UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1996
OR
[ ] 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 001-10997
INTEGON CORPORATION
______________________________
(Exact name of registrant as specified in its charter)
Delaware 13-3559471
______________________________ _____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 West Fifth Street, Winston-Salem, North Carolina 27152
(Address of principal executive offices) (Zip Code)
(910) 770-2000
______________________________
(Registrant's telephone number, including area code)
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.
Yes X No
As of October 31, 1996, there were 15,732,965 shares outstanding of Integon
Corporation's Common Stock.
Page 1
<PAGE>
INTEGON CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements.
Balance Sheets - September 30, 1996 and December 31, 1995...... 3
Statements of Operations - Three Months Ended September 30,
1996 and 1995 and Nine Months Ended September 30, 1996
and 1995................................................... 4
Statements of Cash Flows - Nine Months Ended
September 30, 1996 and 1995................................ 5
Notes to Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................... 15
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)
September 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale--at market ..... $ 497,942 $ 481,944
Other long-term investments ......................... 2,633 2,114
----------- -----------
500,575 484,058
Cash and cash equivalents ........................... 50,678 21,046
Reinsurance receivable .............................. 186,699 199,826
Premiums due and uncollected, net ................... 259,274 199,087
Prepaid reinsurance premiums ........................ 53,085 56,726
Accounts and notes receivable, primarily financing
receivables, net ................................ 32,273 28,277
Accrued investment income ........................... 8,311 7,683
Deferred policy acquisition costs ................... 59,292 46,413
Property and equipment, net ......................... 67,642 65,247
Goodwill ............................................ 107,721 110,976
Deferred loan costs ................................. 1,925 2,195
Deferred income taxes ............................... 20,024 12,934
Other assets ........................................ 6,091 7,211
----------- -----------
$ 1,353,590 $ 1,241,679
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums ................................... $ 371,868 $ 305,911
Loss and loss adjustment expenses payable ........... 444,191 416,740
Accrued expenses and other liabilities .............. 120,571 117,374
Short-term debt ..................................... 34,000 16,000
Notes payable ....................................... 150,751 150,807
----------- -----------
1,121,381 1,006,832
----------- -----------
STOCKHOLDERS' EQUITY
$3.875 Convertible Preferred Stock--$.01 par value
per share, 1,437,500 shares authorized, issued and
outstanding ...................................... 14 14
Common Stock--$.01 par value per share, authorized--
35,000,000 shares; issued--17,300,165 shares and
17,271,707 shares ................................ 173 173
Class A Non-Voting Common Stock--$.01 par value per
share, authorized 20,000,000 shares; issued and
outstanding--none ................................ -- --
Additional paid-in capital .......................... 147,802 147,296
Net unrealized appreciation (depreciation) of
securities ....................................... (2,985) 8,288
Retained earnings ................................... 125,026 116,897
Treasury stock--at cost, 1,567,200 shares ........... (37,821) (37,821)
----------- -----------
232,209 234,847
----------- -----------
$ 1,353,590 $ 1,241,679
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3
<PAGE>
Item 1. Financial Statements. (continued)
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net premiums written ......................................... $ 214,369 $ 163,564 $ 606,442 $ 458,126
========= ========= ========= =========
Premiums earned .............................................. $ 191,790 $ 146,537 $ 536,845 $ 413,145
Net investment income ........................................ 8,026 7,657 23,637 22,419
Net realized investment gains ................................ 1,140 3,248 2,360 6,171
Other income ................................................. 4,165 5,157 12,375 15,720
--------- --------- --------- ---------
205,121 162,599 575,217 457,455
--------- --------- --------- ---------
BENEFITS AND EXPENSES
Loss and loss adjustment expenses ............................ 147,249 107,820 411,839 301,796
Policy acquisition and other underwriting
expenses ................................................... 41,977 31,608 114,042 91,038
Other expenses ............................................... 4,311 4,088 11,682 13,472
Amortization of goodwill ..................................... 769 775 2,308 2,322
Interest expense ............................................. 3,732 3,593 11,087 10,917
--------- --------- --------- ---------
198,038 147,884 550,958 419,545
--------- --------- --------- ---------
INCOME FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND EXTRAORDINARY ITEMS .............................. 7,083 14,715 24,259 37,910
Federal income taxes ......................................... 2,212 4,805 7,706 11,836
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS ............................ 4,871 9,910 16,553 26,074
Extraordinary items, net of federal income tax
benefit of $276 ............................................ -- -- -- (2,624)
--------- --------- --------- ---------
NET INCOME .............................................. 4,871 9,910 16,553 23,450
