<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: JUNE 30, 1997 Commission file number: 0-16332
NATIONAL INSURANCE GROUP
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3031790
(State of Incorporation) (IRS Employer Identification No.)
395 OYSTER POINT BOULEVARD, SUITE 500
SOUTH SAN FRANCISCO, CA 94080
(Address of principal executive office) (Zip Code)
(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: 3,916,103 shares as
of August 12, 1997.
<PAGE> 2
NATIONAL INSURANCE GROUP
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1 - Financial Statements:
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996 1
Consolidated Statements of Earnings for the periods
ended June 30, 1997 and 1996 2
Consolidated Statements of Shareholders' Equity
for the six months ended June 30, 1997 and 1996 3
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996. 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Exhibit 10.1 - Employment Agreement dated May 7, 1997 by and between
National and Douglas H. Helm
Exhibit 11.1 - Computation of Weighted Average Shares Outstanding
and Earnings per Share
Exhibit 27.1 - Financial Data Schedule
</TABLE>
<PAGE> 3
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 1997 and December 31, 1996
(in thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Fixed maturities $13,972 $18,538
Equity securities 2,159 2,051
Short-term investments 9,034 10,005
------- -------
Total investments 25,165 30,594
------- -------
Cash and cash equivalents 4,955 3,183
Net premiums and
accounts receivable 8,616 5,181
Accrued interest receivable 362 377
Property and equipment, net 4,128 3,484
Deferred acquisition costs 2,492 2,186
Deferred federal income taxes receivable 636 421
Other assets 1,622 1,686
------- -------
Total assets $47,976 $47,112
======= =======
LIABILITIES:
Reserve for losses and LAE $ 2,446 $ 2,198
Unearned premiums 5,819 4,753
Commissions payable 1,403 1,113
Accrued expenses and other
liabilities 4,263 3,718
Drafts payable 594 295
Notes payable 833 1,333
Reserve for return premiums 3,825 2,382
Unclaimed property-proposition 103 2,261 2,268
Deferred revenue 500 500
------- -------
Total liabilities 21,944 18,560
------- -------
SHAREHOLDERS' EQUITY:
Common stock, no par value;
authorized, 15,000,000 shares;
issued and outstanding 3,916,103
in 1997 and 3,896,937 in 1996 17,693 17,592
Retained earnings 8,339 10,960
------- -------
Total shareholders' equity 26,032 28,552
------- -------
Total liabilities and
shareholders' equity $47,976 $47,112
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the periods ended June 30, 1997 and 1996
(in thousands of dollars, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net premiums written $ 5,067 $ 3,235 $ 9,714 $ 6,005
Change in unearned premiums (596) (180) (1,066) 836
----------- ----------- ----------- -----------
Net premiums earned 4,471 3,055 8,648 6,841
Flood inquiry fees 5,673 5,160 9,979 9,591
Tracking fees 1,834 1,305 3,594 2,522
Net commission income 171 122 388 599
Net investment income 444 490 899 1,002
----------- ----------- ----------- -----------
TOTAL REVENUES 12,593 10,132 23,508 20,555
----------- ----------- ----------- -----------
Loss and LAE incurred 1,673 1,565 2,886 2,672
Commissions to
non-affiliates 686 568 1,101 1,260
Personnel expenses 5,621 5,018 10,572 10,160
All other expenses 3,278 4,331 6,434 7,579
----------- ----------- ----------- -----------
TOTAL EXPENSES 11,258 11,482 20,993 21,671
----------- ----------- ----------- -----------
Income (loss) before provision
for (benefit from) income taxes 1,335 (1,350) 2,515 (1,116)
Provision for (benefit from)
income taxes 497 (493) 875 (408)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 838 $ (857) $ 1,640 $ (708)
=========== =========== =========== ===========
Weighted average common and
common equivalent shares
outstanding 3,989,724 4,679,942 3,989,660 4,691,008
----------- ----------- ----------- -----------
Per share results:
Net income (loss) per share $ 0.21 $ (0.18) $ 0.41 $ (0.15)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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NATIONAL INSURANCE GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1997 and 1996
(in thousands of dollars, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
Total
Common Stock Share-
-------------------- Retained holders'
Shares Amount Earnings Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at
Dec. 31, 1995 4,679,697 $ 23,071 $ 9,810 $ 32,881
Options exercised 22,500 149 - 149
Accelerated vesting: - 39 - 39
Net loss - - (710) (710)
Unrealized loss, net
of deferred tax - - (54) (54)
--------- --------- --------- ---------
Balance at
June 30, 1996 4,702,197 $ 23,259 $ 9,046 $ 32,305
========= ========= ========= =========
Balance at
Dec. 31, 1996 3,896,937 $ 17,592 $ 10,960 $ 28,552
Net income - - 1,640 1,640
Options exercised 19,166 101 - 101
Dividends paid - - (4,229) (4,229)
Unrealized (loss),
net of deferred tax - - (32) (32)
--------- --------- --------- ---------
Balance at
June 30, 1997 3,916,103 $ 17,693 $ 8,339 $ 26,032
========= ========= ========= =========
</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
For the six months ended June 30, 1997 and 1996
(in thousands of dollars, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,640 $ (708)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 610 994
Change in assets and liabilities:
Increase in net premiums and accounts
receivable and accrued interest receivable (3,420) (405)
(Increase) decrease in deferred acquisition costs (306) 385
Increase in insurance liabilities 3,346 214
Decrease in unclaimed property-proposition 103 (7) (1,898)
(Increase) decrease in tax assets (215) 127
Other, net 609 607
-------- --------
Net cash provided (used) by operating activities 2,257 (684)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (25,434) (54,861)
Maturity of investments 30,832 58,250
Purchase of equipment (1,254) (286)
-------- --------
Net cash provided by investing activities 4,144 3,103
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 100 188
Dividends to shareholders (4,229) -
Principal payments on notes payable (500) -
-------- --------
Net cash provided by financing activities (4,629) 188
-------- --------
Net increase in cash and cash equivalents 1,772 2,607
Cash and cash equivalents at beginning of period 3,183 3,235
-------- --------
Cash and cash equivalents at end of period $ 4,955 $ 5,842
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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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 six month period
ended June 30, 1997 and June 30, 1996 are not necessarily indicative of
the results to be expected in the future.
