UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-11195
LIFE PARTNERS GROUP, INC.
Delaware No. 75-2301836
---------------------- ------------------------------
State of Incorporation IRS Employer Identification No.
11825 N. Pennsylvania Street
Carmel, Indiana 46032 (317) 817-6100
------------------------------- --------------
Address of principal executive offices Telephone
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 [ ]
Shares of common stock outstanding as of July 31, 1996: 28,189,593
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
June 30, December 31,
1996 1995
---- ----
(unaudited) (audited)
<S> <C> <C>
Investments:
Fixed maturities:
Held-to-maturity, at amortized cost........................................................... $ 661,193 $ 678,826
Available-for-sale, at fair value............................................................. 2,731,180 2,672,365
Equity securities, at fair value................................................................ 23,818 23,721
Mortgage loans on real estate, at amortized cost................................................ 103,222 110,214
Investment in real estate, at cost, net of accumulated depreciation............................. 4,564 4,921
Policy loans.................................................................................... 227,439 226,212
Collateral loans................................................................................ 4,686 4,373
Cash and short-term investments................................................................. 79,121 197,684
Other invested assets........................................................................... 68,945 59,593
---------- ----------
Total investments........................................................................... 3,904,168 3,977,909
Notes and accounts receivable and uncollected premiums............................................. 31,228 29,303
Receivable from reinsurers......................................................................... 279,640 244,828
Accrued investment income.......................................................................... 55,980 54,785
Deferred policy acquisition costs, net............................................................. 265,416 238,736
Cost of insurance acquired......................................................................... 300,893 306,015
Goodwill, net of accumulated amortization.......................................................... 99,501 100,470
Deferred income taxes.............................................................................. 9,716 -
Other assets....................................................................................... 28,147 28,819
---------- ----------
Total assets................................................................................ $4,974,689 $4,980,865
========== ==========
(continued on next page)
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED BALANCE SHEET, continued
(Dollars in thousands, except per share amount)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1996 1995
---- ----
(unaudited) (audited)
<S> <C> <C>
Future policy benefits and claims.................................................................. $ 737,116 $ 708,226
Dividends, endowments and other policyholder funds................................................. 89,531 86,162
Policyholder account balances...................................................................... 3,331,094 3,271,906
Deferred policy fees............................................................................... 85,938 80,590
Investment borrowings.............................................................................. 71,547 73,585
Notes payable:
Due within one year............................................................................. 26,591 15,000
Due after one year.............................................................................. 212,332 231,083
Federal income taxes payable:
Current......................................................................................... 5,110 13,444
Deferred........................................................................................ - 25,812
Other liabilities.................................................................................. 63,814 74,548
---------- ----------
Total liabilities........................................................................... 4,623,073 4,580,356
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares authorized; 28,189,593 and 27,911,851 shares
issued and outstanding at June 30, 1996 and December 31, 1995, respectively................... 28 28
Additional paid-in capital...................................................................... 286,572 287,863
Net unrealized investment gains (losses)........................................................ (3,517) 58,269
Retained earnings............................................................................... 68,533 54,349
---------- ----------
Total stockholders' equity.................................................................. 351,616 400,509
---------- ----------
Total liabilities and stockholders' equity.................................................. $4,974,689 $4,980,865
========== ==========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Universal life and investment product charges............... $ 70,280 $ 64,970 $ 139,962 $ 118,379
Universal life charges ceded to client companies............ (6,867) (7,575) (14,355) (14,679)
Universal life and investment product surrender
charges, net.............................................. 5,162 4,916 9,203 8,178
Traditional life and annuity premiums....................... 14,223 15,272 28,206 28,113
Traditional reinsurance premiums............................ (11,415) (11,089) (22,096) (19,022)
Accident and health insurance premiums, net................. 6,990 7,083 14,818 8,478
---------- ---------- --------- ---------
Total premium income and other considerations............. 78,373 73,577 155,738 129,447
Net investment income....................................... 72,665 73,932 146,225 134,948
Net realized gains (losses)................................. 408 (143) 2,296 2,418
Other income................................................ 1,429 917 2,619 1,824
---------- --------- --------- ---------
Total revenues............................................ 152,875 148,283 306,878 268,637
---------- --------- --------- ---------
Benefits and expenses:
Policyholder benefits....................................... 34,906 46,569 69,486 76,829
Interest credited to policyholders.......................... 44,622 43,907 88,574 78,189
Amortization of deferred policy acquisition costs,
costs of insurance acquired and deferred policy fees...... 32,024 20,300 64,317 32,472
Other operating expenses.................................... 18,009 23,493 35,870 50,243
