<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
_____ EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
_____ EXCHANGE ACT OF 1934
For the transition period from ________________________ to
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Commission file number 0-19239
LAW COMPANIES GROUP, INC. 401(k) SAVINGS PLAN
(the "Plan")
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(Full title of the Plan)
LAW COMPANIES GROUP, INC.
114 Townpark Drive, Suite 500; Kennesaw, Georgia 30144
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(Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office)
Exhibit Index at Page 23
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REQUIRED INFORMATION
Audited financial statements and schedules for the Plan prepared in accordance
with the financial reporting requirements of the Employee Retirement Income
Security Act of 1974, as amended, are filed herein in lieu of an audited
statement of financial condition and statement of income and changes in plan
equity.
Financial Statements and Exhibits
- ---------------------------------
A) The following financial statements and schedules are being filed pursuant to
the Required Information to Form 11-K:
1) Statements of Net Assets Available for Benefits - December 31, 1997
and 1996
2) Statement of Changes in Net Assets Available for Benefits -
Year Ended December 31, 1997
3) Schedules
a) Assets Held for Investment Purposes - December 31, 1997
b) Transactions in Excess of 5% of the Current Value of Plan Assets
Year Ended December 31, 1997
B) The following exhibit is filed as part of this annual report:
Exhibit 23 Consent of Independent Auditors
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Audited Financial Statements and Supplemental Schedules
Law Companies Group, Inc.
401(k) Savings Plan
Year ended December 31, 1997
and as of December 31, 1996
With Report of Independent Auditors
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Law Companies Group, Inc.
401(k) Savings Plan
Audited Financial Statements and Supplemental Schedules
Year ended December 31, 1997 and as of December 31, 1996
Contents
Report of Independent Auditors................................................1
Financial Statements
Statements of Net Assets Available for Benefits...............................2
Statements of Changes in Net Assets Available for Benefits....................3
Notes to Financial Statements.................................................4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes...................13
Line 27d - Schedule of Reportable Transactions...............................14
<PAGE>
Report of Independent Auditors
The Board of Directors
Law Companies Group, Inc. 401(k) Savings Plan
We have audited the accompanying statements of net assets available for
benefits of Law Companies Group, Inc. 401(k) Savings Plan as of December 31,
1997 and 1996, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1997. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In
our opinion, the financial statements referred to above present fairly, in all
material respects, the net assets available for benefits of the Plan at December
31, 1997 and 1996, and the changes in its net assets available for benefits for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes and of reportable transactions for the
year ended December 31, 1997 are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974, and are not a required part
of the financial statements. These supplemental schedules are the responsibility
of the Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ Ernst & Young LLP
June 5, 1998
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Law Companies Group, Inc.
401(k) Savings Plan
Statements of Net Assets Available for Benefits
December 31
1997 1996
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Assets
Investments:
Massachusetts Mutual Life Insurance Company:
Guaranteed Income Fund at contract value
(Note 3) ................................... $15,643,010 $14,924,175
Separate Investment Accounts at fair value:
Equity Fund ................................. 19,333,108 14,569,435
Balanced Fund ............................... 5,110,168 4,283,042
Small Company Fund .......................... 3,458,916 1,527,272
Bond Fund ................................... 644,609 471,733
Law Companies Common Stock Fund ............. 1,196,096 1,333,339
Money market account ........................ 325,125 345,536
Participant loans receivable ................ 1,419,529 1,277,974
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47,130,561 38,732,506
Contributions receivable:
Participants .................................... -- 657,903
Employer ........................................ -- 15,478
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Net assets available for benefits .................. $47,130,561 $39,405,887
=========== ===========
See accompanying notes.
<PAGE>
Law Companies Group, Inc.
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1997
Additions to net assets attributed to:
Participant contributions ................................... $ 4,589,913
Employer contributions ...................................... 1,050,192
Investment income ........................................... 2,022,367
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7,662,472
Deductions from net assets attributed to:
Distributions to participants ............................... 5,174,064
Administrative expenses ..................................... 20,118
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5,194,182
Net realized and unrealized appreciation in fair value of
investments ................................................. 5,256,384
-----------
Net increase ................................................... 7,724,674
Net assets available for benefits at beginning of year ......... 39,405,887
-----------
Net assets available for benefits at end of year ............... $47,130,561
===========
See accompanying notes.
