UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of the earliest event reported): JANUARY 24, 1997
(NOVEMBER 8, 1996)
STANDARD MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
0-20882 No. 35-1773567
(Commission file number) (IRS employer identification no.)
9100 Keystone Crossing
Indianapolis, Indiana 46240
(Address of principal executive offices) (Zip Code)
(317) 574-6200
(Telephone)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements are filed as part of this report:
(a) Audited Financial Statements of Shelby Life Insurance Company:
Report of Independent Accountants
Balance Sheets as of December 31, 1995 and 1994
Statements of Income for the years ended
December 31, 1995 and 1994
Statements of Cash Flows for the years ended
December 31, 1995 and 1994
Notes to Financial Statements
Unaudited Interim Financial Statements of Shelby Life Insurance
Company
Balance Sheet as of September 30, 1996
Statements of Income for the nine months ended
September 30, 1996 and September 30, 1995
Statement of Cash Flows for the nine months ended
September 30, 1996 and 1995
Notes to Financial Statements
(b) Pro Forma Financial Information:
Standard Management Corporation
Pro Forma Combined Financial Statements (Unaudited)
Pro Forma Combined Balance Sheet as of September 30, 1996
(Unaudited)
Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1996 (Unaudited)
Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 (Unaudited)
Notes to Pro Forma Combined Financial Statements (Unaudited)
First Draft
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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 hereunto duly authorized.
STANDARD MANAGEMENT CORPORATION
(Registrant)
Date: JANUARY 24, 1997 By: /S/ RONALD D. HUNTER
Ronald D. Hunter
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
SHELBY LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
First Draft
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Shelby Life Insurance Company
We have audited the accompanying balance sheets of the Shelby Life Insurance
Company (the Company) as of December 31, 1995 and 1994, and the related
statements of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
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 financial position of the Shelby Life Insurance
Company as of December 31, 1995 and 1994 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
September 18, 1996,
except for Note 13
as to which the date is
November 8, 1996
First Draft
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SHELBY LIFE INSURANCE COMPANY
Balance Sheets
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inve stm ent s:
Debt secur iti es ava ila ble -fo r-s ale , at fair
value 57556880 28944618
Debt secur iti es hel d-t o-m atu rit y, at amo rti zed
cost 41647602 77872761
Poli cy loa ns
2268534 1840890
Othe r inve stm ent s
2420916 550000
103893932 109208269
Cash and cash equiv ale nts
1154269 -
Accrue d inve stm ent incom e
1331813 1850254
Rein sur anc e reco ver abl e
949637 1101964
Inco me tax es rec eiv abl e
- 220832
Deferr ed pol icy acqui sit ion costs , net
483018 378895
Pres ent value of futur e prof its , net
4475083 4012857
Defe rre d inco me tax es
499,000 1090000
Othe r asse ts
240444 317185
Tota l asse ts
113027196 118180256
LIABILITIES AND STOCKHOLDER'S
EQUITY
Poli cy dep osi ts and liabi lit ies :
Annui ty and life dep osi ts
84191283 92149921
Annu ity and life liabi lit ies
10996561 10794212
Acco unt s paya ble , accr ued expen ses and othe r liab
ili tie s 607954 713952
F ede ral incom e taxe s paya ble 415628 -
Paya ble to paren t
373025 271903
Tota l liab ili tie s
96584451 103929988
Comm itm ent s and con tin gen cie s (Not e 12)
Comm on sto ck, $100 par value , 25,0 00 sha res autho riz
ed, issue d
and outs tan din g
2500000 2500000
Addi tio nal paid-in cap ita l
13351000 13351000
Reta ine d earn ing s
580915 74074
Net unr eal ize d hold ing gain (lo ss) on avail abl e-f
or-sal e secu rit ies , net
of tax liabi lit y (ben efi t) of $5, 000 and $(86 3,0 00)
in 1995
and 1994, respe cti vel y
10830 -1674806
Tota l stoc kho lde rs' equit y
16442745 14250268
Tota l liab ili tie s and sto ckh old er' s
equi ty 113027196 118180256
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
SHELBY LIFE INSURANCE COMPANY
Statements of Income
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
REVENUES 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiu m inco me $ $
1627541 1851879
Net inv est men t inco me
7950287 7603188
Real ize d inve stm ent gains (loss ), net
84705 -80751
Poli cy cha rge s
2374615
2051454
Othe r inco me
334046 382110
Tota l reve nue s
11807880
12371194
POLICY BENEFITS AND EXPENSES
Policy benef its and expe nse s
2371044
2486783
Inte res t cred ite d to poli cie s
4812545
5382361
Unde rwr iti ng, acqui sit ion and insu ran ce
exp ens es 2106858 2003616
Oper ati ng exp ens es
1138446 346216
Tota l poli cy ben efi ts and expen
ses 10428893
10218976
Inco me bef ore provi sio n for inc ome taxes
1942301
1588904
Prov isi on for incom e taxe s
660460 514830
Net inc ome $ $
1281841 1074074
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
First Draft
<PAGE>
SHELBY LIFE INSURANCE COMPANY
Statements of Stockholders' Equity
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET
UNREALIZED
HOLDING
GAIN
(LOSS)
ADDITIONAL
ON TOTAL
AVAILABLE-
COMMON PAID-IN RETAINED
FOR- STOCKHOLDERS'
SALE
STOCK CAPITAL EARNINGS
