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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended MARCH 31, 1996
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Commission file number 1-11422
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PENNCORP FINANCIAL GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3543540
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
745 FIFTH AVENUE, NEW YORK, NEW YORK 10151
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (212) 832-0700
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Former Name, Former Address and Former Fiscal Year, If Changes Since Last Report
Indicate by check [X] 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 [ ]
Indicate the number of shares outstanding of each of the issuer's common
stock, as of the latest practicable date.
CLASS MAY 10, 1996
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COMMON STOCK, $.01 PAR VALUE 27,879,347
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PENNCORP FINANCIAL GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
No.
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<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 .................. 3
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995 ............ 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 ............ 5
Notes to Consolidated Condensed Financial Statements ..... 6
Review by Independent Certified Public Accountants ....... 9
Independent Auditor's Report ............................. 10
Signature ................................................................. 11
</TABLE>
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PART I. FINANCIAL INFORMATION -- ITEM 1. FINANCIAL STATEMENTS
PENNCORP FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
(UNAUDITED)
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March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS:
Investments:
Fixed maturities:
Held for investment, at amortized cost (market $42,090 and $51,354) $ 42,090 $ 51,366
Available for sale, at market (cost $1,649,533 and $1,414,187) 1,672,242 1,486,985
Equity securities available for sale, at market (cost $14,202 and $13,707) 16,262 15,172
Trading securities at market 32,380 86,104
Mortgage loans on real estate 17,723 36,563
Policy loans 124,608 125,179
Short term investments 136,823 416,953
Other investments 47,672 43,937
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Total investments 2,089,800 2,262,259
Cash 23,270 27,778
Accrued investment income 26,826 30,992
Accounts and notes receivable 33,814 34,842
Investments in unconsolidated affiliates 125,566 119,390
Present value of insurance in force 292,020 288,664
Deferred policy acquisition costs 210,692 193,903
Costs in excess of net assets acquired 120,596 121,795
Other assets 208,355 70,383
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Total assets $ 3,130,939 $ 3,150,006
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Policy liabilities $ 2,202,549 $ 2,229,047
Notes payable 170,271 307,271
Income taxes, primarily deferred 25,378 24,977
Other liabilities 78,965 92,198
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Total liabilities 2,477,163 2,653,493
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Mandatory redeemable preferred stock:
Series B, $.01 par value, $100 redemption value; authorized, issued and
outstanding 127,500 shares at March 31, 1996 and December 31, 1995 13,640 13,307
Series C, $.01 par value, $100 redemption value; authorized, issued and
outstanding 178,500 shares at March 31, 1996 and December 31, 1995,
respectively 17,117 16,700
Shareholder's Equity:
Convertible preferred stock, $.01 par value, $50 redemption value;
authorized issued and outstanding 2,300,000 at March 31, 1996 and
December 31, 1995, respectively 110,513 110,513
Common stock, $.01 par value; authorized 50,000,000 shares; issued and
outstanding 28,011,008 shares at March 31, 1996 and 22,879,708 at
December 31, 1995 280 229
Treasury stock (3,370) (3,370)
Other shareholders' equity 515,596 359,134
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Total shareholders' equity 623,019 466,506
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Total liabilities and shareholders' equity $ 3,130,939 $ 3,150,006
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</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
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PENNCORP FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
------------------------
Three Months Ended
March 31,
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1996 1995
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<S> <C> <C>
REVENUES:
Premiums, principally accident and sickness $ 64,421 $ 60,756
Interest sensitive product policy charges 22,669 11,149
Net investment income 41,334 15,616
Other income 4,281 1,614
Net gains (losses) from sale of investments (527) (441)
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Total revenues 132,178 88,694
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BENEFITS AND EXPENSES:
Claims incurred 44,326 32,072
Change in liability for future policy benefits and
other policy benefits 11,490 2,729
Amortization of present value of insurance in force
and deferred policy acquisition costs 14,859 9,420
Amortization of costs in excess of net assets acquired 2,030 1,427
Underwriting and other administrative expenses 23,632 19,443
Interest and related debt costs 6,057 5,603
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Total benefits and expenses 102,394 70,694
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Income before income taxes 29,784 18,000
Income taxes 9,630 6,034
