<PAGE>
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 Quarterly period ended MARCH 31, 1996.
[ ] Transition report pursuant to section 13 or 15 (d) of the
Securities Exchange Act of 1934.
For the transition period from_____________________ to ___________________.
Commission file number 0-17676
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AMERINST INSURANCE GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 52-1534560
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1751 W. 47th Street, Chicago, Illinois 60609
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (312) 523-4416
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.
[X] YES [ ] NO
Number of shares of commons stock outstanding:
Number outstanding
Class as of May 3, 1996
----- -----------------
$0.01 par value common 334,640
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AMERINST INSURANCE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
INVESTMENTS
Fixed maturity investments, at market value................. $38,755,479 $35,114,791
Short-term investments, at market value..................... 367,569 2,734,633
Mutual fund shares, at market value......................... 1,250,378
----------- -----------
TOTAL INVESTMENTS....................................... 39,123,048 39,099,802
Cash........................................................ 1,035,577 1,070,639
Assumed reinsurance premiums receivable..................... 809,271 1,126,426
Reinsurance recoveries receivable........................... 3,025,028 3,159,561
Accrued investment income................................... 588,106 440,567
Deferred policy acquisition costs........................... 691,466 562,475
Deferred income tax asset................................... 1,149,174 732,964
Income tax refunds receivable............................... 268,278 396,992
Prepaid expenses and other assets........................... 70,438 80,250
----------- -----------
TOTAL ASSETS............................................ $46,760,386 $46,669,676
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses.................. $22,127,531 $21,789,036
Unearned premiums........................................... 2,458,270 2,095,462
Reinsurance balances payable................................ 3,054,262 3,235,492
Accrued expenses and other liabilities...................... 449,407 489,893
----------- -----------
TOTAL LIABILITIES...................................... 28,089,470 27,609,883
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STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 2,000,000 shares authorized:
1996: 334,640 issued and outstanding
1995: 334,872 issued and outstanding................... 3,346 3,349
Additional paid-in capital.................................. 7,203,985 7,206,283
Retained earnings........................................... 11,314,987 11,274,797
Unrealized gains on investments, net of tax................. 148,598 575,364
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TOTAL STOCKHOLDERS' EQUITY............................. 18,670,916 19,059,793
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $46,760,386 $46,669,676
=========== ===========
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
2
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AMERINST INSURANCE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
------------- -------------
1996 1995
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<S> <C> <C>
REVENUE
Premiums earned............................... $ 1,177,029 $1,235,403
Net investment income......................... 634,786 630,408
Net realized capital gain (loss).............. 169,422 (82,855)
----------- ----------
Total revenue............................. 1,981,237 1,782,956
LOSSES AND EXPENSES
Losses and loss adjustment expense............ 1,086,821 1,296,995
Policy acquisition costs...................... 309,738 265,718
Operating and management expenses............. 220,293 209,309
----------- ----------
Total losses and expenses................. 1,616,852 1,772,022
----------- ----------
Income before income taxes..................... 364,385 10,934
Provision for income taxes.................... 103,821 16,920
----------- ----------
NET INCOME (LOSS).............................. $ 260,564 $ (5,986)
=========== ==========
RETAINED EARNINGS, BEGINNING OF PERIOD......... $11,274,797 $8,635,931
Net income (loss).............................. 260,564 (5,986)
Dividends paid................................. (217,607)
Excess of purchase price on stock redemptions.. (2,767)
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RETAINED EARNINGS, END OF PERIOD............... $11,314,987 $8,629,945
=========== ==========
Per common share data
Net income..................................... $0.78 $(0.02)
=========== ==========
Dividends paid................................. $0.65 $ -
=========== ==========
Weighted average number of shares
outstanding for the entire period........... 334,773 336,562
=========== ==========
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
AMERINST INSURANCE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided (Used) by Operating Activities.... $ 693,782 $(3,297,893)
----------- -----------
INVESTING ACTIVITIES
Purchases of investments........................... (4,803,315) (921,729)
Proceeds from sales and maturities of investments.. 1,930,082 4,862,790
Net sales of short term investments................ 2,367,064
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Net Cash Provided (Used) by Investing Activities.... (506,169) 3,941,061
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FINANCING ACTIVITIES
Redemption of shares............................... (5,068) (42,550)
Dividends paid..................................... (217,607)
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Net Cash Provided (Used) by Financing Activities.... (222,675) (42,550)
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INCREASE (DECREASE) IN CASH......................... $ (35,062) $ (685,718)
=========== ===========
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
AMERINST INSURANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1996
Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by the Registrant without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and reflect all adjustments consisting
of normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the results of operations for the periods shown.
These statements are condensed and do not include all information required by
generally accepted accounting principles to be included in a full set of
financial statements. It is suggested that these condensed statements be read
in conjunction with the consolidated financial statements at and for the year
ended December 31, 1995 and notes thereto, included in the Registrant's annual
report as of that date. Certain prior period amounts have been reclassified to
conform with current period presentations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATIONS
Net income for the first quarter of 1996 increased to $260,564 from a loss of
$(5,986) for the same period in 1995. This increase resulted from improvements
in both underwriting results and investment results.