2. Reclassification
For comparative purposes, certain prior year amounts have been
reclassified to conform to the current year presentation. Such
reclassifications had no impact on the net income or shareholders'
equity.
3. Earnings per share
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128. SFAS
No. 128 is designed to improve the earnings per share (EPS) information
provided in the financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an international basis. SFAS
No. 128 is required to be adopted on December 31, 1997. The Company has
not yet determined the impact that SFAS No. 128 may have on its
financial statements.
4. Comprehensive income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. Comprehensive income is defined
as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. The Company does not believe that SFAS No. 130 will
have a material impact on its financial statements.
5. Segment reporting
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 requires
publicly-held companies to report financial and other information about
key revenue-producing segments of the entity for which such information
is available and utilized by the chief operation decision maker.
Specific information to be reported for individual segments includes
profit or loss, certain revenue and expense items and total assets. A
reconciliation of segment financial information to amounts reported in
the financial statements would be provided. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. The Company does not
believe that SFAS No. 131 will have a material impact on its financial
statements.
6. Subsequent events
On July 24, 1997, the Company's Board of Directors declared a
dividend of $0.11 per share. The dividend was paid on August 8, 1997 to
shareholders of record on August 4, 1997. The aggregate amount of the
dividend was $430,771.
These quarterly interim financial statements are unaudited.
5
<PAGE> 8
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the interim
financial statements and the notes thereto, which are set forth elsewhere in
this Report.
RESULTS OF OPERATIONS
SECOND QUARTER OF 1997 COMPARED WITH SECOND QUARTER OF 1996:
Revenue
Total revenue of National Insurance Group (the "Company" or "National") for
the second quarter increased from $10.1 million in 1996 to $12.6 million in
1997, an increase of $2.5 million, or 24.8%.
Net premiums written by the Company's wholly owned subsidiary, Great
Pacific Insurance Company (the "Insurance Subsidiary"), for the second quarter
increased from $3.2 million in 1996 to $5.1 million in 1997, an increase of $1.9
million, or 59.4%. The increase in net premiums written was primarily due to an
increase in the volume of business from existing mortgage tracking customers.
Net premiums earned by the Insurance Subsidiary for the second quarter
increased from $3.1 million in 1996 to $4.5 million in 1997, an increase of $1.4
million, or 45.2%. Premium revenue is generally earned ratably over a twelve
month period and is affected by policies written over the prior twelve months
and by policies canceled during the quarter. Such cancellations would be
applicable to premiums written in all prior periods. The combined effect of
changes in premiums written, earned and canceled within any period is measured
in terms of the change in unearned premiums. For the three months ended June 30,
1997, unearned premiums increased by $596,000, compared to an increase in
unearned premiums of $180,000 for the same quarter of 1996.
Flood inquiry fees for the second quarter increased from $5.2 million in
1996 to $5.7 million in 1997, an increase of $500,000, or 9.6%. This increase is
primarily a result of higher volume of inquires from existing customers.
Tracking fees for the second quarter increased from $1.3 million in 1996 to
$1.8 million in 1997, an increase of $500,000, or 38.5%. The increase was due
primarily to the addition of new customers.
Expenses
Loss and loss adjustment expenses (LAE) incurred for the second quarter
increased from $1.6 million (51.6% of net premiums earned) in 1996 to $1.7
million (37.8% of net premiums earned) in 1997, an increase of $100,000, or
6.3%. The average loss and loss adjustment expense per new claim reported in the
second quarter of 1997 was approximately $9,100, compared to $8,400 for the same
period in 1996. The number of losses decreased from 187 in 1996 to 183 in 1997.
Commissions to non-affiliates in the second quarter increased from $568,000
(18.6% of net premiums earned) in 1996 to $686,000 (15.3% of net premiums
earned) in 1997, an increase of $118,000, or 20.8%. The increase in the amount
of commission expense is due to the volume increase in net premiums written. The
percentage of commissions paid to net premiums earned varies depending
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upon customer mix. The decrease as a percentage of net premiums is due primarily
to the fact that a larger percentage of the Insurance Subsidiary's business has
transferred to customers who earn lower commission rates.
Personnel expenses in the second quarter increased from $5.0 million in
1996 to $5.6 million in 1997, an increase of $600,000, or 12.0%. This increase
was in response to volume increases in the flood zone determination and motor
vehicle tracking businesses. Personnel expenses as a percent of total revenue
decreased from 49.5% in 1996 to 44.6% in 1997. The reduction was primarily due
to continued productivity improvements in the motor vehicle and mortgage
insurance tracking business.
All other expenses in the second quarter decreased from $4.3 million in
1996 to $3.3 million in 1997, a decrease of $1.0 million, or 23.3%. The decrease
was primarily due to $1.4 million of expense incurred by the Company in the
second quarter of 1996 as a result of retention agreements entered into with
certain executives of the prior management team, who departed from the Company
in July, 1996.
As a result of the above factors, income before provision for income taxes
for the second quarter increased from a loss of $1.4 million in 1996 to a gain
of $1.3 million in 1997, an increase of $2.7 million. Net loss for the second
quarter of 1996 was $857,000, or $0.18 per share compared with net income of
$838,000, or $0.21 per share in 1997. The weighted average number of shares
outstanding for the second quarter of 1996 and 1997 were 4,679,942 and
3,989,724, respectively.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1996:
Revenue
Total revenue of the Company for the six month period increased from $20.6
million in 1996 to $23.6 million in 1997, an increase of $3.0 million, or 14.6%.
Net premiums written for the period increased from $6.0 million in 1996 to
$9.7 million in 1997, an increase of $3.7 million, or 61.7%. The increase in net
premiums written was primarily due to an increase in the volume of business from
existing mortgage tracking customers.