Acquisition and merger expenses............................. 7,091 - 7,891 -
Amortization of goodwill.................................... 722 687 1,439 1,284
Interest expense............................................ 5,839 6,600 11,812 11,977
---------- --------- --------- ---------
Total expenses............................................ 143,213 141,556 279,389 250,994
---------- --------- --------- ---------
Earnings before income taxes................................... 9,662 6,727 27,489 17,643
Federal income tax expense.................................. 5,174 2,361 11,622 6,378
---------- --------- --------- ---------
Net earnings................................................... $ 4,488 $ 4,366 $ 15,867 $ 11,265
========== ========= ========= =========
Weighted average common shares and common
equivalent shares outstanding............................... 28,441,048 27,542,276 28,400,337 26,845,898
========== ========== ========== ==========
Net earnings per common share and common
equivalent share outstanding................................ $0.16 $0.16 $0.56 $0.42
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(unaudited)
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....................... - 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 loss........................................... - - - (13,384) (13,384)
--- -------- --------- ------- --------
Balance at December 31, 1995.......................... 28 287,863 58,269 54,349 400,509
Common stock issued for cash....................... - 528 - - 528
Common stock retained in lieu of cash
on exercise of stock options..................... - (1,819) - - (1,819)
Cash dividends paid on common stock................ - - - (1,683) (1,683)
Change in unrealized gains (losses), net........... - - (61,786) - (61,786)
Net earnings....................................... - - - 15,867 15,867
--- -------- --------- ------- --------
Balance at June 30, 1996.............................. $28 $286,572 $ (3,517) $68,533 $351,616
=== ======== ========= ======= ========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
LIFE PARTNERS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Six months ended
June 30,
----------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings.................................................................................. $ 15,867 $ 11,265
Adjustments to reconcile net earnings to net cash used by operating activities:
Realized gains.............................................................................. (2,296) (2,418)
Adjustments relating to universal life and annuity products:
Interest credited to account balances..................................................... 75,074 63,930
Charges for mortality and administration.................................................. (125,607) (103,700)
Depreciation and amortization............................................................... 3,055 2,831
Decrease in future policy benefits.......................................................... (10,106) (11,972)
Increase in reserve liability on modified coinsurance agreements............................ 12,570 5,587
Increase in deferred policy acquisition costs............................................... (15,019) (26,651)
Amortization of cost of insurance acquired, net............................................. 21,689 14,657
Amortization of deferred policy fees........................................................ (8,818) (5,898)
Decrease in currently payable taxes......................................................... (8,334) (1,520)
Deferred tax (benefit) expense.............................................................. (1,872) 6,755
(Decrease) increase in policy liabilities, other policyholder funds, and other liabilities.. (7,878) 20,635
Increase in notes and accounts receivable and accrued investment income..................... (3,120) (112)
Amortization of bond and mortgage loan discount and premium, net............................ (719) 29
Other, net.................................................................................. (5,365) (12,317)
--------- ---------
Net cash used by operating activities.................................................. (60,879) (38,899)
--------- ---------
Cash flows from investing activities:
Sales of fixed maturities:
Available-for-sale.......................................................................... 59,895 153,574
Held-to-maturity............................................................................ 2,307 9,802
Maturities of fixed maturities:
Available-for-sale.......................................................................... 86,400 40,393
Held-to-maturity............................................................................ 18,193 34,045
Sales of other long-term invested assets...................................................... 21,157 22,643
(Increase) decrease in policy loans, net...................................................... (1,227) 122
Purchases of fixed maturities................................................................. (325,990) (209,921)
Purchases of other long-tem invested assets................................................... (24,441) (11,369)
Purchase of subsidiaries, net of cash and short-term investments acquired..................... - (20,591)
--------- ---------
Net cash provided (used) by investing activities....................................... (163,706) 18,698
--------- ---------
Cash flows from financing activities:
Policyholder contract deposits................................................................ 265,151 226,515
Policyholder contract withdrawals............................................................. (148,436) (138,890)
Proceeds from issuance of common stock........................................................ 528 1,653
Change in principal of investment borrowings.................................................. (2,038) (12,030)
Proceeds from notes payable................................................................... - 36,000
Principal repayments on notes payable......................................................... (7,500) (53,073)
Cash dividends paid on common stock........................................................... (1,683) (1,346)
--------- ---------
Net cash provided by financing activities.............................................. 106,022 58,829
--------- ---------
Net (decrease) increase in cash and short-term investments............................. (118,563) 38,628
Cash and short-term investments at beginning of period........................................... 197,684 41,715
--------- --------
Cash and short-term investments at end of period................................................. $ 79,121 $ 80,343
========= ========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
6
<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."