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Income before extraordinary charge 20,154 11,966
Extraordinary loss on retirement of debt, net of tax benefit (816) --
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Net income 19,338 11,966
Preferred stock dividend requirements 2,691 866
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Net income available to common shareholders' $ 16,647 $ 11,100
========== ==========
Net income per share:
Primary
Income before extraordinary charge $ 0.69 $ 0.54
Extraordinary charge (0.03) --
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Net income $ 0.66 $ 0.54
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Fully diluted
Income before extraordinary charge $ 0.63
Extraordinary charge (0.03)
Net income $ 0.60
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Common shares used in computing primary earnings per share 25,483 20,455
========== ==========
Common shares used in computing fully diluted earnings per share 30,593
==========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
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PENNCORP FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
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Three Months Ended
March 31,
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1996 1995
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<S> <C> <C>
Net cash flows from operating activities $ (11,575) $ (2,540)
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Cash flows from investing activities:
Purchases of invested assets (426,683) (28,540)
Sales of invested assets 246,015 14,190
Maturities of invested assets 39,495 5,849
Other, primarily short term investments, net 127,764 (17,558)
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Net cash used by investing activities (13,409) (26,059)
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Cash flows from financing activities:
Issuance of common stock 155,759 50,781
Reduction in notes payable (137,000) (29,500)
Dividends (3,332) (1,464)
Receipts from interest sensitive policies credited
to policyholder account balances 27,718 15,093
Return of policyholder account balances of interest
sensitive products (22,669) (11,148)
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Net cash provided by financing activities 20,476 23,762
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Decrease in cash (4,508) (4,837)
Cash at beginning of period 27,778 13,037
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Cash at end of period $ 23,270 $ 8,200
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Supplemental disclosures:
Income taxes paid $ 829 $ 1,907
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Interest paid $ 2,757 $ 2,879
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</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
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PENNCORP FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business and Organization
PennCorp Financial Group, Inc. (the "Company") is an insurance holding
company. The Company commenced operations with the acquisition of Pennsylvania
Life Insurance Company ("PLIC") and Executive Fund Life Insurance ("EFLIC")
(PLIC and EFLIC collectively referred to herein as "Penn Life") and Pacific
Life and Accident Insurance Company ("PLAIC") on August 23, 1990. Through its
wholly-owned life insurance subsidiaries, PLIC, EFLIC, Peninsular Life
Insurance Company ("Peninsular"), Professional Insurance Corporation
("Professional"), Pioneer Security Life Insurance Company ("Pioneer Security")
and its wholly-owned subsidiaries American-Amicable Life Insurance Company of
Texas and Pioneer American Insurance Company (Pioneer Security and its
subsidiaries collectively referred to herein as "AATX"), Salem Life Insurance
Corporation ("SLIC") and its wholly-owned subsidiaries Integon Life Insurance
Corporation ("ILIC"), Georgia International Life Insurance Company and
Occidental Life Insurance Company of North Carolina ("OLIC"), (SLIC and its
wholly-owned subsidiaries collectively referred to herein as "Integon Life")
and PLAIC, the Company offers a broad range of life insurance and accident and
sickness products to individuals through general agents and through a sales
force that is contractually exclusive to certain of the Company's subsidiaries.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. All dollar amounts presented
hereafter, except per share information, are stated in thousands.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Accounts that the Company deems to be acutely sensitive to changes in estimates
include deferred policy acquisition costs, future policy benefits, policy and
contract claims and present value of insurance in force. In addition, the
Company must determine requirements for disclosure of contingent assets and
liabilities as of the date of the financial statements based upon estimates. In
all instances, actual results could differ from these estimates.
(B) Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, none of which are other
than normal recurring accruals, necessary to present fairly the financial
position as of March 31, 1996, and the results of operations and cash flows for
the three-month periods ended March 31, 1996, and 1995. Results of operations
for interim periods are not necessarily indicative of results for the entire
year.
(2) COMMON STOCK
On March 5, 1996, the Company consummated the sale of 5,131,300 shares of
common stock ("the March offering"). Net proceeds from the offering were
$155,759 and the effect on the Company's financial position was to increase
common stock by $51 and additional paid in capital by $155,708.