Preferred stock dividends .................................... 1,393 1,393 4,178 4,178
--------- --------- --------- ---------
Net income available to common shareholders .................. $ 3,478 $ 8,517 $ 12,375 $ 19,272
========= ========= ========= =========
EARNINGS PER COMMON SHARE
Primary:
Income before extraordinary items .......................... $ .22 $ .55 $ .78 $ 1.40
Extraordinary items ........................................ -- -- (.17)
--------- --------- --------- ---------
NET INCOME ................................................. $ .22 $ .55 $ .78 $ 1.23
========= ========= ========= =========
Fully diluted:
Income before extraordinary items .......................... $ .22 $ .51 $ .78 $ 1.33
Extraordinary items ........................................ -- -- -- (.13)
--------- --------- --------- ---------
NET INCOME ................................................. $ .22 $ .51 $ .78 $ 1.20
========= ========= ========= =========
Weighted average common shares outstanding:
Primary .................................................... 15,880 15,705 15,869 15,700
========= ========= ========= =========
Fully diluted .............................................. 15,880 19,477 15,869 19,473
========= ========= ========= =========
Dividends declared per share ................................. $ .09 $ .09 $ .27 $ .27
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
Item 1. Financial Statements. (continued)
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income ...................................................................... $ 16,553 $ 23,450
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains ............................................ (2,360) (6,171)
Depreciation and amortization ............................................ 7,157 5,355
Net amortization of discounts and premiums ............................... 927 (761)
Provision for deferred federal income taxes (benefit) .................... (1,020) 2,753
Net decrease in reinsurance assets ....................................... 16,767 24,698
Increase in premiums due and uncollected ................................. (60,187) (43,629)
Increase in deferred policy acquisition costs ............................ (12,879) (8,450)
Net increase in accounts and notes receivable,
accrued investment income and other assets ............................ (2,754) (3,377)
Increase in unearned premiums ............................................ 65,956 24,973
Increase in loss and loss adjustment expenses payable .................... 27,451 25,028
Net increase in accrued expenses and other liabilities .................. 9,768 15,574
--------- ---------
Net cash flows provided by operating activities
from continuing operations ............................................ 65,379 59,443
--------- ---------
Cash Flows from Investing Activities
Investment securities sold ...................................................... 441,801 419,642
Investment securities matured, called or redeemed ............................... 18,984 21,995
Investment securities purchased ................................................. (492,463) (471,912)
Other ........................................................................... (7,021) 2,135
--------- ---------
Net cash flows used in investing activities ................................. (38,699) (28,140)
--------- ---------
Cash Flows from Financing Activities
Net increase (decrease) in short-term debt ...................................... 18,000 (4,000)
Common stock dividends .......................................................... (4,247) (4,239)
Preferred stock dividends ....................................................... (4,178) (4,178)
Decrease in notes payable ....................................................... (55) (20)
Increase (decrease) in book cash overdrafts ..................................... (6,568) 8,860
--------- ---------
Net cash flows provided by (used in) financing activities ................... 2,952 (3,577)
--------- ---------
Net increase in cash and cash equivalents ....................................... 29,632 27,726
Cash and cash equivalents at beginning of period ............................ 21,046 31,549
--------- ---------
Cash and cash equivalents at end of period ...................................... $ 50,678 $ 59,275
========= =========
Supplemental Disclosures of Cash Flows Information
Interest paid during the period ................................................. $ 10,498 $ 6,801
Federal income taxes paid during the period ..................................... 10,300 7,700
</TABLE>
The accompanying notes are an integral part of these statements.
Page 5
<PAGE>
Item 1. Financial Statements. (continued)
INTEGON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
Note 1 - Accounting Policies
The accompanying unaudited consolidated financial statements of Integon
Corporation and subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim periods.
In the opinion of management, these financial statements include all
adjustments, including all normal recurring accruals, necessary for a fair
presentation of the consolidated financial position at September 30, 1996 and
December 31, 1995 and the consolidated results of operations and cash flows for
the periods ended September 30, 1996 and 1995.
The operating results for the three months and nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year ending December 31, 1996.
Page 6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes on pages 3 through 6 of this
Quarterly Report on Form 10-Q. The reader is presumed to have read or have
access to Integon Corporation's 1995 Annual Report on Form 10-K.
