<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------------
For Quarter Ended March 31, 1996 Commission File Number 1-11195
-------------- -------
LIFE PARTNERS GROUP, INC.
--------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware #75-2301836
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7887 East Belleview Avenue
Englewood, Colorado 80111
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 303-779-1111
------------
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports as
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days: Yes [X] No [ ]
As of May 6, 1996, Life Partners Group, Inc. had 27,924,785 shares of its Class
A Common Stock outstanding.
The Exhibit Index to this report is located on page 17 of 18.
<PAGE>
LIFE PARTNERS GROUP, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets at March 31, 1996
and December 31, 1995........................................ 2
Consolidated Statements of Operations for the three
months ended March 31, 1996 and March 31, 1995............... 3
Consolidated Statements of Stockholders' Equity for
the periods ended March 31, 1996 and December 31, 1995....... 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and March 31, 1995...................... 5
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
Signature Page............................................... 18
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFE PARTNERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities:
Held-to-maturity, at amortized cost. . . . . . . . . . . . . . . $ 676,404 $ 678,826
Available-for-sale, at fair value. . . . . . . . . . . . . . . . 2,735,729 2,672,365
Equity securities, at fair value . . . . . . . . . . . . . . . . . 29,021 23,721
Mortgage loans on real estate, at amortized cost . . . . . . . . . 105,049 110,214
Investment real estate, at cost, net of accumulated
depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . 4,871 4,921
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,809 226,212
Collateral loans . . . . . . . . . . . . . . . . . . . . . . . . . 5,090 4,373
Cash and short-term investments. . . . . . . . . . . . . . . . . . 90,700 197,684
Other invested assets. . . . . . . . . . . . . . . . . . . . . . . 59,912 59,593
----------- -----------
Total investments . . . . . . . . . . . . . . . . . . . . . . . 3,933,585 3,977,909
Notes and accounts receivable and uncollected premiums . . . . . . . 32,436 29,303
Receivable from reinsurers . . . . . . . . . . . . . . . . . . . . . 282,110 244,828
Accrued investment income. . . . . . . . . . . . . . . . . . . . . . 55,452 54,785
Deferred policy acquisition costs, net . . . . . . . . . . . . . . . 256,482 238,736
Cost of insurance acquired . . . . . . . . . . . . . . . . . . . . . 300,826 306,015
Goodwill, net of accumulated amortization. . . . . . . . . . . . . . 99,753 100,470
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,439 28,819
----------- -----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,988,083 $ 4,980,865
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits and claims. . . . . . . . . . . . . . . . . . 742,152 708,226
Dividends, endowments and other policyholder funds . . . . . . . . . 87,403 86,162
Policyholder account balances. . . . . . . . . . . . . . . . . . . . 3,298,101 3,271,906
Deferred policy fees . . . . . . . . . . . . . . . . . . . . . . . . 84,045 80,590
Investment borrowings. . . . . . . . . . . . . . . . . . . . . . . . 72,481 73,585
Notes payable:
Due within one year. . . . . . . . . . . . . . . . . . . . . . . . 20,795 15,000
Due after one year . . . . . . . . . . . . . . . . . . . . . . . . 221,708 231,083
Federal income taxes payable:
Current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,030 13,444
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,344 25,812
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 65,847 74,548
----------- -----------
4,614,906 4,580,356
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 50,000,000
shares authorized; 27,921,585 and 27,911,851 shares
issued and outstanding at March 31, 1996 and
December 31, 1995, respectively. . . . . . . . . . . . . . . . . . 28 28
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 287,895 287,863
Net unrealized investment gains . . . . . . . . . . . . . . . . . . 20,363 58,269
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . 64,891 54,349
----------- -----------
373,177 400,509
----------- -----------
$ 4,988,083 $ 4,980,865
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
<PAGE>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Universal life and investment product charges. . . . . . . . . . . $ 69,682 $ 53,319
Universal life charges ceded to client companies . . . . . . . . . (7,488) (7,104)
Universal life and investment product surrender
charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . 4,041 3,262
Traditional life and annuity premiums. . . . . . . . . . . . . . . 13,983 12,841
Traditional reinsurance premiums . . . . . . . . . . . . . . . . . (10,681) (7,933)
Accident and health insurance premiums, net. . . . . . . . . . . . 7,828 1,395
------------ ------------
Total premium income and other considerations. . . . . . . . . . 77,365 55,780
Net investment income. . . . . . . . . . . . . . . . . . . . . . . 73,560 61,016
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . 1,888 2,561
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,190 907
------------ ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . 154,003 120,264
------------ ------------
Benefits and expenses:
Policyholder benefits. . . . . . . . . . . . . . . . . . . . . . . 34,580 31,620
Interest credited to policyholders . . . . . . . . . . . . . . . . 43,952 32,922
Amortization of deferred policy acquisition costs,
costs of insurance acquired, and deferred policy fees. . . . . . 30,043 12,082
Other operating expenses . . . . . . . . . . . . . . . . . . . . . 20,911 26,750
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . 717 597
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 5,973 5,377
------------ ------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 136,176 109,348
------------ ------------