While earned premiums declined 5% from the first quarter of 1995 due to a
continued competitive Accountants Professional Liability Insurance market, and
policy acquisition costs increased 16% due to a contractual increase effective
August 1, 1995, these changes were offset by a reduction in the loss ratio to
92% from 105%. Losses incurred do not reflect any development of prior year
reserves. The loss ratio of 92% represents the effective rate selected by
management in consultation with the Company's independent consulting actuary to
apply to current premiums assumed and earned. These fluctuations combined to
result in a net underwriting loss of $(439,824) for the period as compared to
$(533,619) for the same period in 1995.
Investment yield remained consistent with recent prior periods at 6.5%, however
sales of securities during the quarter resulted in realized capital gains of
$169,422 as compared to losses of $(82,855) in the first quarter of 1995. In
the prior year period the Company made a tax payment of $3,500,000,
necessitating the sale of several fixed maturity investments. Investments
selected were those generating a capital loss in order to obtain the benefit of
tax loss carrybacks. In the first quarter of 1996, the Company retained an
equity manager for the purpose of investing $2,000,000 in equities. Upon the
advice of the equity manager, $1,250,000 held in mutual funds as of December 31,
1995 were liquidated which resulted in the gain.
5
<PAGE>
AMERINST INSURANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-
(Continued)
FINANCIAL CONDITION AND LIQUIDITY
As of March 31, 1996, 99% of investments were in fixed maturities other than
short-term investments. As discussed above, management has appointed a new
equity manager, and transferred approximately $2,000,000 or 5% of total
investments to an equity portfolio during the second quarter. The balance of
cash remained stable, as did the ratio of cash and invested assets to total
liabilities, which was 1.43 to 1, compared to a ratio of 1.45 to 1 at March 31,
1995.
Deferred policy acquisition costs, representing the deferral of ceding
commissions expense related to premiums not yet earned, increased from December
31, 1995 with the increase in unearned premiums and an increase in the ceding
commission rate from 21.5% to 28.5% which became effective August 1, 1995.
The Registrant paid its third consecutive quarterly dividend of $0.65 per share
during the first quarter of 1996.
6
<PAGE>
AMERINST INSURANCE GROUP, INC.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
See Index to Exhibits immediately following the signature page.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
7
<PAGE>
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.
AMERINST INSURANCE GROUP, INC.
------------------------------
(Registrant)
May 10, 1996 /s/ Bruce W. Breitweiser
--------------------------------------------------
Bruce W. Breitweiser
(Vice President and acting Chief Financial Officer,
duly authorized to sign this Report in such
capacity and on behalf of the Registrant.)
8
<PAGE>
AMERINST INSURANCE GROUP, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- - ------ -----------
3(i) Certificate of Incorporation of the Company (1)
3(ii) Bylaws of the Company (1)
4 Article Fourth of Certificate of Incorporation -- included in Exhibit
3(i) above
10.1 Reinsurance Treaty between AIIC and Virginia Surety Company, Inc. (2)
10.2 Agreement between Country Club Bank and AIIC (2)
10.3 Agreement between Country Club Bank and AIIG (2)
10.4 Reinsurance Treaty between AIIC and CNA Insurance Companies (3), 1994
placement slip (4) and 1995 placement slip (5)
10.5 Revised Management Agreement between USA Risk Group (USARG) and AIIC
dated July 1, 1994 (5)
10.6 Escrow Agreement among AIIC, United States Fire Insurance Company and
Harris Trust and Savings Bank dated March 7, 1995 (5)
10.7 Security Trust Agreement among AIIC, Harris Trust and Savings Bank and
Virginia Surety Company, Inc. dated March 9, 1995 (5)
27 Financial Data Schedule (filed herewith)
- - -----------
(1) Filed with the Company's Registration Statement on Form S-1, Registration
No. 33-17421 and incorporated herein by reference.
(2) Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference.
(3) Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
(4) Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
(5) Filed with the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by reference.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 38,755,479
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 39,123,048
<CASH> 1,035,577
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 691,466
<TOTAL-ASSETS> 46,760,386
<POLICY-LOSSES> 22,127,531
<UNEARNED-PREMIUMS> 2,458,270
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 3,346
0
0
<OTHER-SE> 18,677,570
<TOTAL-LIABILITY-AND-EQUITY> 46,760,386
1,177,029
<INVESTMENT-INCOME> 634,786
<INVESTMENT-GAINS> 169,422
<OTHER-INCOME> 0
<BENEFITS> 1,086,821
<UNDERWRITING-AMORTIZATION> 309,738
<UNDERWRITING-OTHER> 220,293
<INCOME-PRETAX> 364,385
<INCOME-TAX> 103,821
<INCOME-CONTINUING> 260,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,564
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
<RESERVE-OPEN> 18,629,475
<PROVISION-CURRENT> 1,086,821
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 613,793
<RESERVE-CLOSE> 19,102,503
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