Results of Continuing Operations
Nine Months Ended September 30, 1996 ("1996") Compared with Nine Months Ended
September 30, 1995 ("1995")
Net premiums written increased 32.4% from $458.1 million in 1995 to
$606.4 million in 1996. Nonstandard automobile insurance net premiums written
increased from $420.1 million in 1995 to $550.1 million in 1996 or 31.0% due
primarily to growth in the Company's more mature operating states. Specialty
auto products net premiums written increased 100.1% from $18.5 million in 1995
to $37.0 million in 1996. Premiums earned on all lines of business increased
29.9% from $413.1 million in 1995 to $536.8 million in 1996 and reflects the
increase in net premiums written referred to above.
Loss and loss adjustment expenses increased 36.5% from $301.8 million
in 1995 to $411.8 million in 1996. The loss ratio, defined as loss and loss
adjustment expenses as a percentage of premiums earned, increased from 73.1% in
1995 to 76.7% in 1996 due primarily to severe winter weather in the first
quarter and hurricanes Fran and Bertha in the third quarter. The Company
experienced an increase in the frequency of claims in 1996 compared to the same
period in 1995 and estimates that the severe winter weather and the hurricanes
accounted for approximately $12.0 million of additional loss and loss adjustment
expenses.
Policy acquisition and other underwriting expenses increased $23.0
million from $91.0 million in 1995 to $114.0 million in 1996. The expense ratio,
defined as policy acquisition and other underwriting expenses as a percentage of
premiums earned, decreased from 22.0% in 1995 to 21.2% in 1996. The decrease in
the expense ratio was due primarily to reductions in commission rates and state
taxes. In addition, a management bonus of $1.8 million, of which $1.0 million
was allocated to policy
Page 7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
acquisition and other underwriting expenses and $.8 million was allocated to
loss adjustment expenses, was reversed in the third quarter of 1996 due to
year-to-date financial results not meeting the Company's financial plan.
Net investment income increased 5.4% from $22.4 million in 1995 to
$23.6 million in 1996 as a result of the $67.7 million increase in average
invested assets. This higher level of invested assets was partially offset by
lower yields. The pre-tax yield of the portfolio was 6.0% in 1996 compared to
6.4% in 1995. The percentage of cash and invested assets invested in tax-exempt
securities was 20.3% and 25.4% in 1996 and 1995, respectively. In addition to
the variances discussed above, there were pre-tax net realized investment gains
of $2.4 million in 1996 compared to pre-tax net realized investment gains of
$6.2 million in 1995.
Other income less other expenses resulted in income of $.7 million in
1996 and $2.2 million in 1995. The decrease in 1996 income reflects the fact
that 1995 results included $.9 million of income from the sale of a joint
venture. Premium finance income also declined.
Interest expense increased 1.6% from $10.9 million in 1995 to $11.1
million in 1996 due to increased short-term borrowings to pay parent company
expenses as the insurance subsidiaries retain earnings to fund future growth.
Federal income taxes decreased $4.1 million from $11.8 million in 1995
to $7.7 million in 1996 due to lower pre-tax earnings. The effective tax rate
increased from 31.2% in 1995 to 31.8% in 1996 due primarily to decreased
holdings of tax-exempt securities in 1996. The Company's investment in
tax-exempt securities as a percentage of cash and invested assets decreased from
25.4% in 1995 to 20.3% in 1996.
Income before extraordinary items decreased $9.5 million from $26.1 million
in 1995 to $16.6 million in 1996.
Three Months Ended September 30, 1996 ("1996") Compared with Three Months Ended
September 30, 1995 ("1995")
Net premiums written increased 31.1% from $163.6 million in 1995 to $214.4
million in 1996. Nonstandard automobile insurance
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
net premiums written increased from $150.4 million in 1995 to $194.5 million in
1996 or 29.0% due primarily to growth in the Company's more mature operating
states. Specialty auto products net premiums written increased 126.6% from $6.0
million in 1995 to $13.5 million in 1996. Premiums earned on all lines of
business increased 30.9% from $146.5 million in 1995 to $191.8 million in 1996
and reflects the increase in net premiums written referred to above.
Loss and loss adjustment expenses increased 36.6% from $107.8 million
in 1995 to $147.2 million in 1996. The loss ratio, defined as loss and loss
adjustment expenses as a percentage of premiums earned, increased from 73.6% in
1995 to 76.8% in 1996. The increase in the loss ratio was due primarily to
higher frequency of claims in 1996 and to hurricanes Fran and Bertha which
accounted for $2.7 million of additional loss and loss adjustment expenses in
1996.