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements as of June 30, 1996, and
for the quarters ended June 30, 1996 and 1995, and for the six months ended June
30, 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.
ACQUISITIONS
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.
<TABLE>
<CAPTION>
Pro forma
six months
ended
June 30, 1995
-------------
(in thousands,
except share data)
<S> <C>
Revenues............................................................ $306,644
Earnings before income taxes........................................ 19,385
Net earnings........................................................ 12,366
Net earnings per share.............................................. $0.44
Weighted average common shares and common
equivalent shares outstanding.................................... 28,156,705
</TABLE>
The above unaudited pro forma information was intended for informational
purposes only.
7
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
CHANGES IN STOCKHOLDERS' EQUITY
During the six months ended June 30, 1996, 432,083 option shares previously
granted under the Company's incentive stock option plan were exercised and 5,858
options were forfeited. Included in the options exercised during the period were
352,941 options exercised by the former chairman of the Company, net of 166,914
shares remitted to the Company in lieu of cash. 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 was 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 June 30, 1996, 957,822
options were unexercised and outstanding.
In addition, warrants to purchase 12,573 shares were exercised by the
former chairman of the Company during the six months ended June 30, 1996 at a
price of $3.98 per share. At June 30, 1996, no further warrants were
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.
NOTES PAYABLE
Notes payable at June 30, 1996 and December 31, 1995 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Amount outstanding
Face amount net of unamortized
outstanding issuance costs
----------------------- -------------------------
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Borrowings under Bank Credit Facility............................ $148,678 $156,178 $148,194 $155,581
12-3/4% senior subordinated notes due 2002....................... 95,100 95,100 90,729 90,502
-------- -------- -------- --------
$243,778 $251,278 $238,923 $246,083
======== ======== ======== ========
</TABLE>
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.
8
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
INVESTMENTS
Investment income by type of investment was as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Gross investment income:
Fixed maturities....................................................................... $132,051 $120,238
Short-term investments................................................................. 2,573 3,484
Policy loans........................................................................... 7,353 7,194
Other invested assets.................................................................. 3,402 5,210
Mortgage loans......................................................................... 5,147 3,619
Equity securities...................................................................... 715 939
Collateral loans....................................................................... 136 53
Investment real estate................................................................. 438 527
-------- --------
Gross investment income.............................................................. 151,815 141,264
Less:
Investment expenses.................................................................... 3,476 2,311
Interest expense on investment borrowings.............................................. 2,114 4,005
-------- --------
Net investment income................................................................ $146,225 $134,948
======== ========
</TABLE>
Following is an analysis of net realized gains on investments (in thousands):
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Fixed maturities.......................................................................... $ 887 $ 458
Equity securities......................................................................... 118 1,874
Other..................................................................................... 1,291 86
------ ------
$2,296 $2,418
====== ======
</TABLE>
9
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The cost and estimated fair values of equity securities are as follows (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
June 30, 1996 cost gains losses fair value
- ------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Preferred stock.................................................. $18,936 $1,333 $2,211 $18,058
Common stock..................................................... 4,262 3,094 1,596 5,760
------- ------ ------ -------
Totals........................................................ $23,198 $4,427 $3,807 $23,818
======= ====== ====== =======
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
======= ====== ==== =======
</TABLE>
The amortized cost and estimated fair values of debt securities classified
as fixed maturity investments held-to-maturity are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
June 30, 1996 cost gains losses fair value