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(3) EXTRAORDINARY CHARGE
The Company utilized $137,000 of proceeds from the March offering to
retire certain indebtedness of the Company and its subsidiaries. As a result of
the early retirement of such indebtedness and the resulting write-off of
deferred financing costs, the Company realized an after-tax extraordinary
charge of $816 for the three-month period ended March 31, 1996. If the
retirement of debt and issuance of common stock had occurred at the beginning
of the period, primary and fully diluted earnings per share would have
increased $0.01, respectively.
(4) KNIGHTSBRIDGE
In March 1996, during the continuing negotiations of the terms of the
joint venture relationship between the Company and Knightsbridge Capital Fund
I, L.P., David J. Stone, Chairman of the Board and CEO and Steven W. Fickes,
President and CFO of the Company and the members of the Knightsbridge Committee
of the Company's Board of Directors jointly concluded that it would be
appropriate to explore a comprehensive restructuring of the Knightsbridge
relationship, including the formulation of compensation arrangements between
the Company and each of Messrs. Stone and Fickes. Discussions are continuing
and the Board of Directors has postponed the Company's 1996 Annual Meeting
until July 11, 1996 to enable the Company to submit the final terms of the
restructuring arrangements and Messrs. Stone's and Fickes' compensation
arrangements requiring shareholder approval.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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(5) SOUTHWESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
Through its direct investment in Southwestern Financial Corporation and
Subsidiaries, the Company beneficially owns 67.2% of Southwestern Financial
Corporation and Subsidiaries' outstanding common stock.
Financial information for the three-month period ended March 31, 1996 is
provided below (unaudited).
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1996
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<S> <C>
ASSETS:
Invested assets $1,673,489
Insurance assets 289,769
Other assets 136,932
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Total assets $2,100,190
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Policy liabilities $1,743,774
Long-term debt 159,938
Other liabilities 59,893
Mandatory redeemable preferred stock 31,627
Shareholders' equity 104,958
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Total liabilities and shareholders' equity $2,100,190
==============
</TABLE>
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
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<S> <C>
REVENUES:
Policy revenues $ 62,708
Net investment income 32,386
Net gains from sale of investments 511
Other income 3,664
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Total revenue 99,269
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BENEFITS AND EXPENSES:
Policyholder benefits 64,930
Amortization (988)
Other operating expenses 21,500
Interest expense 3,575
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Total benefits and expenses 89,017
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Income before income taxes 10,252
Income tax expense 3,812
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Net income 6,440
Less dividends on preferred stock (667)
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Net income applicable to common stock $ 5,773
==================
</TABLE>
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REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The March 31, 1996 and 1995 financial statements included in this
Quarterly Report on Form 10-Q have been reviewed by KPMG Peat Marwick LLP,
independent certified public accountants, in accordance with established
professional standards and procedures for such a review.
The report of KPMG Peat Marwick LLP commenting upon their review is
included on page 10 of this quarterly report on Form 10-Q.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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KPMG Peat Marwick LLP
150 Fayetteville Street Mall
Suite 1200
Post Office Box 29543
Raleigh, NC 27626-0543
Independent Auditor's Review Report
The Board of Directors and Shareholders
PennCorp Financial Group, Inc.
We have reviewed the accompanying consolidated condensed balance sheet of
PennCorp Financial Group, Inc. and subsidiaries as of March 31, 1996, and the
related consolidated statements of income and consolidated statements of cash
flows for the three-month periods ended March 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of PennCorp Financial Group, Inc. as
of December 31, 1995 and the related consolidated statements of income,
shareholder's equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 5, 1996, we expressed an unqualified
opinion on those consolidated statements. In our opinion, the financial
information set forth in the accompanying consolidated condensed balance sheet
as of December 31, 1995 is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
May 8, 1996
Raleigh, North Carolina
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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.
PennCorp Financial Group, Inc.
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(The Registrant)
Date: July 12, 1996 By: /s/ James P. McDermott
-----------------------------------
James P. McDermott
Senior Vice President
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