Policy acquisition and other underwriting expenses increased $10.4
million from $31.6 million in 1995 to $42.0 million in 1996. The expense ratio,
defined as policy acquisition and other underwriting expenses as a percentage of
premiums earned, increased from 21.6% in 1995 to 21.9% in 1996. This increase in
the expense ratio is attributable primarily to increased investment in
technology, partially offset by the reversal of $1.8 million in the management
bonus accrual, of which $1.0 million was allocated to policy acquisition and
other underwriting expenses and $.8 million was allocated to loss adjustment
expenses, due to year-to-date financial results not meeting the Company's
financial plan.
Net investment income increased 4.8% from $7.7 million in 1995 to $8.0
million in 1996 as a result of the $62.1 million increase in the average
invested assets. This higher level of invested assets was partially offset by
lower yields. The pre-tax yield of the portfolio was 5.8% in 1996 compared to
6.1% in 1995. The percentage of cash and invested assets invested in tax-exempt
securities was 20.3% and 25.4% in 1996 and 1995, respectively. In addition to
the variances discussed above, there were pre-tax net realized investment gains
of $1.1 million in 1996 compared to pre-tax net realized gains of $3.2 million
in 1995.
Page 9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Other income less other expenses resulted in an expense of $.1 million
in 1996 and income of $1.1 million in 1995. The decrease in other income less
other expenses was due to an increase in corporate expenses during 1996 and the
1995 realization of $.9 million in income from the sale of a joint venture.
Interest expense increased 3.9% from $3.6 million in 1995 to $3.7
million in 1996 due to increased short-term borrowings to pay parent company
expenses as the insurance subsidiaries retain earnings to fund future growth.
Federal income taxes decreased $2.6 million from $4.8 million in 1995
to $2.2 million in 1996 due to lower pre-tax earnings. The effective tax rate
decreased from 32.7% in 1995 to 31.2% in 1996.
Income before extraordinary items decreased $5.0 million from $9.9
million in 1995 to $4.9 million in 1996.
Page 10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
<TABLE>
<CAPTION>
Analysis of Financial Condition
Information regarding the Company's investment portfolio at September
30, 1996 is as follows:
September 30, 1996
-------------------------------
Type/Ratings of Investments (1) Carrying Amount (2) Percentage
- ------------------------------- ------------------- ----------
(in thousands)
<S> <C> <C>
Fixed maturities:
Government and agencies ............. $ 92,588 18.5%
Aaa ................................. 165,408 33.0%
Aa .................................. 63,493 12.7%
A (3) ............................... 158,444 31.7%
Baa (4) ............................. 13,633 2.7%
-------- -----
Total investment grade .......... 493,566 98.6%
Below investment grade .............. 4,376 0.9%
-------- -----
Subtotal ........................ 497,942 99.5%
Other long-term investments ............. 2,633 0.5%
-------- -----
Total invested assets ........... $500,575 100.0%
======== =====
</TABLE>
(1) The ratings set forth above are based on the ratings, if any, assigned by
Moody's Investors Service, Inc. ("Moody's"). If Moody's ratings were
unavailable, the equivalent ratings supplied by Standard & Poor's
Corporation ("S&P") or the National Association of Insurance Commissioners
("NAIC") were used where available. The percentage of rated securities that
were not assigned a rating by Moody's at September 30, 1996 was 12%.
(2) Carrying amount is estimated market value for fixed maturities available
for sale.
(3) The "A" category includes $23.4 million of securities which were not rated
by Moody's or S&P, but were rated "1" by the NAIC.
(4) The "Baa" category includes $4.4 million of securities which were not rated
by Moody's or S&P, but were rated "2" by the NAIC.