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . 17,827 10,916
Federal income tax expense . . . . . . . . . . . . . . . . . . . . 6,448 4,017
------------ ------------
Net earnings applicable to common stock. . . . . . . . . . . . . . . $ 11,379 $ 6,899
------------ ------------
------------ ------------
Weighted average common shares and common
equivalent shares outstanding. . . . . . . . . . . . . . . . . . . 28,435,125 26,125,969
------------ ------------
------------ ------------
Net earnings per common share and common
equivalent share outstanding . . . . . . . . . . . . . . . . . . . $ 0.40 $ 0.26
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Net
Additional Unrealized Total
Common Paid-In Investment Retained Stockholders'
Stock Capital Gains(Losses) Earnings Equity
------ ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 . . . . . . . . . . $ 26 $245,652 $ (22,783) $ 70,751 $293,646
Common Stock issued for cash, net of
related offering costs . . . . . . . . . . . 1,942 1,942
Common Stock issued in acquisition of
subsidiaries . . . . . . . . . . . . . . . . 2 39,457 39,459
Cash dividends paid on Common Stock. . . . . . (3,018) (3,018)
Compensation for management options. . . . . . 812 812
Change in unrealized gains (losses), net . . . 81,052 81,052
Net earnings (loss). . . . . . . . . . . . . . (13,384) (13,384)
------ ---------- ------------- ---------- -------------
Balance at December 31, 1995 . . . . . . . . . 28 287,863 58,269 54,349 400,509
Common Stock issued for cash . . . . . . . . . 32 32
Cash dividends paid on Common Stock. . . . . . (837) (837)
Change in unrealized gains (losses), net . . . (37,906) (37,906)
Net earnings . . . . . . . . . . . . . . . . . 11,379 11,379
------ ---------- ------------- ---------- -------------
Balance at March 31, 1996. . . . . . . . . . . $ 28 $287,895 $ 20,363 $ 64,891 $373,177
------ ---------- ------------- ---------- -------------
------ ---------- ------------- ---------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,379 $ 6,899
Adjustments to reconcile net earnings to net cash used by
operating activities:
Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . (1,888) (2,561)
Adjustments relating to universal life and annuity products:
Interest credited to account balances. . . . . . . . . . . . . . 41,146 26,756
Charges for mortality and administration . . . . . . . . . . . . (62,194) (46,215)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 1,635 1,229
Decrease in future policy benefits . . . . . . . . . . . . . . . . (4,460) (6,631)
Increase in reserve liability on modified coinsurance agreements . 5,120 3,004
Increase in deferred policy acquisition costs. . . . . . . . . . . (6,826) (11,315)
Amortization of cost of insurance acquired, net. . . . . . . . . . 11,245 6,384
Amortization of deferred policy fees . . . . . . . . . . . . . . . (4,218) (1,851)
Increase (decrease) in currently payable taxes . . . . . . . . . . 4,586 (5,744)
Deferred tax expense (benefit) . . . . . . . . . . . . . . . . . . (1,059) 2,559
(Decrease) increase in policy liabilities, other policyholder
funds, and other liabilities . . . . . . . . . . . . . . . . . . (10,054) 11,925
Increase in notes and accounts receivable and accrued
investment income. . . . . . . . . . . . . . . . . . . . . . . . (3,800) (1,037)
Amortization of bond and mortgage loan discount and premium, net . (67) 162
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,452 3,092
---------- ----------
Net cash used by operating activities. . . . . . . . . . . . . . . (18,003) (13,344)
---------- ----------
Cash flows from investing activities:
Sales of fixed maturities:
Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . 44,675 73,535
Held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . 9,826
Maturities of fixed maturities:
Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . 41,002 12,187
Held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . 7,029 8,298
Sales of other long-term invested assets . . . . . . . . . . . . . 13,583 9,838
(Increase) decrease in policy loans, net . . . . . . . . . . . . . (597) 517
Purchases of fixed maturities. . . . . . . . . . . . . . . . . . . (229,882) (98,868)
Purchases of other long-term invested assets . . . . . . . . . . . (10,397) (6,979)
---------- ----------
Net cash provided (used) by investing activities . . . . . . . . (134,587) 8,354
---------- ----------
Cash flows from financing activities:
Policyholder contract deposits . . . . . . . . . . . . . . . . . . 123,569 94,589
Policyholder contract withdrawals. . . . . . . . . . . . . . . . . (72,304) (56,945)
Proceeds from issuance of common stock . . . . . . . . . . . . . . 32 1,263
Change in principal of investment borrowings . . . . . . . . . . . (1,104) 517
Principal repayments on notes payable. . . . . . . . . . . . . . . (3,750) (3,750)
Cash dividends paid on common stock. . . . . . . . . . . . . . . . (837) (513)
---------- ----------
Net cash provided by financing activities. . . . . . . . . . . . 45,606 35,161
---------- ----------
Net (decrease) increase in cash and short-term investments . . . . . (106,984) 30,171
Cash and short-term investments at beginning of period . . . . . . . 197,684 41,715
---------- ----------
Cash and short-term investments at end of period . . . . . . . . . . $ 90,700 $ 71,886
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following notes to the unaudited consolidated financial statements should be
read in conjunction with the notes to consolidated financial statements
contained in the 1995 Form 10-K of Life Partners Group, Inc. ("Life Partners").
Life Partners and its consolidated subsidiaries are collectively referred to as
the "Company."
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements as of March 31, 1996, and
for the quarters ended March 31, 1996 and 1995, reflect all adjustments,
consisting solely of normal recurring items, which are necessary for a fair
presentation of financial position, results of operations and cash flows on
a basis consistent with that of the prior audited consolidated financial
statements.
The Company has reclassified certain prior period information to conform to
the 1996 presentation.