Net premiums earned by the Insurance Subsidiary for the period increased
from $6.8 million in 1996 to $8.6 million in 1997, an increase of $1.8 million,
or 26.5%. Premium revenue is generally earned ratably over a twelve month period
and is affected by policies written over the prior twelve months and by policies
canceled during the quarter. Such cancellations would be applicable to premiums
written in all prior periods. The combined effect of changes in premiums
written, earned and canceled within any period is measured in terms of the
change in unearned premiums. For the six months ended June 30, 1997, unearned
premiums increased by $1.1 million, compared to a decrease in unearned premiums
of $836,000 for the same six months of 1996.
Flood inquiry fees for the period increased from $9.6 million in 1996 to
$10.0 million in 1997, an increase of $400,000, or 4.2%. This increase is
primarily a result of higher volume of inquiries from existing customers.
Tracking fees for the period increased from $2.5 million in 1996 to $3.6
million in 1997, an increase of $1.1 million, or 44%. The increase was due
primarily to the addition of new customers.
7
<PAGE> 10
EXPENSES
Loss and loss adjustment expenses (LAE) incurred for the six month period
increased from $2.7 million (39.1% of net premiums earned) in 1996 to $2.9
million (33.4% of net premiums earned) in 1997, an increase of $200,000, or
7.4%. The average loss and loss adjustment expense per new claim reported in the
six month period ended June 30, 1997 was approximately $8,000, compared to
$6,300 for the same period in 1996. The number of losses decreased from 421 in
1996 to 359 in 1997.
Commissions to non-affiliates for the period decreased from $1.3 million
(18.4% of net premiums earned) in 1996 to $1.1 million (12.7% of net premiums
earned) in 1997, a decrease of $200,000, or 15.4%. The percentage of commissions
paid to net premiums earned varies depending upon customer mix. The decrease is
due primarily to the fact that a larger percentage of the Insurance Subsidiary's
business has transferred to customers who earn lower commission rates.
Personnel expenses for the period increased from $10.2 million in 1996 to
$10.6 million in 1997, an increase of $400,000, or 3.9%. This increase was in
response to volume increases in the flood zone determination and motor vehicle
tracking businesses. Personnel expenses as a percent of total revenue decreased
from 49.4% in 1996 to 45.0% in 1997. The reduction was primarily due to
continued productivity improvements in the motor vehicle and mortgage insurance
tracking business.
All other expenses in the six month period decreased from $7.6 million in
1996 to $6.4 million in 1997, a decrease of $1.2 million, or 15.8%. The decrease
was primarily due to $1.4 million of expense incurred by the Company in the
second quarter of 1996 as a result of retention agreements entered into with
certain executives of the prior management team, who departed from the Company
in July, 1996.
As a result of the above factors, income before provision for income taxes
for the six month period increased from a loss of $1.1 million in 1996 to a gain
of $2.5 million in 1997, an increase of $3.6 million. Net loss for the six
months of 1996 was $708,000, or $0.15 per share compared with net income of $1.6
million, or $0.41 per share in 1997. The weighted average number of shares
outstanding for the six months ended June 30, 1996 and 1997 were 4,691,008 and
3,989,660, respectively.
LIQUIDITY AND CAPITAL RESOURCES
National is a holding company with no operations and no sources of income
itself except interest or investment income. The principal assets of National
are the stock of its subsidiaries. National is, and for the foreseeable future
will continue to be, dependent on the dividends from its subsidiaries to meet
its liquidity requirements, including debt service obligations. Dividends
payable to National by the Insurance Subsidiary are subject to certain
regulatory restrictions described below.
The Insurance Subsidiary collects and invests premiums written in advance
of the payments for associated claims. In the absence of a catastrophic loss,
this timing difference between premium collection and claims payment, combined
with investment income, normally provides short-term funds in excess of normal
operating demands for cash. As of June 30, 1997, the Company had cash and
short-term investments aggregating $14.0 million compared to $13.2 million at
December 31, 1996.
Of the Company's cash and short-term investments as of June 30, 1997, $11.0
million is held by the Insurance Subsidiary compared to $8.3 million at December
31, 1996. Insurance companies, including
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the Insurance Subsidiary, are subject to laws and regulations which restrict
their ability to pay dividends to parent companies or other shareholders. Under
California law, the maximum amount of dividends that the Insurance Subsidiary
may pay the Company in any twelve (12) month period without prior regulatory
approval is the greater of (i) net income for the preceding calendar year, or
(ii) 10% of policyholders' surplus (shareholders' equity adjusted to a statutory
basis) as of the previous December 31. For the year ended December 31, 1996, the
Insurance Subsidiary had net income of approximately $2.8 million and as of
December 31, 1996, statutory policyholders' surplus of $26.8 million. For the
year ended December 31, 1996, the maximum dividend permitted to be paid by the
Insurance Subsidiary to National was approximately $2.8 million. In addition,
insurers are required to report dividends within five (5) days of declaration
and at least ten (10) days prior to payment. The interim period will allow the
Commissioner to issue an order stopping payment of the dividend if, in the
Commissioner's opinion, the payment would in any way violate the California
Insurance Code or be hazardous to the insurer's policyholders, creditors or the
public.
On April 10, 1997, the Insurance Subsidiary made a dividend payment to
National in the amount of $2.5 million.
In April, 1997, the Company concluded an agreement for a $5 million bank
line of credit. As of June 30, 1997 there were no advances made on the credit
line. As of June 30, 1997, the Company was in compliance with all financial
ratio and minimum net worth requirements per the terms of the agreement.
Consolidated stockholders' equity at June 30, 1997 totaled $26.0 million,
or $6.65 per share, compared to $28.6 million, or $7.33 per share, at December
31, 1996.
Industry and regulatory guidelines suggest that a property and casualty
insurers' annual statutory net written premium should not exceed approximately
three times its policyholder's surplus. The Company's surplus ratio is
significantly lower than such guidelines. For the year ended December 31, 1996,
the Company's net written premium to policyholder surplus ratio was .50 to 1.
Management believes that as of June 30, 1997, that ratio has not materially
changed.