Page 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Liquidity and Capital Resources
Sources of Funds. The Company's major sources of operating funds have
been (i) dividends from its subsidiaries, (ii) reimbursements of costs and
expenses in connection with the management agreement among the Company and its
subsidiaries pursuant to which the Company provides certain services to such
subsidiaries, (iii) tax sharing payments from the operating subsidiaries of the
Company and (iv) borrowings under credit facilities. The Company files a
consolidated federal income tax return including its subsidiaries and receives
payments pursuant to a tax sharing agreement among the Company and its
subsidiaries. Taxes are computed for each subsidiary and paid to the Company as
if such subsidiary were filing a tax return on a stand-alone basis, thereby
providing additional funds to the Company, because the aggregate of such
payments generally exceeds taxes to be paid by the Company on a consolidated
basis. These sources are expected to be available for future needs except for
dividends from the Company's subsidiaries. Dividends will be retained by the
subsidiaries as needed to fund future growth. The Company's insurance
subsidiaries are limited as to the amount of ordinary dividends they may pay
(see "Regulation" below). In addition, in determining the ability of its
subsidiaries to pay dividends, the Company monitors its subsidiaries' operating
leverage based on the level of net premiums written to statutory surplus.
Currently, the Company seeks to maintain its subsidiaries' ratio of net premiums
written to statutory surplus at a level of approximately 3.0x in accordance with
industry standards. The ratio was 3.0x for the twelve months ended September 30,
1996.
As of September 30, 1996, Integon Corporation, the parent company, had
approximately $2.4 million of cash and cash equivalents that were available for
general corporate purposes, including debt service, dividend payments and
working capital. The Company believes that the sources of funds available to it,
including the $75.0 million committed credit facility described in "Financing
Activities" below, are and will be sufficient to satisfy its short-term needs.
Page 12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
The principal sources of funds for the Company's subsidiaries are net premiums
collected, proceeds from investment income and from investments that have been
sold, matured or repaid and premium financing revenues.
On a consolidated basis, net cash flows provided by operating activities for the
nine months ended September 30, 1996 and 1995 were $65.4 million and $59.4
million, respectively. Based on the Company's current financial plans,
management believes that its subsidiaries will continue to realize positive cash
flows from their operating activities and that the operating liquidity needs of
such subsidiaries can be funded from such cash flow.
Statements concerning cash flows look forward in time.
The following important factors, among others, could cause actual cash flows to
differ materially from those set forth in the forward looking statements: claims
frequency, claims severity, severe adverse weather conditions, the cost of
automobile repair, economic activity, competitive pricing, and the regulatory
environment in which the Company operates.
Uses of Funds. The Company's principal uses of funds are the payment of
corporate operating expenses, taxes, debt service and dividends on Common and
Preferred Stock. During the third quarter of 1996, the Company contributed $6.5
million of capital to the insurance subsidiaries to maintain the ratio of net
premium written to statutory surplus at a level of 3.0x.
The principal uses of funds of the Company's subsidiaries are the payment of
claims on insurance policies, the payment of operating expenses, purchase of
investments, tax sharing payments and dividends to the Company.
The Company and its subsidiaries have no material commitments for capital
expenditures.
Financing Activities: In July 1996, the Company's committed credit
facility was increased from $25.0 million to $75.0 million to reflect the
increased size of the Company and to pay parent company expenses as the
insurance subsidiaries retain earnings to fund future growth. The interest rate
charged on this credit facility is based on the bids of the participating
lenders and in the case of Eurodollar loans a margin percentage ranging from
Page 13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
.55% to .675% is added. The facility fee ranges from .20% to .35% of the total
amount of the facility.
Investments. In accordance with the Company's investment policy, the
Company's investments at September 30, 1996 consisted primarily of
investment-grade securities (rated Baa or better by Moody's Investor Services,
Inc. or the equivalent). Consolidated cash and cash equivalents at September 30,
1996 amounted to $50.7 million, or 9.2% of total cash and invested assets.
Management has determined that the entire fixed maturity portfolio should be
classified as "available for sale". Fixed maturity securities classified as
"available for sale" are carried at estimated market value. The market value and
amortized cost of all fixed maturity securities at September 30, 1996 were
$497.9 million and $502.6 million, respectively.
Management believes that the securities in the Company's investment portfolio at
September 30, 1996 are readily marketable.
Regulation. Insurance laws and regulations impose certain restrictions
on the amount of dividends that may be paid by insurance companies. The maximum
amount of ordinary dividends that a North Carolina domiciled property and
casualty insurance company may pay at any point in time without regulatory
approval is the lesser of (a) 10% of the policyholders' statutory surplus of
such property and casualty insurance company as of the preceding December 31 or
(b) the statutory net income of such property and casualty insurance company for
the preceding calendar year, less the amount of dividends paid during the
preceding 12 months. The Company's insurance subsidiaries paid approximately
$4.8 million of ordinary dividends in 1996.