2. ACQUISITIONS AND PENDING MERGER
On April 28, 1995, Life Partners Group, Inc. acquired Lamar Financial
Group, Inc. ("Lamar"), together with all its subsidiaries, including Lamar
Life Insurance Company of Jackson, Mississippi for a purchase price of $77
million. The acquisition was accounted for using the purchase method, and
the results of operations of Lamar were included in the consolidated
statement of operations from the date of acquisition.
The following unaudited pro forma information presents the consolidated
results of operations of the Company and Lamar as if the acquisitions had
been effective at the beginning of the period presented, after giving
effect to adjustments to reflect the acquisition and the financing related
thereto.
Pro Forma
Three Months
Ended
March 31, 1995
--------------
(In thousands,
except share data)
Revenues . . . . . . . . . . . . . . . . $142,461
Earnings before income taxes . . . . . . 12,652
Net earnings. . . . . . . . . . . . . . 7,994
Net earnings per share . . . . . . . . . $ 0.28
Weighted average common shares and common
equivalent shares outstanding. . . . . 28,136,614
The above unaudited pro forma information was intended for informational
purposes only.
On March 11, 1996, the Company and Conseco, Inc. ("Conseco") jointly
entered into a definitive merger agreement providing for all shareholders
of the Company to receive Conseco stock for each of their shares through a
share exchange based upon a value of $21.00 per share for Life Partners
stockholders. The total value of the transaction would be approximately
$840 million, including $600 million to purchase the Company's outstanding
common stock and $240 million of existing debt to be assumed by Conseco.
Under the merger agreement, Life Partners would become a wholly-owned
subsidiary of Conseco. Consummation of the merger is subject to customary
terms and conditions, including approval by both the stockholders of the
Company and Conseco and regulatory authorities.
-6-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. CHANGES IN STOCKHOLDERS' EQUITY
During the three months ended March 31, 1996, 9,734 option shares
previously granted under the Company's incentive stock option plan were
exercised and 3,200 options were forfeited. Also during 1996, the
Stock Option Committee of the Life Partners Board of Directors granted
additional options to purchase 157,400 shares of common stock reserved
under the Company's stock option plan to certain key employees and
executive officers of the Company. The options are exercisable at prices
ranging from $13.50 to $13.75 per share, vest equally over three or five
year periods, and expire in 2006. In addition, on February 14, 1996, the
Company repriced certain common stock options to reflect the market value
of the Company's common stock on the date of repricing. Such repricing
reduced the exercise price of certain previously granted shares to $13.50
per share from previous prices ranging from $16.75 to $20.25. In exchange
for the reduction in exercise price, the number of stock options previously
granted were reduced by a ratio of the new exercise price divided by the
original exercise price. A total of 856,800 previously granted option
shares were subject to the repricing, which correspondingly reduced the
total number of option shares outstanding by 237,673. At March 31, 1996,
1,029,888 options were unexercised and outstanding.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"). SFAS 123 establishes fair value based
accounting and reporting standards for all transactions in which a company
acquires goods or services by issuing equity securities, including
stock-based compensation plans. Under SFAS 123, compensation cost is
measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
The fair value of stock options is determined using an option-pricing
model. This statement encourages, but does not require, companies to adopt
the fair value based method of accounting to recognize compensation expense
for employee stock compensation plans. However, it does require a company
to comply with the disclosure requirements set forth in the statement. The
Company continues to utilize the accounting in Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and beginning
with year end 1996, and thereafter, expects to make pro forma disclosures
of net income as if the fair value based method of accounting defined in
SFAS 123 had been applied.
4. NOTES PAYABLE
Notes payable at March 31, 1996 and December 31, 1995 are summarized as
follows (in thousands):
Amount Outstanding
Amount Net of Unamortized
Outstanding Issuance Costs
--------------------- --------------------
03/31/96 12/31/95 03/31/96 12/31/95
-------- -------- -------- --------
Borrowings under Bank Credit
Facility . . . . . . . . . . $152,428 $156,178 $151,888 $155,581
12-3/4% Senior Subordinated
Notes Due 2002 95,100 95,100 90,615 90,502
-------- -------- -------- --------
$247,528 $251,278 $242,503 $246,083
-------- -------- -------- --------
-------- -------- -------- --------
-7-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. NOTES PAYABLE (Continued)
Wabash has certain surplus debentures outstanding to Life Partners.
Payments made by Wabash on these surplus debentures are used by Life
Partners to pay principal and interest on Life Partners' notes payable.
Accordingly, the principal and interest payment terms of the surplus
debentures are structured, subject to certain surplus restrictions, to
provide essentially all cash required to meet Life Partners' obligations
under the bank credit facility and the senior subordinated notes.
