision for income taxes (108) 147 (173.4)
------ ------
Net income (loss) $ (229) $313 (173.2)
====== ======
Net income (loss) per share $ (.05) $.06 (183.3)
====== ======
Weighted average shares
outstanding 4,678,729 5,204,496 (10.1)
========= =========
</TABLE>
6
<PAGE> 9
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Operating Results
Item 2
Results of Operations
FIRST QUARTER OF 1995 COMPARED WITH FIRST QUARTER OF 1994:
REVENUE
Total revenue for the first quarter decreased from $10.0 million in 1994 to
$7.9 million in 1995, a decrease of $2.1 million or 21.1%.
Net premiums written decreased from $5.4 million in 1994 to $3.7 million in
1995, a decrease of $1.7 million or 32.4%. The decrease in net premiums
written for the first quarter of 1995 was principally due to three factors:
(1) heavy cancellations by one of the Company's larger customers accounted for
approximately $750,000 of the decrease; (2) 1994 premiums written included
approximately $480,000 from a significant customer whose loan processing
portfolio was sold by the RTC in late 1994 and therefore, this customer did not
contribute to premiums in the first quarter of 1995, and; (3) the change in
reserves for premium cancellations accounted for approximately $440,000 of the
decrease.
During the first quarter of 1995, the Company's Insurance Subsidiary exchanged
written communication with the California Department of Insurance regarding its
premium refund obligation under California Proposition 103 (see Note 9 of the
1994 Notes to Consolidated Financial Statements). The Insurance Subsidiary
expects to continue communication with the California Department of Insurance,
but at this time there has been no final agreement with the California
Department of Insurance or change in the status of the Company's estimates for
this contingent liability.
Net premiums earned for the first quarter decreased from $5.9 million in 1994
to $4.5 million in 1995, a decrease of $1.4 million or 23.6% due primarily to
the same factors which caused the decline in net premiums written during the
period.
Flood inquiry fees for the first quarter decreased from $2.9 million in 1994 to
$1.7 million in 1995, a decrease of $1.2 million or 40.8%. At the end of the
first quarter of 1994 the Federal Reserve began a series of interest rate
increases which brought a sudden collapse to the mortgage refinancing market.
Although loan origination volumes have declined by approximately 50% for the
mortgage origination industry, the Company has responded by converting
customers to its higher priced life-of-loan product as the industry complies
with recent regulations issued by Freddie Mac.
Tracking fees for the first quarter increased from $705,000 in 1994 to $997,000
in 1995, an increase of $292,000 or 41.4%. The increase is due primarily to the
addition of new outsourcing customers.
7
<PAGE> 10
Net commission income for the first quarter of 1995 increased by $136,000 from
$62,000 in 1994 to $198,000 in 1995. The increase was primarily generated by a
new customer which produced significant premiums in states which required
placing the premiums with a nonaffiliated insurance company from which the
Company receives a commission.
Net investment income remained relatively unchanged at $484,000 for 1994 and
$510,000 for 1995.
EXPENSES
Loss and loss expenses incurred decreased in total from $2.6 million (44.3% of
net premiums earned) for the first quarter in 1994 to $1.9 million (40.3% of
premiums earned) for the same period in 1995. The decrease in losses as a
percentage of premiums earned is primarily due to losses incurred for the
Southern California earthquake in January 1994, including the Company's share
of losses incurred by the California FAIR Plan Association.
Commissions paid to nonaffiliates decreased from $1.3 million (22.8% of
premiums earned) in the first quarter of 1994 to $0.7 million (15.2% of
premiums earned) in the first quarter of 1995 a decrease of $0.6 million or
48.9%. The decrease is due primarily to the elimination of ceding commission
for fronting arrangements and the elimination of the expense reimbursement to a
major customer.
Personnel expenses decreased $0.3 million or 7.1% from $3.6 million in the
first quarter of 1994 to $3.3 million in the first quarter of 1995, due to
layoffs of certain part-time employees and the relocation of the Bellevue
office which eliminated certain duplicate personnel.
All other expenses increased from $2.0 million in the first quarter 1994 to
$2.3 million for the first quarter in 1995, an increase of $0.3 million or
14.9%, due primarily to the amortization of deferred acquisition cost accounts.
As a result of the above factors, operating income before provision for income
taxes for the first quarter of 1995 decreased $797,000 from a $460,000 profit
in first quarter of 1994 to a loss of $337,000 in first quarter of 1995. The
net income for the first quarter of 1994 was $313,000 or $.06 per share
compared with a net loss of $229,000 or $.05 for the first quarter of 1995. The
weighted average number of shares for the first quarter of 1995 is the same as
the actual number of shares outstanding, or 4,678,729, because the Company has
a loss for the period, compared to the weighted average number of shares for
the same period in 1994 of 5,204,496.
8
<PAGE> 11
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
NATIONAL INSURANCE GROUP
(REGISTRANT)
/S/ MARK A. SPEIZER
- - - - - - ------------------------------ -----------------------------------
DATE: MAY 11, 1995 (SIGNATURE)
Mark A. Speizer, Chairman
of the Board and Chief
Executive Officer
(Principal Executive Officer)
/S/ HOWARD L. HERMAN
- - - - - - ------------------------------ -----------------------------------
DATE: MAY 11, 1995 (SIGNATURE)
Howard L. Herman, President,
Acting Chief Financial Officer
and Director (Principal Financial
and Accounting Officer)
9
<PAGE> 12
Exhibit Index
Ex. 11 Computation of weighted average shares outstanding and earnings per
share
Ex. 27 Financial Data Schedule
<PAGE> 1
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF WEIGHTED AVERAGE SHARES
OUTSTANDING AND EARNINGS PER SHARE
(in thousands of dollars except share amounts)
(Unaudited)
There are no differences between primary and fully diluted earnings per share.
<TABLE>
<CAPTION>
First Quarter
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Actual common shares outstanding 4,678,729 -
Weighted average common shares - 5,154,451
Common shares issuable under outstanding
stock option - 50,045
--------- ---------
Total weighted average shares outstanding 4,678,729 5,204,496
========= =========
Net income (loss) $ (229) $ 313
========= =========
Net Income (loss) per share $ (.05) $ .06
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) GREAT
PACIFIC INS. CO., QUARTERLY P&C FINANCIAL STATEMENT - STATUTORY BASIS ACCOUNTING
PRINCIPALS - FOR THE PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) MARCH 31, 1995 SEC FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 21,676
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,064
<MORTGAGE> 36
<REAL-ESTATE> 0
<TOTAL-INVEST> 38,258
<CASH> 617
<RECOVER-REINSURE> 11
<DEFERRED-ACQUISITION> 3,197
<TOTAL-ASSETS> 52,907
<POLICY-LOSSES> 3,333
<UNEARNED-PREMIUMS> 6,951
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 23,066
0
0
<OTHER-SE> 14,037
<TOTAL-LIABILITY-AND-EQUITY> 52,907
4,468
<INVESTMENT-INCOME> 510
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 2,914
<BENEFITS> 1,873
<UNDERWRITING-AMORTIZATION> 2,443
<UNDERWRITING-OTHER> 3,913
<INCOME-PRETAX> (337)
<INCOME-TAX> (108)
<INCOME-CONTINUING> (229)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (229)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
<RESERVE-OPEN> 3,155
<PROVISION-CURRENT> 2,056
<PROVISION-PRIOR> (183)
<PAYMENTS-CURRENT> 518
<PAYMENTS-PRIOR> 1,382
<RESERVE-CLOSE> 3,128
<CUMULATIVE-DEFICIENCY> (183)
</TABLE>