The Company is not aware of any trends, requirements, commitments, or
events that will or are reasonably likely to have a negative impact on the
Company's liquidity during 1997. This report contains forward-looking statements
reflecting the Company's current expectations. There can be no assurance that
the Company's actual future performance will meet the Company's current
expectations. Investors should review the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Factors
Affecting Future Financial Condition and Operating Results" for a discussion of
factors that could affect future performance.
Inflation generally affects the rate of investment return in the securities
and financial markets, and increases and decreases in such investment return
rates have a corresponding effect on the Company's investment income.
FACTORS AFFECTING FUTURE FINANCIAL CONDITION AND OPERATING RESULTS
These factors, together with statements regarding certain risks and
uncertainties contained in other parts of this Report, may affect the Company's
operating results. Investors should read this section in
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connection with any forward-looking statement made in this Report, including
statements preceded or followed by the words "believes", "anticipates",
"expects", "aware" or similar expressions as they relate to the Company or its
management.
Flood Zone Determinations
The Company derives a substantial portion of its total revenues from fees
for Flood Zone Determination Services. These services are primarily provided to
assist lenders in complying with federal laws which in many instances require
lenders to determine whether property being financed is located in a federally
designated Special Flood Hazard Area ("SFHA") and require borrowers to obtain
flood insurance. Any change in federal legislation or secondary market
requirements changing these requirements on lenders or borrowers, or the
development by competitors of enhanced service or delivery systems could have a
material adverse effect on the Company's business or operating results.
Earnings Volatility
The Company's financial results can be significantly affected by a number
of factors. Those factors include, but are not limited to, the volume of
force-placed insurance and the rate of cancellation of insurance policies, the
addition or loss of customers, changes in the number of loans or personal
property leases being tracked for major customers, increases or decreases in
interest rates, increased losses and loss adjustment expenses (LAE),
catastrophic loss or a series of loss events, and assessments from mandatory
insurance pools or associations. In addition, revenues from the Company's Flood
Zone Determination Services are directly related to the volume of mortgage loan
originations, both new and refinanced, and any change in the level of such
activity could have a material impact on the Company's performance.
The Insurance Industry
The Company derives a significant amount of its revenues from insurance
premiums and investment income. In the event that, for whatever reason, the
Insurance Subsidiary experiences abnormally high losses, purchases reinsurance
from reinsurers who will not or cannot pay losses submitted, or other adverse
developments occur, then any such event or combination of events could have a
material adverse impact on the Company. In addition, insurance companies and
others have often been sued under certain legal theories, such as bad faith
handling or settlement of claims, which could subject the Insurance Subsidiary
to liability in excess of policy limits. An adverse outcome of any such lawsuit
could have a material negative impact on the Company.
Reserve Adequacy
The Insurance Subsidiary is required to maintain reserves to cover its
estimated ultimate liability for loss and loss adjustment expenses with respect
to reported losses and incurred but not reported claims. These reserves are
estimates of what the Insurance Subsidiary expects the ultimate settlement and
administration of claims will cost, and are based on known facts and
circumstances, predictions of future events, estimates of future trends in
claims severity and other variable, subjective factors. No assurances can be
given that such estimates will be adequate to cover actual losses incurred by
the Insurance Subsidiary. Any significant changes in the Insurance Subsidiary's
estimate of ultimate losses on
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reported claims may materially adversely affect the results of the Insurance
Subsidiary's operations in the period reported. The Insurance Subsidiary has at
times in the past experienced adverse developments in its loss reserves. The
Insurance Subsidiary's loss and loss adjustment expense reserves are reviewed on
an annual basis by unaffiliated actuaries. The Insurance Subsidiary's most
recent actuarial review of such reserves as of December 31, 1996 concluded that
the reserves (i) met the requirements of the insurance laws of California, (ii)
were computed in accordance with accepted loss reserving standards and
principles and (iii) make a reasonable provision for all unpaid loss and loss
expense obligations of the Insurance Subsidiary under the terms of its policies
and agreements.
The Insurance Subsidiary also maintains a reserve for return premiums which
is based upon the Insurance Subsidiary's historical experience. As is prevalent
in the force-placed insurance industry, a substantial amount of the Insurance
Subsidiary's premiums written are refunded to policyholders. The amount of such
refunds can be affected by, among other things, inaccurate or untimely data
submitted by customers, which the Insurance Subsidiary uses as a basis for
recording written premiums or the loss of a significant customer. No assurance
can be given that the reserve for return premiums will be adequate to cover
actual refunded premiums paid by the Insurance Subsidiary in the future.
Underwriting Risks
Traditional insurance companies underwrite risks individually or by class,
following an in-depth analysis of such risks. Although the Insurance Subsidiary
applies underwriting techniques to a small portion of insured risks, the
immediate coverage required by purchasers of force-placed insurance generally
requires the Insurance Subsidiary to write specialized insurance within
pre-designated limits and geographic area, at a flat rate, without the
application of traditional underwriting criteria to individual risks.
Accordingly, the Insurance Subsidiary may be insuring individual risks that it
might not have insured had it applied traditional analysis to such risks. In
addition, the Insurance Subsidiary may not have adequate spread of risk in a
particular geographic area.
Reinsurance Considerations
The Insurance Subsidiary's business is partially dependent upon its ability
to cede to reinsurers risks insured by the Insurance Subsidiary. The amount,
availability and cost of reinsurance are subject to prevailing market
conditions, beyond the control of the Insurance Subsidiary, which can affect the
Insurance Subsidiary's level of business and profitability. The Insurance
Subsidiary is ultimately liable for the reinsured risk if for any reason the
reinsurers do not cover or will not pay the Insurance Subsidiary for the losses
of the insureds. As a result of the increased cost and more limited availability
of reinsurance, in the future, the Insurance Subsidiary may elect to retain a
higher portion of the risk historically ceded to reinsurers. If the Insurance
Subsidiary were to retain a higher proportion of insured risks, it would
increase its exposure to significant losses relating to properties insured by
the Insurance Subsidiary. This increased exposure could have a material adverse
effect on the Insurance Subsidiary's results of operation.