If the insurance subsidiaries are not able to pay ordinary dividends and their
requests for the payment of extraordinary dividends are not granted, and if
amounts needed are in excess of the available funds under the credit facility,
additional borrowings, the issuance of additional securities or obtaining other
funds could be necessary to pay debt service, Common Stock and Preferred Stock
dividends and other expenses of the Company.
Page 14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Filed Herewith (*),
Nonapplicable (NA), or
Incorporated by Reference from
------------------------------
Integon
Exhibit Registration
Number Exhibit No. or Report
- ------ ------- --------------
11.1 Computation of Earnings per Share * NA
27 Financial Data Schedule * NA
b. Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter ended
September 30, 1996.
Filing Date Item No. Description
---------- -------- -----------
July 26, 1996 5 Other Events. Copy of press release
concerning second quarter 1996 results.
September 23, 1996 5 Other Events. Copy of press release
concerning third quarter 1996 losses
due to hurricane.
Page 15
<PAGE>
SIGNATURE
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.
INTEGON CORPORATION
November 12, 1996 /s/ Brian T. Sheekey
--------------------
Brian T. Sheekey
(Duly Authorized Officer
and Principal Accounting Officer)
Page 16
<PAGE>
INDEX TO EXHIBITS
Filed Herewith (*),
Nonapplicable (NA), or
Incorporated by Reference From
Integon
Exhibit Registration Sequential Page
Number Exhibit No. or Report Number
- ------ --------- -------------- ------------
11.1 Computation of Earnings
Per Share 11.1 *
27 Financial Data Schedule 27 *
<PAGE>
Exhibit 11.1
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income available to common shareholders:
Income before extraordinary items ..................... $ 4,871 $ 9,910 $ 16,553 $ 26,074
Preferred stock dividends ............................. 1,393 1,393 4,178 4,178
------------ ------------ ------------ ------------
Income before extraordinary items
available to common shareholders ..................... 3,478 8,517 12,375 21,896
Extraordinary items ................................... -- -- -- (2,624)
------------ ------------ ------------ ------------
Net income available to common
shareholders .................................... $ 3,478 $ 8,517 $ 12,375 $ 19,272
============ ============ ============ ============
Weighted average common shares outstanding:
Primary:
Common shares outstanding ........................ 15,732,440 15,704,507 15,724,386 15,699,957
Assumed exercise of stock options ................ 147,979 -- 144,273 --
------------ ------------ ------------ ------------
Total ............................................. 15,880,419 15,704,507 15,868,659 15,699,957
============ ============ ============ ============
Fully diluted:
Common shares outstanding ........................ 15,732,440 15,704,507 15,724,386 15,699,957
Assumed conversion of convertible
preferred stock ............................... -- 3,772,966 -- 3,772,966
Assumed exercise of stock options ................ 147,979 -- 144,273 --
------------ ------------ ------------ ------------
Total ............................................. 15,880,419 19,477,473 15,868,659 19,472,923
============ ============ ============ ============
Earnings per common share:
Primary:
Income before extraordinary items ................ $ .22 $ .55 $ .78 $ 1.40
Extraordinary items .............................. -- -- -- (.17)
------------ ------------ ------------ ------------
Net income ..................................... $ .22 $ .55 $ .78 $ 1.23
============ ============ ============ ============
Fully diluted:
Income before extraordinary items ................ $ .22 $ .51 $ .78 $ 1.33
Extraordinary items .............................. -- -- -- (.13)
------------ ------------ ------------ ------------
Net income ..................................... $ .22 $ .51 $ .78 $ 1.20
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information
extracted from Integon Corporation's September 30, 1996
financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000878660
<NAME> INTEGON CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Sep-30-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 497,942
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 500,575
<CASH> 50,678
<RECOVER-REINSURE> 186,699
<DEFERRED-ACQUISITION> 59,292
<TOTAL-ASSETS> 1,353,590
<POLICY-LOSSES> 444,191
<UNEARNED-PREMIUMS> 371,868
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 150,751
0
14
<COMMON> 173
<OTHER-SE> 232,022
<TOTAL-LIABILITY-AND-EQUITY> 1,353,590
536,845
<INVESTMENT-INCOME> 23,637
<INVESTMENT-GAINS> 2,360
<OTHER-INCOME> 12,375
<BENEFITS> 411,839
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 114,042
<INCOME-PRETAX> 24,259
<INCOME-TAX> 7,706
<INCOME-CONTINUING> 16,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,553
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