- ------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
United States treasury securities and obligations of United
States government corporations and agencies................... $ 1,950 $ 76 $ - $ 2,026
Obligations of states and political subdivisions................. 2,392 222 - 2,614
Debt securities issued by foreign governments.................... 16,256 68 459 15,865
Corporate securities............................................. 514,233 21,911 9,205 526,939
Mortgage-backed securities....................................... 71,992 564 779 71,777
Other debt securities............................................ 54,370 3,206 730 56,846
-------- ------- ------- --------
Totals........................................................ $661,193 $26,047 $11,173 $676,067
======== ======= ======= ========
</TABLE>
10
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1995 cost gains losses fair value
- ----------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
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>
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
June 30, 1996 cost gains losses fair value
- ------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
United States treasury securities and obligations of United
States government corporations and agencies................... $ 88,188 $ 1,412 $ 886 $ 88,714
Obligations of states and political subdivisions................. 8,393 191 317 8,267
Debt securities issued by foreign governments.................... 18,429 31 1,010 17,450
Corporate securities............................................. 1,230,876 25,898 30,573 1,226,201
Mortgage-backed securities....................................... 1,140,482 16,464 15,275 1,141,671
Other debt securities............................................ 253,540 2,867 7,530 248,877
---------- ------- ------- ----------
Totals........................................................ $2,739,908 $46,863 $55,591 $2,731,180
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1995 cost gains losses fair value
- ----------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
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>
11
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
REINSURANCE
Policyholder benefits reflects the reduction of policy and contract claims
by amounts recovered from reinsurers of $65.5 million and $41.4 million,
including accident and health claims recovered from reinsurers of $42.2 million
and $16.6 million for the six months ended June 30, 1996 and 1995, respectively.
Accident and health premiums are reported net of premiums ceded to reinsurers of
$45.0 million and $20.1 million for the six months ended June 30, 1996 and 1995,
respectively.
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):
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------
1996 1995
---- ----
<S> <C> <C>
Current tax provision (benefit)........................................................... $13,494 $ (377)
Deferred tax provision (benefit).......................................................... (1,872) 6,755
------- ------
Total income tax provision............................................................. $11,622 $6,378
======= ======
</TABLE>
SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash payments for interest expense and income taxes were as follows (in
thousands):
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
Interest expense.......................................................................... $12,959 $10,925
Income taxes.............................................................................. 20,725 7,200
</TABLE>
In connection with the acquisition of Lamar, liabilities were assumed as
follows (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired, including cash and short-term
investments of $20,591 ............................................ $1,004,182
Cash paid............................................................. (37,937)
Common stock issued................................................... (39,459)
----------
Fair value of liabilities assumed.................................. $ 926,786
==========
</TABLE>
12
<PAGE>
LIFE PARTNERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
SUBSEQUENT EVENT
On August 2, 1996, the Company completed its merger with Conseco, Inc.
("Conseco"). As a result of the merger, the Company became a wholly owned
subsidiary of Conseco. In the merger, each of the issued and outstanding shares
of LPG common stock was converted into .5833 of a share of Conseco common stock.
A total of 16.3 million shares of Conseco common stock (or equivalent shares)
with a value of approximately $588 million were issued. As a result of Conseco's
ownership of the Company, a new basis of accounting under the "push down" method
will be adopted by the Company in the third quarter of 1996. Under this method,
the assets and liabilities of the Company will reflect Conseco's cost basis,
which is based on the fair values of the Company's assets and liabilities at the
effective date of the merger.
As a result of the merger, Conseco plans to relocate the Company's
operations to Conseco's headquarters in Carmel, Indiana, by August 30, 1996.
13
<PAGE>
LIFE PARTNERS GROUP, INC.
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 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.