Rapid Technological Change and New Products; Product Delays
The markets for the Company's information services are highly competitive
and characterized by rapidly changing technology. The Company believes that its
future success will depend, in part, on its ability to identify, develop,
install and support new services in a timely fashion, and on market
11
<PAGE> 14
acceptance of such services. No assurance can be given that the introduction of
new technologies will enable the Company to gain market share, realize cost
savings, increase revenues or retain customers.
Shortage of Skilled Labor
The Company's delivery and upgrade of products and services to its
customers is dependent upon, among other factors, the Company's ability to
attract and retain key analytical and management professionals, including
skilled computer programmers and systems analysts. Businesses located in San
Francisco, San Mateo, Contra Costa and Santa Clara counties of California are
experiencing a tightening of the local labor market for these professionals,
which may result in one or more of the following: an increase in personnel
costs, a delay in service installations, and a reduction in customer service.
The Company is unable to predict when the conditions in the local labor market
will change.
12
<PAGE> 15
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is routinely a party to litigation incidental to its
business, as well as other litigation. While the ultimate results of such
litigation cannot presently be determined on the date of this Report, management
believes that no individual item of litigation or group of similar items of
litigation is likely to have a material adverse effect on the consolidated
financial position of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit 10.1 Employment Agreement dated May 7, 1997 by and between
National and Douglas H. Helm.
Exhibit 11.1 Computation of weighted average shares outstanding and
earnings per share.
Exhibit 27.1 Financial data schedule.
(b) Reports on Form 8-K
None.
13
<PAGE> 16
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: AUGUST 13, 1997 (SIGNATURE)
Mark A. Speizer, Chairman
of the Board and Chief
Executive Officer
/s/ GREGORY S. SAUNDERS
- --------------------- ----------------------------------------
DATE: AUGUST 13, 1997 (SIGNATURE)
Gregory S. Saunders,
Executive Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)
14
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------ --------
<S> <C>
10.1 Employment Agreement dated May 7, 1997 by and between
National and Douglas H. Helm
11.1 Computation of weighted average shares outstanding and
earnings per share
27.1 Financial data schedule
</TABLE>
<PAGE> 1
Exhibit 10.1
May 7 ,1997
National Insurance Group
395 Oyster Point Blvd., Suite 500
South San Francisco, CA 94080
Attention: Mark A. Speizer, Chairman and Chief Executive Officer
Dear Mr. Speizer:
This letter agreement (the "Agreement") confirms my understanding and agreement
that (i) the following terms and conditions were discussed with me prior to
being offered employment, and (ii) I agreed to them at that time and I accept
them as terms and conditions of my employment as an employee of National
Insurance Group, a California corporation ("National")or any of its subsidiaries
which currently exist or may exist in the future. The current subsidiaries of
National are Fastrac Systems, Inc., Fastrac Systems, Inc. Insurance Agent &
Broker, Pinnacle Data Corporation, and Great Pacific Insurance Company. Unless
the context requires otherwise, any references in this Agreement to the Company
shall mean National and its subsidiaries collectively.
My employment by the Company shall be as an employee of the Company
("Employment") and is subject to the terms and conditions set forth in this
Agreement, together with all written rules, policies and procedures of the
Company that may be in effect from time to time during my employment ("Policies
and Procedures").
1. Compensation.
1.1 Salary Compensation. My bi-weekly salary shall be $6,730.77 ("Salary
Compensation"), which shall be paid to me in accordance with payroll practices
and procedures of the Company, less any applicable withholdings, taxes as
required by law and any deductions authorized by me. My Salary Compensation
shall accrue from the first day of my Employment, which shall be May 26, 1997.
My Salary Compensation may be adjusted, to be increased or
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<PAGE> 2
decreased on or after the first anniversary of my Employment if I am an employee
of the Company at such time.
1.2 Bonus Plan. In addition to my Salary Compensation, I understand that
I shall be eligible to receive a bonus from the Company under a bonus plan;
provided, however, the minimum amount which shall be awarded to me as a bonus
during each Working Year as defined in Section 5(a) of this Agreement shall be
$20,000 and the maximum payable to me in any Working Year shall be $50,000. The
foregoing bonus shall be based on mutually agreed upon performance benchmarks
which shall be determined within ninety (90) days of the commencement of my
Employment. The minimum amount of the foregoing bonus shall be paid on a monthly
basis, and any additional amounts shall be paid upon my meeting the benchmarks
established by the Company. I understand that, except as provided above, there
is no guarantee, promise or assurance that I will be granted any other bonus
under any other bonus plan or, if I am awarded any other bonus, that any such
other award granted to me would be equal to those granted to other employees of
the Company, including but not limited to, officers who hold the same or similar
titles or offices or who perform the same or similar duties as me.
1.3 Reimbursement for Reasonable Business Expenses. I further understand
that the Company will reimburse me for any reasonable business related expenses
incurred by me for travel (for air travel, coach fares only), entertainment or
other business expenses in accordance with the Policies and Procedures of the
Company. All requests for reimbursements or any advances by the Company for
expenses shall be on such forms as the Company may require with documentation or
substantiation of any such expenses. All requests for reimbursement of expenses
or advances shall be approved by one of the following officers of the Company
(i) the Chairman of the Board and Chief Executive Officer, (ii) the President;
or (iii) any Executive Vice President as may be designated by the Chairman or
the President. I understand that I may be issued one or more credit cards,
including, without limitation an American Express Corporate Card, issued to me
on the account of the Company. I agree that I will use any such charge only for
business purposes or, in the event that I use any such credit cards for personal
purposes, I will identify any such expense as personal in nature and pay to the
Company the amount of any such charges at the time the account is rendered to
the Company for payment by the credit
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<PAGE> 3
card entity. The Company may revoke, modify or suspend its issuance
of credit cards to its employees, including me.
1.4 Modification of Agreement of Employment Termination and Release. My
prior employment with the Company, which was rendered pursuant to a certain
Agreement for Employment, dated January 1, 1990 (the "Original Employment
Agreement"), and was terminated pursuant to a certain Agreement of Employment
Termination and Release, dated July 2, 1995 (the "Termination Agreement").