<PAGE>
Law Companies Group, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1997
1. Description of Plan
The following description of the Law Companies Group, Inc. ("Company") 401(k)
Plan ("Plan") provides only general information. Participants should refer to
the Summary Plan Description for Law Companies Group, Inc. 401(k) Savings Plan
for a more complete description of the Plan's provisions. Copies of this booklet
are available from the Plan administrator.
General
The Plan is a defined contribution plan which covers substantially all U.S.
employees who are age twenty-one or older. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Contributions
Each year, participants may contribute up to the lesser of 20% of their pre-tax
annual compensation, as defined by the Plan, or the maximum allowable by the
Internal Revenue Service. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution
plans.
Through November 1995, the Company's contribution was equal to 50% of the
participant's contributions, not to exceed 1% of the participant's compensation.
As of November 1995, the Plan was amended to provide the Company's matching
contributions in the form of the Company's common stock, not to exceed 1 1/2% of
the participant's compensation.
Effective May 1996 the Plan was amended to remove the provision of Company
matching contributions in the form of Company common stock (see further
discussion at Note 8). The Company is currently contributing matching
contributions in the form of cash.
Effective February 14, 1997, the Board of Directors elected to increase the
Company's matching percentage from 1 1/2% to 2% of the participant's
compensation.
<PAGE>
Law Companies Group, Inc.
401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Participant Accounts
Each participant's account is credited with the participant's contributions,
rollovers and allocations of (a) the Company's contributions and (b) Plan
earnings. Forfeited balances of terminated participants' nonvested accounts are
applied to future Company contributions and to pay administrative expenses of
the Plan.
Vesting
Participants are immediately vested in their contributions plus earnings
thereon. Company contributions plus earnings thereon vest 100 percent after 5
years of credited service.
Investment Options
Upon enrollment in the Plan, a participant may direct employer and participant
contributions in 5% increments with a 10% minimum in any of six investment
options.
Guaranteed Income Fund
Funds are invested in shares of a registered investment company that
invests in U.S. Government securities and corporate bonds.
Equity Fund
Funds are invested in shares of a registered investment company that
invests in Standard & Poor's 500 common stocks.
Balanced Fund
Funds are invested in shares of a registered investment company that
invests in corporate bonds, common stocks and U.S. Government securities.
<PAGE>
1. Description of Plan (continued)
Investment Options (continued)
Small Company Fund
Funds are invested in shares of a registered investment company that
invests in common stock of smaller capitalization companies.
Bond Fund
Funds are invested in shares of a registered investment company that
invests in U.S. Government securities, corporate bonds, and commercial
paper.
Law Companies Common Stock Fund
Funds are invested in shares of the Company's common stock. (see Note 8)
Participants may change their investment elections at any time.
Payment of Benefits
Upon termination of service, a participant may elect to receive benefits in
either lump-sum or annuity distributions. The full value of benefits are payable
upon retirement, disability, or to beneficiaries upon death of the participant.
Participant Loans Receivable
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of the lesser of $50,000 or 50% of their vested account balance. The
loans bear interest at prime plus 2% and must be repaid within 5 years, except
loans made for the purchase of a primary residence, which may be repaid over
longer periods. The respective participant's loan principal and interest are
repaid ratably through bi-weekly payroll deductions.
<PAGE>
1. Description of Plan (continued)
Administrative Expenses
The Plan is liable for all administrative expenses not paid by the Company. In
1997, the Company paid the majority of the Plan's administrative expenses.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Plan are prepared on the accrual basis of
accounting.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain amounts as previously reported have been reclassified to conform to the
current year presentation.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Valuation of Investments
The Plan has a group annuity contract with Massachusetts Mutual Life Insurance
Company (Mass Mutual). Mass Mutual receives contributions in exchange for
participation units in various investment options.
The fair values of the participation units owned by the Plan in Mass Mutual's
separate investment accounts are based on quoted redemption values as determined
by Mass Mutual on the last business day of the plan year. The investment in the
guaranteed income fund is stated at contract value, as determined by Mass
Mutual, which represents contributions made under the contract, plus interest,
less distributions and administrative expenses.
Investments in Law Companies Common Stock Fund are stated at fair value as
determined in good faith by Mass Mutual and based on a third party appraisal.