On August 2, 1996, the Company completed its merger with Conseco. As a result of
the merger, the Company became a wholly-owned subsidiary of Conseco. Conseco
plans to relocate the Company's operations to Conseco's headquarters in Carmel,
Indiana by August 30, 1996. In the merger, each outstanding share of the
Company's stock was converted into the right to receive 0.5833 of a share of
Conseco common stock. As a result of this transaction, the Company incurred
acquisition and merger expenses of approximately $7.9 million in 1996 which
include, but are not limited to, financial advisory services, and attorney
and accounting fees.
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. As a result, 1996 amounts and other data may
not be comparable to those of prior periods.
14
<PAGE>
LIFE PARTNERS GROUP, INC.
RESULTS OF OPERATIONS
Second Quarter of 1996 Compared to Second Quarter of 1995
The following table sets forth the results of operations of the Company for
the quarters ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three months ended
June 30,
-----------------
1996 1995
---- ----
(Dollars in millions)
<S> <C> <C>
Revenues:
Universal life and investment product charges.................................................... $ 70.3 $ 65.0
Universal life charges ceded to client companies................................................. (6.9) (7.6)
Universal life and investment product surrender charges, net..................................... 5.2 4.9
Traditional life and annuity premiums............................................................ 14.2 15.3
Traditional reinsurance premiums................................................................. (11.4) (11.1)
Accident and health insurance premiums, net...................................................... 7.0 7.1
----- ------
Total premium income and other considerations.................................................. 78.4 73.6
Net investment income............................................................................ 72.7 73.9
Net realized gains (losses)...................................................................... .4 (.1)
Other income..................................................................................... 1.4 .9
----- ------
Total revenues................................................................................. 152.9 148.3
----- ------
Benefits and expenses:
Policyholder benefits............................................................................ 34.9 46.6
Interest credited to policyholders............................................................... 44.6 43.9
Other operating expenses......................................................................... 18.0 23.5
Amortization of deferred policy acquisition costs, costs of
insurance acquired, and deferred policy fees................................................... 32.0 20.3
----- ------
Total benefits and expenses.................................................................... 129.5 134.3
----- ------
Earnings before acquisition and merger expenses, amortization of goodwill, interest
expense and taxes............................................................................... 23.4 14.0
Acquisition and merger expenses................................................................ 7.1 -
Amortization of goodwill....................................................................... .7 .7
Interest expense............................................................................... 5.9 6.6
----- ------
Earnings before income taxes........................................................................ 9.7 6.7
Federal income tax expense....................................................................... 5.2 2.3
----- ------
Net earnings applicable to common stock............................................................. $ 4.5 $ 4.4
===== ======
Operating earnings before income taxes, acquisition and merger expenses, amortization
of goodwill, interest expense, net realized gains and related amortization........................ $22.9 $14.3
===== =====
</TABLE>
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 8.2% from $65.0 million in the second quarter of 1995 to
$70.3 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 $43.7
billion at June 30, 1995, to $47.9 billion at June 30, 1996, which is a result
of new life sales.
15
<PAGE>
LIFE PARTNERS GROUP, INC.
The Company's sales of its life insurance products will translate into
future increases in the Company's universal life revenues since 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 decreased 9.2% from $7.6 million in the 1995
period to $6.9 million in the 1996 period.
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.
Traditional Life and Annuity Premiums
Premiums on traditional policies decreased 7.2% from $15.3 million in the
second quarter of 1995 to $14.2 million in 1996. Sales growth in this product
line has not been a strategic goal of the Company.
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 2.7% from $11.1 million in the second
quarter of 1995 to $11.4 million in 1996, relating primarily to 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 decreased from $7.1 million to $7.0 million, from the 1995 to the 1996
periods. Lamar underwrites the business and cedes a substantial portion to its
reinsurers. As a result, this business principally generates servicing fees to
the Company.
Net Investment Income
Net investment income decreased $1.2 million, or 1.6%, from $73.9 million
in the second quarter of 1995 to $72.7 million in 1996. This decrease is
primarily a result of a decrease in the effective yield on invested assets from
7.8% in 1995 to 7.5% in 1996. Average invested assets, net of investment
borrowings and excluding the Statement of Financial Accounting Standards No. 115
mark-to-market adjustment, were $3.7 billion for the three months ended June 30,
1995, compared to $3.9 billion for the three months ended June 30, 1996.