Pursuant to the Original Employment Agreement, as confirmed in the Termination
Agreement, I am entitled to receive certain commissions for a three year period
commencing January 1, 1995 (the "Commissions"). With respect to the Commissions
which would otherwise be earned and payable for the period after May 1, 1997,
the provisions relating to the payment of such Commissions shall be modified as
follows:
a. To the extent the Commissions are earned in any given month, I shall
be paid $12,000 of the Commissions each month. If the amount of the Commissions
earned for a particular month is greater than $12,000, then the Company shall
hold such excess amount of Commissions (the "Excess Commissions"). The
cumulative amount of such Excess Commissions which remains unpaid, from time to
time, as hereinafter provided, shall be referred to as "Cumulative Excess
Commissions". The Company shall not be obligated to hold the Cumulative Excess
Commissions in a separate account, and shall not be obligated to pay me any
interest on the Cumulative Excess Commissions.
b. If the amount of the Commissions earned for a particular month is
less than $12,000, then I shall be paid (i) the amount of the Commissions earned
for such month, plus (ii) an amount equal to the difference between the amount
of Commissions earned for such month and $12,000; provided however, the amount
payable under (ii) above shall only be paid to me from the Cumulative Excess
Commissions in an amount up to, but not in excess of, the total amount of the
Cumulative Excess Commissions, as it exists at such time. Any amounts so paid
from the Cumulative Excess Commissions shall reduce the amount of Cumulative
Excess Commissions.
c. If my Employment is terminated at any time, the Company shall pay
to me promptly the total amount, if any, of the
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<PAGE> 4
Cumulative Excess Commissions which exist at that time, and if my Employment is
terminated prior to December 31, 1997 then any Commissions earned after the date
of such termination shall be paid in the same manner as they would have been
paid before the execution of this Agreement.
d. If, at any time, while I am employed by the Company, when there
exists any Cumulative Excess Commissions, any subsidiary of National makes an
initial public offering of its common stock, then, by delivery of a written
notice to the Company prior to such initial public offering, I may elect to
accelerate the payment of all or a portion of amount of the Cumulative Excess
Commissions which exists at that time, which amounts shall be paid by the
Company to such subsidiary on my behalf in exchange for common stock of such
subsidiary at a purchase price per share which is equal to seventy-five percent
(75%) of the initial public offering price of the stock; provided, however, any
such purchase of common stock shall be subject to the approval of the
underwriter engaged by the subsidiary with respect to any such initial public
offering.
e. Except as specifically provided herein, the terms and conditions of
the Termination Agreement shall remain unchanged and nothing provided herein
shall be construed to extend the period during which Commissions are earned or
to otherwise amend, change or modify the method by which Commissions are
determined.
2. Position and Title. My position shall be Executive Vice President, Business
Development and Strategic Marketing of National and I understand that I will be
elected as an officer of National and may be elected as an officer of one of
more of the subsidiaries of National. I shall have such duties as may be
assigned to me by the Chairman of the Board and Chief Executive Officer or the
President of National at any time or from time to time. I shall report to the
Chairman of the Board and Chief Executive Officer or to the President of
National if the Chairman so designates.
3. Work Hours; Exempt Employee Status. I agree that I will work at least forty
hours per week, during the normal business hours of the Company, prevailing
local time, however, I understand that I will not receive any additional
compensation for any hours that I work in excess of eight hours per day and
forty hours per week. As an executive officer of the Company with my duties as
Executive
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<PAGE> 5
Vice President, Business Development and Strategic Planning, I understand and
agree that my duties may require my services in excess of the services performed
by other employees of the Company. I agree that I will devote my full time and
attention to the performance of my duties during business hours. I further agree
that I will not engage in any civic or other activities that would materially
interfere with the performance of my duties under this Agreement or as an
employee of the Company. I will not engage in any other business or commercial
activity. Notwithstanding the foregoing and provided any such service does not
involve more than one day per month, I may serve as a director of any other
corporation and/or organization as long as such service does not interfere with
my assigned duties at the Company and provided that any such service does not
constitute an actual or potential conflict of interest with the Company.
4. At Will Employment. I understand and agree that my Employment will be
"at-will". This means that the Company has the right to and can terminate my
Employment at any time, with or without cause, and without notice, and I can
terminate my Employment at any time, with or without cause, and without notice.
There is no promise that my Employment will continue for a specific period of
time, duration or term and there is no promise that my employment will be
terminated only under particular circumstances. NO POSITION WITHIN THE COMPANY
IS CONSIDERED PERMANENT. This Section 4 constitutes the entire agreement between
me and the Company regarding the term of my Employment.
5. Vacations. The following is the vacation policy of the Company applicable to
me.
a. My paid vacation time ("Vacation Time") will accrue on the following
basis: (i) .0625 of a vacation day for each full working day worked at the
Company during each Working Year until such Vacation Time is modified by the
Company. A "Working Year" begins on the first day of my Employment and ends 365
continuous days thereafter.
b. If I do not take any Vacation Time within 180 days from the end of
each Working Year of my Employment, the Company will require that I take my
accrued Vacation Time and will assign me Vacation Time that must be used by me.
I am required to take
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<PAGE> 6
Vacation Time within the 180 day period described in Section 5.b because a
stacking of accrued Vacation Time beyond one Working Year into an extended
vacation may be a hardship on the Company.
c. I will give advance written notice of the dates my Vacation Time is
to begin and end by completing the Company's Vacation Request Form then in
effect ("Vacation Request") and submitting it to my supervisor, no less than 60
days before my proposed Vacation Time will begin. I will be given a written
receipt for the Vacation Request and my supervisor will review my Vacation
Request with the Company's payroll supervisor. If my supervisor and the payroll
supervisor are unable to agree mutually to approve the Vacation Request, my
Vacation Request shall be forwarded to the Chief Executive Officer or President
of the Company for review (my supervisor, the payroll supervisor, and/or the
Chief Executive Officer or President shall be referred to herein as the
"Designated Persons"). The Designated Persons can, in their discretion, turn
down my request for the proposed dates of Vacation Time in my Vacation Request,
but the Designated Persons must provide me with alternative dates which I must
use instead. The Designated Persons will provide me with a written acceptance or
rejection of the Vacation Request no more than 30 days after I present it to my
supervisor.