5. INVESTMENTS
Investment income by type of investment was as follows (in thousands):
Three Months Ended
March 31,
--------------------
1996 1995
------- -------
Gross investment income:
Fixed maturities. . . . . . . . . . . . . . . . . $65,288 $54,032
Short-term investments. . . . . . . . . . . . . . 1,762 3,027
Policy loans. . . . . . . . . . . . . . . . . . . 3,658 3,368
Other invested assets . . . . . . . . . . . . . . 1,930 1,606
Mortgage loans. . . . . . . . . . . . . . . . . . 2,537 708
Equity securities . . . . . . . . . . . . . . . . 333 322
Collateral loans. . . . . . . . . . . . . . . . . 53 26
Investment real estate. . . . . . . . . . . . . . 265 87
------- -------
Gross investment income . . . . . . . . . . . . . 75,826 63,176
Less:
Investment expenses . . . . . . . . . . . . . . . 1,198 1,204
Interest expense on investment borrowings. . . . . . 1,068 956
------- -------
Net investment income . . . . . . . . . . . . . . $73,560 $61,016
------- -------
------- -------
Following is an analysis of net realized gains on investments (in thousands):
Three Months Ended
March 31,
--------------------
1996 1995
------- -------
Fixed maturities . . . . . . . . . . . . . . . . . . $448 $517
Equity Securities. . . . . . . . . . . . . . . . . . 1,874
Other. . . . . . . . . . . . . . . . . . . . . . . . 1,440 170
------- -------
$1,888 $2,561
------- -------
------- -------
-8-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. INVESTMENTS (Continued)
The cost and estimated fair values of equity securities are as follows (in
thousands):
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES FAIR VALUE
--------------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Preferred stock . . . . . . . . . . . . . . . . . . . . $18,984 $1,516 $128 $20,372
Common stock. . . . . . . . . . . . . . . . . . . . . . 4,329 4,497 177 8,649
------- ------ ---- -------
Totals. . . . . . . . . . . . . . . . . . . . . . . . $23,313 $6,013 $305 $29,021
------- ------ ---- -------
------- ------ ---- -------
DECEMBER 31, 1995:
------------------
Preferred stock . . . . . . . . . . . . . . . . . . . . $18,984 $1,123 $502 $19,605
Common stock. . . . . . . . . . . . . . . . . . . . . . 1,945 2,271 100 4,116
------- ------ ---- -------
Totals. . . . . . . . . . . . . . . . . . . . . . . . $20,929 $3,394 $602 $23,721
------- ------ ---- -------
------- ------ ---- -------
The amortized cost and estimated fair values of debt securities
classified as fixed maturity investments held-to-maturity are
as follows (in thousands):
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES FAIR VALUE
--------------- --------- ---------- ---------- ----------
United States treasury securities and obligations of
United States government corporations and
agencies. . . . . . . . . . . . . . . . . . . . . . . $1,954 $40 $1,994
Obligations of states and political subdivisions. . . . 2,391 251 2,642
Debt securities issued by foreign governments . . . . . 16,264 82 $324 16,022
Corporate securities. . . . . . . . . . . . . . . . . . 527,894 20,675 8,927 539,642
Mortgage-backed securities. . . . . . . . . . . . . . . 73,445 2,601 83 75,963
Other debt securities. . . . . . . . . . . . . . . . . 54,456 2,879 658 56,677
-------- ------- ------ --------
Totals. . . . . . . . . . . . . . . . . . . . . . . . $676,404 $26,528 $9,992 $692,940
-------- ------- ------ --------
-------- ------- ------ --------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1995: COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
United States treasury securities and obligations
of United States government corporations and
agencies. . . . . . . . . . . . . . . . . . . . . . . $2,024 $44 $2,068
Obligations of states and political subdivisions. . . . 2,420 307 2,727
Debt securities issued by foreign governments . . . . . 16,272 1,014 17,286
Corporate securities. . . . . . . . . . . . . . . . . . 533,110 36,273 $4,280 565,103
Mortgage-backed securities. . . . . . . . . . . . . . . 74,470 4,959 107 79,322
Other debt securities. . . . . . . . . . . . . . . . . 50,530 4,641 301 54,870
-------- ------- ------ --------
Totals. . . . . . . . . . . . . . . . . . . . . . . . $678,826 $47,238 $4,688 $721,376
-------- ------- ------ --------
-------- ------- ------ --------
</TABLE>
-9-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. INVESTMENTS (Continued)
The amortized cost and estimated fair values of debt securities classified
as investments available-for-sale are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES FAIR VALUE
--------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
United States treasury securities and obligations
of United States government corporations and
agencies. . . . . . . . . . . . . . . . . . . . . . . $94,199 $2,154 $554 $95,799
Obligations of states and political subdivisions. . . . 8,448 205 84 8,569
Debt securities issued by foreign governments . . . . . 18,435 46 809 17,672
Corporate securities. . . . . . . . . . . . . . . . . . 1,162,437 27,955 19,861 1,170,531
Mortgage-backed securities. . . . . . . . . . . . . . . 1,168,604 29,615 7,085 1,191,134
Other debt securities. . . . . . . . . . . . . . . . . 249,464 6,741 4,181 252,024
---------- ------- ------- ----------
Totals. . . . . . . . . . . . . . . . . . . . . . . .$2,701,587 $66,716 $32,574 $2,735,729
---------- ------- ------- ----------
---------- ------- ------- ----------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1995: COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
United States treasury securities and obligations
of United States government corporations and
agencies. . . . . . . . . . . . . . . . . . . . . . . $93,368 $4,620 $110 $97,878
Obligations of states and political subdivisions. . . . 8,443 273 8,716
Debt securities issued by foreign governments . . . . . 18,440 673 66 19,047
Corporate securities. . . . . . . . . . . . . . . . . . 1,044,051 52,822 11,965 1,084,908
Mortgage-backed securities. . . . . . . . . . . . . . . 1,147,848 52,606 1,345 1,199,109
Other debt securities. . . . . . . . . . . . . . . . . 249,325 14,584 1,202 262,707
---------- -------- ------- ----------
Totals. . . . . . . . . . . . . . . . . . . . . . . .$2,561,475 $125,578 $14,688 $2,672,365
---------- -------- ------- ----------
---------- -------- ------- ----------
</TABLE>
6. REINSURANCE
Policyholder benefits reflects the reduction of policy and contract claims
by amounts recovered from reinsurers of $32.4 million and $8.1 million,
including accident and health claims recovered from reinsurers of $20.9
million and $3,000 for the three months ended March 31, 1996 and 1995,
respectively. Accident and health premiums are reported net of premiums
ceded to reinsurers of $23.9 million and $12,000 for the three months ended
March 31, 1996 and 1995, respectively.
7. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES
The Company, through its subsidiary IPS, leases office facilities in
Englewood, Colorado. In July, 1994 the Company renegotiated certain
provisions of the master lease agreement. The minimum rental commitment
under the revised noncancelable lease is $1.1 million per year through
June, 2014 and $2.6 million per year through the lease expiration date in
July, 2016.
-10-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES, CONTINUED
Under an agreement entered into in 1991, Wabash and Life Partners, as
guarantor of the obligations of Wabash, have engaged Perot Systems
Corporation to provide data processing services to the Company through
February 2001. Fees under the servicing agreement are based upon usage,
with minimum annual fees of $3.6 million. The agreement is subject to an
option available in 1996 whereby Wabash could pay a fee of approximately
$4.0 million to terminate the agreement.
Various lawsuits and claims are pending against the Company. The Company
has established a liability of approximately $1 million in its financial
statements as of March 31, 1996 and December 31, 1995, for litigation
contingencies. While this provision has been established based upon
management's judgment as to the probable exposure associated with the
disposition of these lawsuits, there can be no assurance that the Company's
ultimate liability, if any, in connection with such lawsuits will not
exceed the provisions established therefor.
In connection with the Company's acquisition of certain of its insurance
subsidiaries, the seller, I.C.H. Corporation ("I.C.H.") agreed to indemnify
the Company relative to various matters pertaining to the Internal Revenue
Service ("IRS") examination for periods prior to the acquisition of said
insurance subsidiaries. To the extent the IRS examination of preacquisition
tax years results in an increase in Philadelphia Life's tax in years
subsequent to the examination, I.C.H. has contractually agreed to reimburse
the Company for certain disallowed deductions relating to Philadelphia
Life. In addition, the Company believes that I.C.H. is liable for damages
in post acquisition tax years with respect to Massachusetts General and
other insurance subsidiaries resulting from I.C.H.'s failure to satisfy
certain contractual covenants in connection with such tax examinations.
Philadelphia Life is also a party to an indemnification agreement between
Tenneco Inc. ("Tenneco"), I.C.H. and others included in the acquisition
agreement pursuant to which I.C.H. acquired Philadelphia Life and other
insurance companies from Tenneco, pursuant to which Tenneco agreed to
indemnify Philadelphia Life for certain lost deductions.
On October 10, 1995, I.C.H. filed under Chapter 11 for bankruptcy
protection. I.C.H., in publicly released documents, has stated that it has
reached a tentative agreement with the IRS whereby I.C.H.'s insurance
subsidiaries would be subject to approximately $68 million of federal
income tax liability for years in which certain of the Company's insurance
subsidiaries were members of the consolidated federal tax group to which
such tax liability related. All members of a consolidated group of
companies may be, under federal law, jointly and severely liable for tax
deficiencies related to such group. The Company has been informed that
I.C.H. has made payment to the IRS for the tax liability and interest.
I.C.H. has orally advised the Company of an intention to file suit against
certain subsidiaries of the Company for contribution of their respective
shares of such tax deficiency. Based upon the indemnification provisions
and other relevant documents, the Company does not believe that it will be
responsible for an allocable share of said taxes.
-11-
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
8. FEDERAL INCOME TAXES
Life Partners and its non-life insurance subsidiaries each file a separate
corporate federal income tax return. The life insurance subsidiaries file
a consolidated federal income tax return.
The components of the provision for income taxes on operating earnings are
as follows (in thousands):
Three Months Ended
March 31,
--------------------
1996 1995
------- ------
Current tax provision. . . . . . . $7,507 $1,457
Deferred tax provision (benefit) . (1,059) 2,560
------- ------
Total income tax provision . . . . $6,448 $4,017
------- ------
------- ------
9. SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash payments for interest expense and income taxes were as follows (in
thousands):
Three Months Ended
March 31,
--------------------
1996 1995
------- ------
Interest expense . . . . . . . . . $9,120 $8,596
Income taxes . . . . . . . . . . . 8,528 7,200
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion that follows should be read in conjunction with the discussion
contained in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.
GENERAL:
On April 28, 1995, Life Partners acquired Lamar Financial Group, Inc., together
with all its subsidiaries, including Lamar Life Insurance Company ("Lamar Life")
of Jackson, Mississippi, for a purchase price of $77 million. The acquisition
added $1.2 billion of assets to Life Partners. The acquisition of Lamar Life
provided an additional distribution system in universal life insurance, annuity
and group health products, as well as providing for consolidation efficiencies
at the Englewood, Colorado main administrative center. The acquisition was
accounted for using the purchase method of accounting and the Consolidated
Financial Statements include Lamar's assets and liabilities as of December 31,
1995, and its results of operations and cash flows from the date of acquisition
only. As such, 1996 amounts and other data may not be comparable to those of
prior periods.
On March 11, 1996, the Company and Conseco, Inc. ("Conseco") jointly entered
into a definitive merger agreement providing for all shareholders of the Company
to receive Conseco stock for each of their shares through a share exchange based
upon a value of $21.00 per share for Life Partners stockholders. The total
value of the transaction would be approximately $840 million, including $600
million to purchase the Company's outstanding common stock and $240 million of
existing debt to be assumed by Conseco. Under the merger agreement, Life
Partners would become a wholly owned subsidiary of Conseco. Consummation of the
merger is subject to customary terms and conditions, including approval by both
the stockholders of the Company and Conseco and regulatory authorities. In
relation to this transaction, the Company incurred addtional expenses totaling
$0.8 million during the first quarter of 1996.