Investment income is stated net of interest expense on investment borrowings,
which totaled $1.1 million and $3.0 million during the 1996 and 1995 quarters,
respectively.
Net Realized Gains (Losses)
The Company's net realized gains (losses) increased from a net realized
loss of $.1 million in the 1995 quarter to a net realized gain of $.4 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 increased by approximately $141,000 during the 1995 quarter in conjunction
with the recognition of these net gains.
16
<PAGE>
LIFE PARTNERS GROUP, INC.
Policyholder Benefits
Total policyholder benefits decreased $11.7 million, or 25.1%, from $46.6
million in the 1995 quarter to $34.9 million in the 1996 quarter. Policyholder
benefits consist primarily of mortality and morbidity benefits, traditional
annuity benefits, and reserve changes on traditional life products. During the
second quarter of 1995, the Company was negatively impacted by adverse mortality
of approximately $11.9 million in excess of actuarial expectations.
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 1.6% from $43.9
million in the 1995 quarter to $44.6 million in the 1996 quarter.
Other Operating Expenses
Other operating expenses consist of general, administrative, and other
operating costs. These costs were $23.5 million for the 1995 quarter and $18.0
million for the 1996 quarter. The 1995 amount includes approximately $2.2
million of one-time charges related to the write-off of certain agent debit
balances.
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 $20.3 million in
1995 to $32.0 million in 1996. Portions of this increase are due to the
Company's expanding in-force business and reserve recognition thereto. 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.
Acquisition and Merger Expenses
Acquisition and merger expenses in 1996 represent costs incurred by the
Company related to the acquisition of the Company by Conseco and include, but
are not limited to, financial advisory services, and attorney and accounting
fees. Such expenses were $7.1 million in the 1996 quarter.
Interest Expense
The Company's interest expense decreased by approximately $.7 million
between the 1995 and 1996 periods. The decrease is primarily due to a decrease
in the Company's bank credit facility borrowing rates (on which bank credit
facility interest expense was based) from an average rate of 7.1% during the
second quarter of 1995 to an average rate of 6.5% during the second 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 and
certain acquisition and merger expenses.
17
<PAGE>
LIFE PARTNERS GROUP, INC.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
The following table sets forth the results of operations of the Company for
the six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------
1996 1995
---- ----
(Dollars in millions)
<S> <C> <C>
Revenues:
Universal life and investment product charges.................................................... $140.0 $118.4
Universal life charges ceded to client companies................................................. (14.4) (14.7)
Universal life and investment product surrender charges, net..................................... 9.2 8.2
Traditional life and annuity premiums............................................................ 28.2 28.1
Traditional reinsurance premiums................................................................. (22.1) (19.0)
Accident and health insurance premiums, net...................................................... 14.8 8.5
------ ------
Total premium income and other considerations.................................................. 155.7 129.5
Net investment income............................................................................ 146.3 134.9
Net realized gains............................................................................... 2.3 2.4
Other income..................................................................................... 2.6 1.8
------ ------
Total revenues................................................................................. 306.9 268.6
------ ------
Benefits and expenses:
Policyholder benefits............................................................................ 69.5 76.8
Interest credited to policyholders............................................................... 88.6 78.2
Other operating expenses......................................................................... 35.9 50.2
Amortization of deferred policy acquisition costs, costs of
insurance acquired, and deferred policy fees................................................... 64.3 32.5
------ ------
Total benefits and expenses.................................................................... 258.3 237.7
------ ------
Earnings before acquisition and merger expenses, amortization of goodwill, interest
expense and taxes................................................................................ 48.6 30.9
Acquisition and merger expenses................................................................ 7.9 -
Amortization of goodwill....................................................................... 1.4 1.3
Interest expense............................................................................... 11.8 12.0
------ -----
Earnings before income taxes........................................................................ 27.5 17.6
Federal income tax expense....................................................................... 11.6 6.3
------ ------
Net earnings applicable to common stock............................................................. $ 15.9 $ 11.3
====== ======
Operating earnings before income taxes, acquisition and merger expenses, amortization
of goodwill, interest expense, net realized gains and related amortization....................... $ 46.5 $ 28.0
====== ======
</TABLE>
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 18.2% from $118.4 million in the six months of 1995 to $140.0
million in 1996. The increase is due to the continued growth in the universal
life in-force block of business. Lamar added approximately $9.5 million of
charges in the 1995 period and $20.5 million in the 1996 period.