6. Health/Life/Welfare Plans.
a. I will be eligible for coverage under the Company's
health/life/welfare plans ("plans"), as may be amended from time-to-time, on the
thirty-first consecutive day of my Employment; provided, however, long term
disability coverage will commence only on the ninety-first consecutive day of my
Employment. The Company shall pay the entire cost of dependent coverage for
medical, dental and vision care pursuant to the plans for my dependents eligible
for coverage through the Company provided plans which are in place from time to
time. Even though my dependents and I will be eligible for the plans on the
thirty-first consecutive day of my Employment (except in the case of long term
disability, in which case I will be eligible on the ninety-first consecutive day
of my Employment), the actual date coverage would go into effect on the plans,
as respects me or my dependents eligible for coverage, is at the sole discretion
of the plans' provider(s) (i.e., the insurance company or plans' trust).
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<PAGE> 7
b. Once my dependents and I are covered by the plans my
dependents and I will be covered until the earlier of the
following:
i. The date my Employment ceases, subject to Federal and
State laws and regulations regarding the termination date of such
coverage, or
ii. Coverage for my dependents or me or the Companies
under the plans is terminated by the insurance company or other
organization providing these benefits, or
iii. The insurance company or other organization providing
these benefits refuses to cover my dependents or me under any of
the plans.
7. Sick Time.
a. If I do not work because of illness, sickness, disease, accident or
disability, at the option of the Company, the Company, in its sole discretion,
may require me to bring a written notice from my physician, addressed to the
Company, on the day I return to work (i) indicating the reason I was unable to
work on the days that I missed work and stating "I have determined that (my
name) was too ill, sick, diseased, injured or disabled to report to work and
perform his duties from (insert date) to (insert date)", and (ii) stating that I
am now able to resume the duties I performed and work the number of hours I was
employed to work prior to such absence. I consent to the disclosure by my
physician to the Company of such medical information as the Company may be
legally entitled to obtain regarding my ability to perform my job.
b. If sick time pay ("Sick Time") is provided by the Company, it is only
payable to me for the times when I am too ill, sick, diseased, injured or
disabled to do the work which I was then employed by the Company to do.
c. Currently, the Company provides me with six (6) Sick Time days during
my Working Year. The Sick Time accrues at one-half day per each two consecutive
pay periods. At the end of any Working Year, all accrued unused Sick Time is
transferred to the next concurrent Working Year. No more than six (6) Sick Time
days may
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<PAGE> 8
be used in any Working Year. If unused Sick Time days are carried over from one
Working Year to the next concurrent Working Year, then the amount of Sick Time
days I can accrue in that next concurrent Working Year shall be limited to the
difference between the unused Sick Time days carried forward to the next
concurrent Working Year and six (6) days.
d. The Company reserves the right to eliminate Sick Time upon
30 days' notice to its employees.
e Normal visits to my doctor or dentist, which are not due to illness,
sickness, disease, accident or disability of a nature which prevented me from
performing the work which I was then employed by the Company to do, shall not be
considered Sick Time and I shall prearrange such visit with my supervisor.
8. Unpaid Absences. Any absence from work for any reason that is not expressly
compensated pursuant to this Agreement will result in a deduction from my salary
compensation, for the appropriate pay period, of an amount equal to the salary
compensation I would have been paid for the time of such absence and, in the
Company's discretion, I may not be allowed to make up time in this regard.
Nothing herein shall operate to authorize an unpaid absence.
9. Other Benefits.
9.1 Automobile Allowance. The Company shall pay me $500 per
month as a reimbursement for automotive expenses, which is intended
to include, but not be limited to, any mileage allowance and
insurance reimbursement.
9.2 Cellular Telephone Expenses. I shall be reimbursed for
cellular telephone expenses related to the business of the Company.
9.3 Laptop Computer. I shall be provided an appropriate
laptop computer to use in my Employment which laptop computer shall
remain the property of the Company.
9.4 Parking Space. I shall be provided a reserved parking
space at the Company's building located at 395 Oyster Point
Boulevard, South San Francisco, California.
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<PAGE> 9
10. Travel Expectations. I understand that my duties as an employee shall
require that I travel during the term of my employment with the Company. The
areas in which I may travel and the frequency of my travel to perform my duties
as an employee may be changed from time to time in the sole discretion of the
Company.
11. Proprietary Information. I agree to be bound by the terms of the
Proprietary Information Agreement and exhibits thereto, which are attached as
Exhibit "A" and incorporated by this reference ("Proprietary Agreement"), and,
by the rules of confidentiality promulgated by the Company from time to time
and applicable to employees of the Company.
12. Outside Activities. Unless I receive official notification to the
contrary in writing from either the Chairman of the Board and Chief Executive
Officer or President of the Company ("Official Notice"), the Company does not
now nor will it in the future sponsor any kind of event or activity for
employees or others, including, without limitation any athletic events. Any
participation in an activity by any officer, manager or director of the Company
does not in any way signify or imply a change to the foregoing. I assume
personal risk for any injury or loss associated with any activity or event,
whether I, or my dependents are participants or spectators, unless I have
received Official Notice that such activity or event is sponsored by the
Company, in which case the activity or event shall be subject to the terms and
conditions of that Official Notice.
13. No Promises or Representations With Respect to Career, Advancement,
Stock Ownership and Other Employment Issues.
a. No promises of a career opportunity at the Company have been made to
me.
b. No promises of future increases in Salary Compensation, or other
compensation payable by the Company have been made to me.
c. Except as specifically provided herein, no promises of being able to
obtain ownership in the Company have been made to me.
d. No promises of sharing the profits of the Company have been made to
me.
9
<PAGE> 10
e. No promises of advancement in the Company have been made to me.
f. No promises of a review of my work and/or performance at the Company
have been made to me, but the Company reserves the right to do so at any time.
g. Except to the extent specifically provided herein, nothing contained
herein shall be deemed to terminate, amend or modify any agreement that I may
have with the Company, including, without limitation, any confidentiality and
nondisclosure agreements.