EQUITY
SECURITIES
Bal an ce s at Jan ua ry 1, $ $
19 94 2500000 13048952 -
$
- 15548952
Add it io na l ac qu is it
io n co st s 302048
302048
Div id en d to par en t $
($ 40 per sha re ) -1000000
-
1000000
Net in co me
1074074
1074074
Net cha ng es in un re
al iz ed hol di ng
loss on av ai la bl
e-fo r-sa le
secu ri ti es , ne t $
of tax es of $8 63
,0 00
- -
1674806 1674806
Bala nc es at De ce mb er 31,
199 4 2500000 13351000 74074
-
1674806 14250268
Div id en d to par en t
($ 31 per sha re ) -775000
-
775000
Net in co me
1281841
1281841
Net cha ng es in un re
al iz ed hol di ng
gain on av ai la bl
e-fo r-sa le
secu ri ti es , ne t
of tax es of $8 68
,0 00
1685636
1685636
Bala nc es at De ce mb er 31, $ $ $ $
199 5 2500000 13351000 580915
$
10830 16442745
</TABLE>
First Draft
<PAGE>
SHELBY LIFE INSURANCE COMPANY
Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows from ope rat ing activ iti es:
Net incom e $ $
1281841 1074074
Adju stm ent s to reco nci le net incom e to net cas h prov ide d
by opera tin g acti vit ies :
Amort iza tio n of inve stm ent s, net
1251486 1456197
Amor tiz ati on of pre sen t valu e of futu re pro fit s, net
-462226 -897183
Defe rre d fede ral incom e tax pro vis ion (bene fit )
-277000 223000
Net (ga in) loss on sal e of inve stm ent s
-84705 80751
Chan ges in opera tin g asse ts and liabi lit ies :
Ot her inves tme nts -550000
-1870916
P oli cy loa ns -427644 -171850
Poli cy acq uis iti on cos ts
-104123 -378895
R ein sur anc e reco ver abl e 152327 182610
Fede ral incom e taxe s rece iva ble and paya ble
636460 -135920
Accr ued inves tme nt inc ome
518441 100804
Othe r asse ts
76741 51385
P oli cy lia bil iti es 202349 724012
Acco unt s paya ble , accr ued expen ses and othe r liab ili tie s
-105998 -129488
P aya ble to paren t 101122 271903
Net cas h prov ide d by oper ati ng act ivi tie s
888155 1901400
Cash flows from inv est ing activ iti es:
Procee ds fro m prin cip al rep aym ent s and mat uri tie s of
held-to-mat uri ty deb t secu rit ies
6685199 8775974
Proc eed s from princ ipa l repa yme nts and matu rit ies of
availa ble -fo r-s ale debt sec uri tie s
1988981 1503433
Proc eed s from sales of avail abl e-f or-sal e debt secur iti es
26370443 3278265
Purc has e of held -to -ma tur ity debt sec uri tie s
-21135616 -12460688
Purch ase of avail abl e-f or-sal e debt secur iti es
-4909255 -
Net cas h prov ide d by inve sti ng act ivi tie s
8999752 1096984
Cash flows from fin anc ing activ iti es:
Net incre ase in depos its
-7958638 -4779168
Divi den ds pai d
-775000 -1000000
Net cas h used by finan cin g acti vit ies
-8733638 -5779168
Net inc rea se (de cre ase ) in cash and cash equiv ale nts
1154269 -2780784
Cash and cash equiv ale nts , begi nni ng of yea r
- 2780784
Cash and cash equiv ale nts , end of yea r $ 1154269 $ -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
First Draft
<PAGE>
SHELBY LIFE INSURANCE COMPANY
Notes to Financial Statements
1.ORGANIZATION, BASIS OF PRESENTATION AND NATURE OF OPERATIONS:
ORGANIZATION
Shelby Life Insurance Company (the Company) is a wholly-owned subsidiary of
Delta Life and Annuity Company (Delta). Delta, a Tennessee corporation, is a
wholly-owned subsidiary of Delta Life Corporation (DLC), a Delaware corporation.
During 1995, the Company received approval for redomestication to Tennessee.
Accordingly, the Company is chartered and licensed in the State of
Tennessee and is licensed in various other states. Prior to 1995, the
Company was chartered and licensed in the State of Ohio as The Shelby Life
Insurance Company of Shelby, Ohio.
BASIS OF PRESENTATION
The accompanying financial statements of the Company are prepared on the basis
of generally accepted accounting principles. Such accounting principles
differ from statutory reporting practices used by insurance companies in
reporting to state regulatory authorities.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make various estimates that
affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities, as well as the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
Effective December 31, 1993, Delta acquired all of the common stock of the
Company. The fair value of the assets acquired was $123.2 million and
liabilities assumed totaled $107.7 million. The acquisition has been
accounted for under the purchase method. During 1994 Delta incurred
additional amounts associated with the acquisition totaling $302,048.
NATURE OF OPERATIONS
The Company markets individual life insurance, annuities and investment
products to its policyholders, primarily in the eastern half of the United
States. Its products are distributed through independent agents and brokers.
The operating results of companies in the insurance industry have
historically been subject to significant fluctuations due to competition,
economic conditions, interest rates, investment performance, maintenance of
insurance ratings, regulation and taxation, and other factors.
<PAGE>
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVESTMENTS
During 1994, the Company adopted Statement of Financial Accounting Standards
No. 115 (SFAS 115), "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES". Under the statement the Company's investments have been
classified as held-to-maturity and available-for-sale. Securities classified
into the held-to-maturity category are accounted for at cost, adjusted
First Draft