18
<PAGE>
LIFE PARTNERS GROUP, INC.
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 decreased 2.0% from $14.7 million in the 1995
period to $14.4 million in the 1996 period.
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 $1.0
million of charges on Lamar policies in 1995 and $1.5 million in 1996.
Traditional Life and Annuity Premiums
Premiums on traditional policies increased .4% from $28.1 million in the
first six months of 1995 to $28.2 million in 1996. Additional premiums added by
Lamar policies totaled $5.7 million for the six months ended June 30, 1996 and
$3.4 million for 1995. 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.
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 16.3% from $19.0 million in the first six
months of 1995 to $22.1 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 $8.5 million to $14.8 million, from the 1995 to the 1996
periods. The increase relates entirely to the acquisition of Lamar, which
increased considerably to the Company's premiums for the accident and health
business.
Net Investment Income
Net investment income increased $11.4 million, or 8.5%, from $134.9 million
in the first six months of 1995 to $146.3 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. Investment income is stated net of interest expense on investment
borrowings, which totaled $2.1 million and $4.0 million for the six months ended
June 30, 1996 and 1995, respectively.
Net Realized Gains
The Company's net realized gains decreased from $2.4 million in the first
six months of 1995 to $2.3 million in the first six months of 1996. In
accordance with applicable financial reporting rules, the net amortization of
deferred policy acquisition costs and deferred policy fees was decreased by
approximately $526,000 during the first six months of 1995 and increased by
approximately $136,000 in the first six months of 1996 in conjunction with the
recognition of these net gains. The Company's realized gains, net of such
related amortization, totaled $2.4 million and $1.9 million for the first six
months of 1996 and 1995, respectively, before income tax expense.
Policyholder Benefits
Total policyholder benefits decreased $7.3 million, or 9.5%, from $76.8
million in the 1995 period to $69.5 million in the 1996 period. The Company
experienced adverse mortality versus actuarial assumptions in the second quarter
of 1995, as discussed previously in the quarterly analysis.
19
<PAGE>
LIFE PARTNERS GROUP, INC.
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 13.3% from $78.2
million in the 1995 period to $88.6 million in the 1996 period 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 $50.2 million for the first six months of 1995
and $35.9 million for the first six months of 1996. The 1995 amount includes
approximately $14.2 million of one-time litigation charges related to the
settlement of a class action lawsuit. Also included in 1995 were one time
write-offs of certain agent debit balances totaling $2.2 million.
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 period.
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 periods, from $32.5 million in 1995
to $64.3 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 $9.4 million in the first
six months of 1996 and $4.3 million in 1995. 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.
Acquisition and Merger Expenses
Acquisition and merger expenses in 1996 represent costs incurred by the
Company related to the acquisition of the Company by Conseco and include, but
are not limited to, financial advisory services, and attorney and accounting
fees. Such expenses were $7.9 million in the 1996 period.
Interest Expense
The Company's interest expense decreased by approximately $0.2 million
between the 1995 and 1996 periods as a result of the items discussed previously
under the quarters ended June 30, 1996 and 1995.
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 and
certain acquisition and merger expenses.
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 June 30, 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 (Losses)
Net unrealized gains (losses) changed from a $58.3 million net unrealized
gain at December 31, 1995 to $3.5 million net unrealized loss at June 30, 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 $14.9 million at
December 31, 1995 and June 30, 1996, respectively.
Operating Cash Flows
The Company's Consolidated Statements of Cash Flows reflect net cash used
by operating activities of $60.9 million and $38.9 million for the six months
ended June 30, 1996 and 1995, respectively. Included in cash flows from
financing activities are policyholder contract deposits and withdrawals which
provided net cash flows of $116.7 million and $87.6 million for the six months
ended June 30, 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.