14. Constitutional Rights and Offensive Conduct. The Company has
advised me that it does not condone or approve any matter or thing,
written or oral:
a. that denigrates any person, creed, color, sex, race, religion,
national origin, personal persuasion, derivation or political belief;
b. or anything else that, to the reasonable employer or employee, would
be considered offensive.
15. Consequences of Breach by Employee. Any breach by me of the
terms and/or conditions of employment set forth in this Agreement
or the Policies and Procedures, may result in discipline up to and
including termination of my Employment. Timely performance of my
duties of Employment is very important to the Company.
16. References. If and when the Company is asked for references
of any kind on prior or current employees, including me, the
Company may withhold any references for any reason.
17. Conditions of Offer. This Agreement and the terms and conditions
described in it are subject to (i) my first completing, signing and submitting
an Application for Employment to the Company, and (ii) the receipt of the
following, which the Company may then deem acceptable: my references and
background information received from any present or past employer or supervisor,
educational institution, law enforcement agency, state and/or federal
administrator, credit bureau, collection agency, military branch, the National
Personnel Records Center for the purpose of
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<PAGE> 11
obtaining my motor vehicle history, credit history and/or criminal history. I
hereby release any person and/or entity from any and all liability relating to
their furnishing any such information to the Company; provided, that such
information relating to me is factually correct.
18. Modifications to this Agreement.
a. No promises or changes in my Employment status or concerning any of
the terms and conditions of this Agreement or any other matter affecting or
relating to my relationship with the Company have been be made to me and I agree
that no such promises, or changes are valid unless they are made to me in
writing and signed by the Chairman of the Board and Chief Executive Officer or
President of the Company, or the person designated in writing by either of them
to make such promises or changes.
b. This Agreement and the terms and conditions described in it cannot be
changed orally or by any conduct of either me or the Company or any course of
dealings between me or another and the Company. Oral agreements are not binding
on the Company. This Agreement is a fully-integrated agreement that stands on
its own and requires no other document to interpret its meaning, and is binding
by itself and covers all the issues raised within it.
19. Worker's Compensation Insurance. I have been informed that the
Company carries Workers' Compensation Insurance, as required by
law.
20. Miscellaneous. If my Employment changes from the Company to any
subsidiary of the Company, then all of the above terms and conditions remain in
force with respect to my Employment by the entity for whom I previously worked
and by the entity for whom I am then working. Any waiver by the Company of any
breach by me of any term or condition of this Agreement or the Policies and
Procedures shall not be construed as a waiver of any subsequent breach by me of
this Agreement or the Policies and Procedures. I acknowledge that I have
received a copy of this Agreement.
21. Arbitration. Any dispute between me and the Company relating
to this Agreement, the Policies and Procedures or my Employment
shall be resolved by binding, non-appealable arbitration in
accordance with the Commercial Arbitration Rules of the American
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<PAGE> 12
Arbitration Association, except as otherwise mandated by law or governmental
regulation. Any such arbitration shall occur in San Francisco, California. The
fees and expenses of the arbitrator for any arbitration under this Agreement
shall be paid by the Company.
22. Governing Law. This Agreement shall be governed by the laws
of the State of California.
23. Severability. If any term, condition or provision of this Agreement is
held to be illegal, invalid, or unenforceable, such provision shall be full,
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision was never a part of this Agreement;
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance. In lieu of any such provision that is illegal,
invalid or unenforceable, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
24. Headings. The headings and captions for the various sections
and provisions of this Agreement are solely for the purpose of ease
of reference for the parties and will not be considered in any
manner as affecting the construction or interpretation of this
Agreement.
I have read the foregoing provisions of this Agreement, consisting of this and
the preceding twelve pages and I fully understand and agree to the terms and
conditions of this Agreement as a condition to my employment by the Company.
/s/ Douglas H. Helm Dated: May 7,1997
- --------------------------
Douglas H. Helm
ACCEPTED and AGREED
NATIONAL INSURANCE GROUP
By: /s/ Mark A. Speizer Dated: May 7, 1997
--------------------------------
Mark A. Speizer
Chairman and Chief Executive Officer
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<PAGE> 1
Exhibit 11.1
NATIONAL INSURANCE GROUP AND SUBSIDIARIES
COMPUTATION OF WEIGHTED AVERAGE SHARES
OUTSTANDING AND EARNINGS PER SHARE
(in thousands of dollars except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Actual common shares
outstanding 3,896,937 4,679,697 3,896,937 4,679,697
Weighted average common
shares issued upon exercise
of stock options 12,956 245 12,892 11,311
Common shares issuable under
outstanding stock
Options 79,831 - 79,831 -
Total weighted average
Shares outstanding 3,989,724 4,679,942 3,989,660 4,691,008
=========== =========== =========== ===========
Net income (loss) $ 838 $ (857) $ 1,640 $ (708)
=========== =========== =========== ===========
Net income (loss) per share $ 0.21 $ (0.18) $ 0.41 $ (0.15)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000815555
<NAME> NATIONAL INSURANCE GROUP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 13,972
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,159
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 25,165
<CASH> 4,955
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 2,492
<TOTAL-ASSETS> 47,976
<POLICY-LOSSES> 2,446
<UNEARNED-PREMIUMS> 5,819
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 833
0
0
<COMMON> 17,693
<OTHER-SE> 8,339
<TOTAL-LIABILITY-AND-EQUITY> 47,976
8,648
<INVESTMENT-INCOME> 899
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 13,961
<BENEFITS> 2,886
<UNDERWRITING-AMORTIZATION> 3,983
<UNDERWRITING-OTHER> 14,124
<INCOME-PRETAX> 2,515
<INCOME-TAX> 875
<INCOME-CONTINUING> 1,640
<DISCONTINUED> 0
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<PAYMENTS-CURRENT> 1,080
<PAYMENTS-PRIOR> 1,559
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</TABLE>