Concentration of Credit Risk
Financial instruments that potentially subject the Plan to significant
concentrations of credit risk consist principally of guaranteed investment
accounts and pooled separate accounts managed by Mass Mutual.
The Plan maintains all financial instruments with Mass Mutual. Mass Mutual's
policy is designed to limit exposure at any one institution. Mass Mutual
performs periodic evaluations of the relative credit standing of those
institutions in which its funds are invested.
<PAGE>
3. Investment with Insurance Company
The guaranteed investment account ("GIA") held by the Plan is fully
benefit-responsive and as such has been recorded at contract value on the face
of the financial statements in accordance with Statement of Position ("SOP")
94-4.
The average yield for the GIA for the years ended December 31, 1997 and 1996 was
7.0%. The crediting interest rates for the GIA was 7.0% at December 31, 1997 and
1996. At December 31, 1997 and 1996, the fair values of the investment accounts
were approximately $15,682,401 and $15,848,539, respectively, as determined by
Mass Mutual. The Plan's intention is to hold the GIA until maturity and to make
withdrawals from the accounts to pay benefits in the normal course of operations
of the Plan. The difference between the fair value and contract value is not
allocable to individual participants.
<PAGE>
4. Separate Investment Option Information
Below is a summary of the changes in investments by investment option, excluding
changes in contributions receivable.
<TABLE>
<CAPTION>
Year ended December 31, 1997
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Guaranteed Small Law
Income Equity Balanced Company Bond Stock Money
Fund Fund Fund Fund Fund Fund Market
-------------- -------------- -------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at beginning of year ... $ 14,924,175 $ 14,569,435 $ 4,283,042 $1,527,272 $ 471,733 $1,333,339 $ 345,536
Additions to net assets attributed
to:
Employer contributions ........ 599,416 308,325 77,752 106,143 22,687 (7,532) (20,411)
Participant contributions ..... 1,539,530 2,460,718 960,320 788,191 260,289 (53) --
Investment income ............. 1,027,277 329,534 165,439 19,994 31,703 -- --
------------ ------------ ------------ ---------- --------- ---------- ---------
3,166,223 3,098,577 1,203,511 914,328 314,679 (7,585) (20,411)
Deductions from net assets
attributed to:
Distribution to participants .. 2,480,895 2,120,534 832,205 377,620 100,288 71,661 --
Administrative expenses ....... 13,211 3,945 1,295 1,136 268 263 --
------------ ------------ ------------ ---------- --------- ---------- ---------
2,494,106 2,124,479 833,500 378,756 100,556 71,924 --
Net transfers between funds ........ 46,718 (163,417) (177,095) 748,005 (62,489) (391,722)
Net realized and unrealized
appreciation in fair value of
investments ..................... -- 3,952,992 634,210 648,067 21,242 333,988 --
------------ ------------ ------------ ---------- --------- ---------- ---------
Investments at end of year ......... $ 15,643,010 $ 19,333,108 $ 5,110,168 $3,458,916 $ 644,609 $1,196,096 $325,125
============ ============ ============ ========== ========== ========== =========
</TABLE>
<PAGE>
5. Plan Termination
Under provisions of the Plan, the Company reserves the right to amend or
terminate the Plan at any time provided that amendments will not divert a vested
interest, permit any part of the Plan's assets to revert to the Company, or
permit any part of the Plan's assets to be used for any purpose other than for
the exclusive benefit of participants or their beneficiaries. Upon Plan
termination, each participant's account will become fully vested.
6. Benefits Payable
At December 31, 1997 and 1996, Plan assets included approximately $1,133,000 and
$1,319,000, respectively, which represent amounts allocated to participants who
have elected to withdraw from the Plan as of year-end but have not yet received
payments.
7. Income Tax Status
The Plan has obtained a favorable determination letter dated March 5, 1998 from
the Internal Revenue Service (IRS) that the Plan qualifies under Section 401(a)
of the Internal Revenue Code (IRC) and the related trust is, therefore, not
subject to tax under current income tax laws. The Plan is required to operate in
conformity with the IRC to maintain its qualification. The Plan administrator is
not aware of any course of action or series of events that have occurred that
might adversely affect the plans qualified status.