20
<PAGE>
LIFE PARTNERS GROUP, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 27, 1996, the shareholders approved the Agreement and Plan of
Merger, dated as of March 11, 1996, by and among Conseco, LPG Acquisition
Company and Life Partners. Shareholders cast 24,446,051 votes for and 5,950
votes against the proposal. There were 14,015 abstentions and 2,002,196
broker non-votes.
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 April 10, 1996 was filed with the Commission to
report under Item 5, the unaudited pro forma consolidated financial
statements of the Company giving effect to the acquisition of Lamar
Financial Group, Inc.
21
<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.
LIFE PARTNERS GROUP, INC.
Date: August 14, 1996 By: /s/ Rollin M. Dick
--------------------
Rollin M. Dick
Executive Vice President and
Chief Financial Officer
(authorized officer and principal
financial officer)
22
<TABLE>
<CAPTION>
EXHIBIT 11.1
LIFE PARTNERS GROUP, INC.
Computation of Earnings Per Common Share And
Common Equivalent Share
(dollars in thousands, except per share amounts)
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings applicable to common stock......................... $ 4,488 $4,366 $15,867 $11,265
======= ====== ======= =======
Net earnings per common share and common equivalent share:
Primary...................................................... $0.16 $0.16 $0.56 $0.42
===== ===== ===== =====
Fully diluted................................................ $0.16 $0.16 $0.56 $0.42
===== ===== ===== =====
Reconciliation of number of shares outstanding to amounts used
in earnings per share computations (A):
Weighted average common shares outstanding................. 28,046,039 27,168,310 27,982,045 26,383,581
Additional dilutive effect of outstanding options and
warrants, based on the common stock daily average
market price during the period........................... 364,888 373,966 340,673 462,317
---------- ---------- ---------- ----------
Weighted average common shares, as adjusted................ 28,410,927 27,542,276 28,322,718 26,845,898
========== ========== ========== ==========
Weighted average common shares outstanding................. 28,046,039 27,168,310 27,982,045 26,383,581
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... 395,009 397,949 418,292 465,733
---------- ---------- ---------- ----------
Weighted average common shares, assuming full dilution..... 28,441,048 27,566,259 28,400,337 26,849,314
========== ========== ========== ==========
<FN>
(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%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q FOR LIFE PARTNERS GROUP,
INC. DATED JUNE 30, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 2,731,180
<DEBT-CARRYING-VALUE> 661,193
<DEBT-MARKET-VALUE> 676,067
<EQUITIES> 23,818
<MORTGAGE> 103,222
<REAL-ESTATE> 4,564
<TOTAL-INVEST> 3,904,168
<CASH> 79,121 <F1>
<RECOVER-REINSURE> 279,640
<DEFERRED-ACQUISITION> 265,416
<TOTAL-ASSETS> 4,964,973
<POLICY-LOSSES> 737,116
<UNEARNED-PREMIUMS> 85,938
<POLICY-OTHER> 89,531
<POLICY-HOLDER-FUNDS> 3,331,094
<NOTES-PAYABLE> 238,923
<COMMON> 28
0
0
<OTHER-SE> 351,588 <F2>
<TOTAL-LIABILITY-AND-EQUITY> 4,964,973
155,738
<INVESTMENT-INCOME> 146,225
<INVESTMENT-GAINS> 2,296
<OTHER-INCOME> 2,619
<BENEFITS> 158,060 <F3>
<UNDERWRITING-AMORTIZATION> 64,317
<UNDERWRITING-OTHER> 35,870
<INCOME-PRETAX> 27,489
<INCOME-TAX> 11,622
<INCOME-CONTINUING> 15,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,867
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Total investments include cash and short-term investments.
<F2> Includes retained earnings of $68,533 and additional paid-in capital of
$286,572, offset by net unrealized depreciation of securities of $3,517.
<F3> Includes policyholder benefits of $69,486 and interest credited to
policyholders of $88,574.
</FN>
</TABLE>