RESULTS OF OPERATIONS:
The following table sets forth the results of operations of the Company for the
quarters ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
(in millions)
<S> <C> <C>
Revenues:
Universal life and investment product charges. . . . . . . . . $69.7 $53.3
Universal life charges ceded to client companies . . . . . . . . (7.5) (7.1)
Universal life and investment product surrender charges, net . . 4.1 3.3
Traditional life and annuity premiums. . . . . . . . . . . . . . 14.0 12.8
Traditional reinsurance premiums . . . . . . . . . . . . . . . . (10.7) (7.9)
Accident and health insurance premiums, net. . . . . . . . . . . 7.8 1.4
------- -------
Total premium income and other considerations . . . . . . . . 77.4 55.8
Net investment income. . . . . . . . . . . . . . . . . . . . . 73.6 61.0
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . 1.9 2.6
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 0.9
------- -------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 154.0 120.3
------- -------
Benefits and expenses:
Policyholder benefits. . . . . . . . . . . . . . . . . . . . . 34.6 31.6
Interest credited to policyholders . . . . . . . . . . . . . . . 44.0 32.9
Other operating expenses . . . . . . . . . . . . . . . . . . . . 20.9 26.8
Amortization of deferred policy acquisition costs, costs of
insurance acquired, and deferred policy fees . . . . . . . . . 30.0 12.1
------- -------
Total benefits and expenses. . . . . . . . . . . . . . . . . . . 129.5 103.4
------- -------
Earnings before amortization of goodwill, interest and taxes . . 24.5 16.9
Amortization of goodwill . . . . . . . . . . . . . . . . . . . 0.7 0.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 6.0 5.4
------- -------
Earnings before income taxes . . . . . . . . . . . . . . . . . . 17.8 10.9
Federal income tax expense. . . . . . . . . . . . . . . . . . . 6.4 4.0
------- -------
Net earnings applicable to common stock. . . . . . . . . . . . . $11.4 $6.9
------- -------
------- -------
Operating earnings before income taxes, interest expense.
amortization of goodwill, net realized gains and related
amortization . . . . . . . . . . . . . . . . . . . . . . . . . $22.8 $13.7
------- -------
------- -------
</TABLE>
-13-
<PAGE>
COMPARISON OF QUARTERS ENDED MARCH 31, 1996 AND 1995
UNIVERSAL LIFE AND INVESTMENT PRODUCT POLICY CHARGES
Universal life revenues consist of the monthly mortality charges and
administrative fees earned by the Company on its in force universal life
insurance, excluding net surrender charges on terminating policies. Such
revenues increased 30.8 % from $53.3 million in the first quarter of 1995 to
$69.7 million in 1996. The increase is due to the continued growth in the
universal life in-force block of business. Such in-force increased from $36.9
billion at March 31, 1995, to $47.0 billion at March 31, 1996, which is a result
of new life sales and the acquisition of Lamar during 1995. The Company's net
annualized premiums on new life sales were $25.3 million in the first quarter of
1995, compared to $24.4 million in the first quarter of 1996. Of the 1996
total, $3.8 million was produced by Lamar.
The Company's sales of its life insurance products will translate into future
increases in the Company's universal life revenues inasmuch as the premiums
received on most of the Company's insurance products are accounted for as
deposit liabilities. With respect to products that are accounted for as deposit
liabilities, revenues are recognized over time in the form of investment income
on policyholder account balances, surrender charges and mortality and other
charges deducted from the policyholders' account balances.
UNIVERSAL LIFE CHARGES CEDED TO CLIENT COMPANIES
Universal life charges ceded to client companies consist of monthly mortality
charges and administrative fees which are ceded to entities in the Company's
network of agent owned reinsurance companies and affiliated companies. The
amount of such charges ceded increased 5.6% from $7.1 million in the 1995
period to $7.5 million in the 1996 period. This growth is the result of added
production in existing client companies and the merger of certain stacking
companies into existing active client companies during 1995.
UNIVERSAL LIFE AND INVESTMENT PRODUCT SURRENDER CHARGES, NET
Revenues from surrender charges represent fees assessed on terminating policies,
net of amounts ceded to client companies. Increases or decreases in surrender
charges are based on termination rates and the level of surrender charges
implicit in the terminating policies. Surrender charges include $0.3 million of
charges on Lamar policies in 1996.
TRADITIONAL LIFE AND ANNUITY PREMIUMS
Premiums on traditional policies increased 9.4% from $12.8 million in the first
quarter of 1995 to $14.0 million in 1996. This growth relates entirely to the
acquisition of Lamar. Sales growth in this product line has not been a
strategic goal of the Company. Rather, the Company's new business strategy
emphasizes the sale of universal life products that generally have greater
profit margins.
REINSURANCE PREMIUMS CEDED
Reinsurance premiums ceded represent coinsured traditional premiums as well as
yearly renewable term reinsurance premiums on traditional and universal life
policies for risks in excess of the Company's maximum retention. The Company
does not retain the mortality risk for any new policy to the extent the risk
exceeds the Company's stated retention, which ranges from $100,000 to $500,000.
The reinsurance premiums increased by 35.4% from $7.9 million in the first
quarter of 1995 to $10.7 million in 1996, relating primarily to reinsurance
premiums on Lamar business, combined with continued growth in life insurance in
force.