8. Transactions with Related Party
Effective as of May 14, 1996, the Plan was amended to eliminate the ability of
participants to elect to invest in the Company common stock and the Company's
matching contributions in the form of the Company common stock. As of December
31, 1997, the Plan held 80,708 shares of Company stock with a fair market value
of $1,196,000.
<PAGE>
9. Form 5500
The Employee Retirement Income Security Act of 1974 (ERISA) requires the annual
filing of a Series 5500 Form with the IRS. This filing satisfies the
requirements of the IRS, the DOL, and the Pension Benefit Guaranty Corporation.
The Plan financial statements are prepared on the accrual basis of accounting,
whereas the Form 5500 is prepared on the cash basis of accounting. Therefore,
differences result relating to the timing of contributions and participant loans
receivable.
<PAGE>
<TABLE>
Law Companies Group, Inc.
401(k) Savings Plan
EIN: 58-0537111
Plan Number: 002
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<CAPTION>
Description of Investment (Including Maturity
Identity of Issue, Borrower, Date, Rate of Interest, Collateral, Par, or
Lessor or Similar Party Maturity Value)
Cost Current Value
- ---------------------------------- ------------------------------------------------ ---------------- --------------
<S> <C> <C> <C>
*Massachusetts Mutual Life Guaranteed Income Fund, (1) maturing
Insurance Company December 31, 2000, 7.0% $15,643,010 $15,643,010
Separate Investment Accounts:
Equity Fund 11,497,494 19,333,108
Balanced Fund 3,680,579 5,110,168
Small Company Fund 2,669,429 3,458,916
Bond Fund 578,456 644,609
Law Stock Fund 1,520,003 1,196,096
Money Market Account 325,125 325,125
Participant Loans, rates from 9.75% to 11.00%,
maturing through December 31, 2004
-- 1,419,529
=============
Total investments $47,130,561
=============
</TABLE>
*Indicates a party-in-interest to the Plan.
(1) Reported at contract value.
<PAGE>
<TABLE>
Law Companies Group, Inc. 401(k) Savings Plan
EIN: 58-0537111
Plan Number: 002
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1997
<CAPTION>
Current Value of
Purchase Selling Cost of of Asset on Net Gain
Identity of Party Involved Description of Assets Price Price Asset Transaction Date (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of securities transactions in excess of 5% of plan
assets.
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Mutual Life Insurance Guaranteed Income Fund
Company $3,963,861 $ -- $3,963,861 $3,963,861 $ --
Massachusetts Mutual Life Insurance Guaranteed Income Fund
Company -- 4,257,078 4,257,078 4,257,078 --
Massachusetts Mutual Life Insurance
Company Equity Fund 4,425,494 -- 4,425,494 4,425,494 --
Massachusetts Mutual Life Insurance
Company Equity Fund -- 3,928,721 2,277,216 3,928,721 1,651,505
Massachusetts Mutual Life Insurance
Company Balanced Fund 1,228,564 -- 1,228,564 1,228,564 --
Massachusetts Mutual Life Insurance
Company Balanced Fund -- 1,196,422 870,628 1,196,422 325,794
Massachusetts Mutual Life Insurance
Company Small Company Fund 2,049,587 -- 2,049,587 2,049,587 --
Massachusetts Mutual Life Insurance
Company Small Company Fund -- 780,507 657,654 780,507 122,853
</TABLE>
There were no category (i), (ii) or (iv) transactions during 1997.
<PAGE>
SIGNATURE
The Plan.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on their behalf by the undersigned
hereunto duly authorized.
LAW COMPANIES GROUP, INC.
401(k) SAVINGS PLAN
/s/ Robert B. Fooshee
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Robert B. Fooshee
Member of the Plan Administrative Committee
Dated: June 29, 1998
FORM 11-K
INDEX TO EXHIBITS
EXHIBIT NUMBER PAGE NUMBER
23 Consent of Independent Auditors 18
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Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-99114) pertaining to the Law Companies Group, Inc. 401(k) Savings
Plan of our report dated June 5, 1998, with respect to the financial statements
and schedules of the Law Companies Group, Inc. 401(k) Savings Plan included in
this Annual Report (Form 11-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
--------------------
Ernst & Young LLP
Atlanta, Georgia
June 25, 1998