ACCIDENT AND HEALTH INSURANCE PREMIUMS, NET
Accident and health insurance premiums represent premiums earned over the
applicable period on individual and group accident and health policies. Such
revenues increased from $1.4 million to $7.8 million, from the 1995 to the 1996
periods. The increase relates entirely to the acquisition of Lamar, which added
considerably to the Company's accident and health business. Lamar underwrites
the business and cedes a substantial portion of said business to its reinsurers.
As such, this business principally represents a servicing fee to the Company.
-14-
<PAGE>
NET INVESTMENT INCOME
Net investment income increased $12.6 million, or 20.7%, from $61.0 million in
the first quarter of 1995 to $73.6 million in 1996. This increase reflected
primarily an increase in invested assets relating to the acquisition of Lamar
offset somewhat by a decrease in the effective yield on invested assets.
Average invested assets, net of investment borrowings and excluding the
Statement of Financial Accounting Standards No. 115 mark-to-market adjustment,
were $3.0 billion for the three months ended March 31, 1995, compared to $3.9
billion for the three months ended March 31, 1996. Investment income is stated
net of interest expense on investment borrowings, which total $1.1 million and
$1.0 million during the 1996 and 1995 quarters, respectively.
NET REALIZED GAINS
The Company's net realized gains decreased from $2.6 million in the 1995
quarter to $1.9 million in the 1996 quarter. In accordance with applicable
financial reporting rules, the net amortization of deferred policy acquisition
costs and deferred policy fees was decreased by approximately $0.7 million
during the 1995 quarter and was increased by $0.1 million during the 1996
quarter in conjunction with the recognition of these net gains.
POLICYHOLDER BENEFITS
Total policyholder benefits increased $3.0 million, or 9.5%, from $31.6 million
in the 1995 quarter to $34.6 million in the 1996 quarter. Included in this
amount are benefits related to Lamar policies totaling $3.6 million during the
1996 quarter. Policyholder benefits consists primarily of mortality and
morbidity benefits, traditional annuity benefits, and reserve changes on
traditional life products. These benefits can vary from period to period based
on mortality experience and will generally increase with growth in the Company's
in-force block of insurance business.
INTEREST CREDITED TO POLICYHOLDERS
Interest credited to policyholders includes interest credited to universal life
and annuity account balances, and the interest accretion inherent in reserve
increases on traditional life insurance policies determined based on standard
actuarial valuation rates. Interest credited increased 33.7% from $32.9 million
in the 1995 quarter to $44.0 million in the 1996 quarter primarily as a result
of increased policyholder account balances acquired with Lamar.
OTHER OPERATING EXPENSES
Other operating expenses consist of general, administrative, and other operating
costs. These costs were $26.8 million for the 1995 quarter and $20.9 million
for the 1996 quarter. The 1995 amount includes approximately $14.2 million of
one-time litigation charges related to the settlement of a class action lawsuit.
The 1996 quarter includes approximately $0.8 million in one-time expenses paid
or accrued in connection with the pending acquisition of the Company by Conseco.
Also in 1996, the Company resolved certain disputes with the Internal Revenue
Service resulting from the examination of agent compensation practices in
certain of its life insurance subsidiaries. The favorable resolution of these
disputes resulted in the release of certain accrued liabilities and the
reduction of other operating expenses by $1.8 million in the 1996 quarter.
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS AND COSTS OF INSURANCE
ACQUIRED
Amortization of deferred policy acquisition costs and cost of insurance acquired
increased between the 1995 and 1996 quarters, from $12.1 million in 1995 to
$30.0 million in 1996. Portions of this increase are due to the Company's
expanding in-force business and reserve recognition thereto, and due to the
acquisition of Lamar, which increased amortization of deferred policy
acquisition costs and costs of insurance acquired by $3.4 million in 1996. In
addition, the Company revised its assumptions related to expected gross profits
on the in-force block of business at December 31, 1995. Such revised
assumptions served to shorten the amortization period for the remaining deferred
costs and fees.
-15-
<PAGE>
INTEREST EXPENSE
The Company's interest expense increased by approximately $0.6 million between
the 1995 and 1996 periods. The increase is primarily due to a net increase in
the outstanding borrowings under the Company's bank credit facility from $116.7
million at March 31, 1995 to $151.9 million at March 31, 1996, which includes an
additional $36 million of long-term debt established on April 28, 1995, as a
result of the Lamar acquisition and $14 million borrowed in December 1995 to
strengthen the surplus position of the insurance subsidiaries. In addition, the
Company's bank credit facility borrowing rates (on which bank credit facility
interest expense was based) decreased from an average rate of 6.9% during the
first quarter of 1995 to an average rate of 6.6% during the first quarter of
1996.
FEDERAL INCOME TAXES
In general, the provision for federal income taxes reflected in the Company's
operating results is computed using the prevailing statutory corporate rate of
35% for the 1995 and 1996 periods as adjusted primarily for the nondeductibility
of certain items such as the amortization of goodwill.
FINANCIAL RESOURCES AND LIQUIDITY:
HOLDING COMPANY OPERATIONS
As a result of previous prepayments on the Company's senior indebtedness, such
indebtedness was approximately $23.0 million less than the holding company's
senior surplus debenture receivable from its direct insurance subsidiary at
March 31, 1996. Such differences on the Senior indebtedness could create
approximately $1.5 million of earnings generated annually by the holding company
in excess of its interest requirements on the senior loan. An additional
$1.2 million in annual earnings is generated by the difference between the
interest income on the subordinated surplus debenture and the actual interest
expense on the subordinated notes.
NET UNREALIZED GAINS
Net unrealized gains changed from $58.3 million at December 31, 1995 to
$20.4 million at March 31, 1996. This change was primarily due to a decrease in
the market value of the available-for-sale investment portfolio as a result of a
general increase in market interest rates in 1996. The held-to-maturity
investment portfolio included total net unrealized gains of $42.6 million and
$16.5 million at December 31, 1995 and March 31, 1996, respectively.
OPERATING CASH FLOWS
The Company's Consolidated Statements of Cash Flows reflect net cash used by
operating activities of $18.0 million and $13.3 million for the three months
ended March 31, 1996 and 1995, respectively. Included in cash flows from
financing activities are policyholder contract deposits and withdrawals which
provided net cash flows of $51.3 million and $37.6 million for the three months
ended March 31, 1996 and 1995, respectively. The deposits and withdrawals are
reported as financing activities pursuant to applicable financial reporting
rules; however, the Company considers the policyholder deposits and withdrawals
to be basic to the Company's core insurance operations.
-16-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In connection with the Company's acquisition of certain of its insurance
subsidiaries, the seller, I.C.H. Corporation ("I.C.H.") agreed to indemnify the
Company relative to various matters pertaining to the Internal Revenue Service
("IRS") examination for periods prior to the acquisition of said insurance
subsidiaries. To the extent the IRS examination of preacquisition tax years
results in an increase in Philadelphia Life's tax in years subsequent to the
examination, I.C.H. has contractually agreed to reimburse the Company (including
penalties and interest.) In addition, Philadelphia Life is a party to an
indemnification agreement between Tenneco Inc. ("Tenneco"), I.C.H. and others
included in the acquisition agreement pursuant to which I.C.H. acquired
Philadelphia Life and other insurance companies from Tenneco.
On October 10,1995, I.C.H. filed under Chapter 11 for bankruptcy protection.
I.C.H., in publicly released documents, has stated that it had reached a
tentative agreement with the IRS whereby I.C.H.'s insurance subsidiaries would
be subject to approximately $68 million of federal income tax liability for
years in which certain of the Company's insurance subsidiaries were members of
the consolidated federal tax group to which such tax liability related. All
members of a consolidated group of companies may be under federal law, jointly
and severable liable for tax deficiencies related to such group. The Company
has been informed that I.C.H. has paid the tax liability to the IRS. I.C.H. has
orally advised the Company of an intention to file suit against certain
subsidiaries of the Company for contribution of their respective tax deficiency.
At this time, the Company does not believe that it will be responsible for the
payment of said taxes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith as Exhibits in response to
Item 601 of Regulation S-K:
11.1 Computation of earnings per common share and common
equivalent share.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
A report on Form 8-K dated March 11, 1996 was filed with the
Commission to report the acquisition of the Company by Conseco, Inc.
under Item 7.
-17-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIFE PARTNERS GROUP, INC.
BY: /s/ Bernhard M. Koch
----------------------------
Bernhard M. Koch
Chief Financial Officer and
Principal Accounting Officer
Date: May 13, 1996
-18-
<PAGE>
EXHIBIT 11.1
LIFE PARTNERS GROUP AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
Exhibit 11.1 1996 1995
---------- ----------
<S> <C> <C>
Net earnings applicable to common stock . . . . . . . . . . . . . . $11,379 $6,899
---------- ----------
---------- ----------
Net earnings per common share and common equivalent share:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.40 $0.26
---------- ----------
---------- ----------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $0.40 $0.26
---------- ----------
---------- ----------
Reconciliation of number of shares outstanding to amounts
used in earnings per share computations (A):
Weighted average common shares outstanding . . . . . . . . . . . 27,918,051 25,590,132
Additional dilutive effect of outstanding options and
warrants, based on the common stock daily average
market price during the period . . . . . . . . . . . . . . . . . 435,837 535,837
---------- ----------
Weighted average common shares, as adjusted . . . . . . . . . . . . 28,353,888 26,125,969
---------- ----------
---------- ----------
Weighted average common shares outstanding . . . . . . . . . . . 27,918,051 25,590,132
Additional dilutive effect of outstanding options and
warrants, based on the more dilutive of the common
stock ending or daily average market price during
the period . . . . . . . . . . . . . . . . . . . . . . . . . . . 517,074 535,837
---------- ----------
Weighted average common shares, assuming full dilution . . . . . . 28,435,125 26,125,969
---------- ----------
---------- ----------
</TABLE>
- - ----------------------------------------
(A) These calculations are submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083, although not required by footnote 2 to paragraph
14 of Accounting Principles Board Opinion No. 15 because they result in
dilution of less than 3%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE QUARTER, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<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> 2,735,729
<DEBT-CARRYING-VALUE> 676,404
<DEBT-MARKET-VALUE> 692,940
<EQUITIES> 29,021
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<TOTAL-INVEST> 3,933,585
<CASH> 90,700
<RECOVER-REINSURE> 282,110
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<POLICY-OTHER> 87,403
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<NOTES-PAYABLE> 242,503
0
0
<COMMON> 28
<OTHER-SE> 373,149
<TOTAL-LIABILITY-AND-EQUITY> 4,988,083
77,365
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<INVESTMENT-GAINS> 1,888
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<UNDERWRITING-OTHER> 20,911
<INCOME-PRETAX> 17,827
<INCOME-TAX> 6,448
<INCOME-CONTINUING> 11,379
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,379
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
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<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
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<PAYMENTS-PRIOR> 0
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</TABLE>
