11/8/96
November 8, 1996
Securities and Exchange Commission
450 Fifth Street, NW.
Washington, D.C. 20549
Re: American Investment Network, Inc.
(formerly Great American Investment Network, Inc.) - Form
10-QSB
Gentlemen:
Please accept for filing the Form 10-QSB of the above referenced
registrant for the period September 30, 1996.
Sincerely,
H. Harold Crumpler
Vice President/Treasurer
HHC:ll
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: September 30, 1996
Commission File Number: 0-21572
AMERICAN INVESTMENT NETWORK, INC.
(formerly Great American Investment Network, Inc.
(Exact name of registrant as specified in its charter)
Mississippi 74-2447294
(State or other jurisdiction of incorporation
(I.R.S. Employer
or organization) Identification
No.)
660 Lakeland East Drive, Flowood, Mississippi 39208
(Address of principal executive offices) (Zip
Code)
(601) 936-2090
Registrant's telephone number, including area code
NOT APPLICABLE
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 required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
As of September 30, 1996, there were outstanding 5,021,764 shares
of registrant's Class A common stock, no par value per share and
2,500 shares of Class B common stock, par value $1 per share.
AMERICAN INVESTMENT NETWORK, INC.
FORM 10-QSB
TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Page
PART I. Financial Information
Item 1. Consolidated Balance Sheet (Unaudited)
as of September 30, 1996 3
Consolidated Statements of Operations (Unaudited)
for the Three Months and Nine Months Ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 1996 and
1995 5-6
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security
Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Part I. Financial Information
ITEM 1: AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
September 30, 1996
ASSETS:
SECURITIES AVAILABLE FOR SALE:
Fixed maturities $2,772,845
Equity securities 965,888
Total investments 3,738,733
OTHER ASSETS:
Cash and cash equivalents 126,948
Accrued investment income 83,547
Notes and accounts receivable 309,650
Reinsurance receivable 37,888
Property and equipment - net 740,432
Deferred policy acquisition costs 2,324,953
Intangible and other assets 210,877
TOTAL ASSETS $7,573,028
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Future policy benefits $2,261,834
Unpaid claims 196,481
Unearned premiums 89,213
Policyholder's dividend accumulations 839,535
Accounts payable and other liabilities 250,260
Notes payable 513,969
Total liabilities 4,151,292
STOCKHOLDERS' EQUITY:
Class A Common Stock, participating, no par value
15,000,000 shares authorized; 5,025,490 shares
issued
4,480,620
Class B Common Stock, $1 par value;
2,500 shares authorized, issued and outstanding 2,500
Unrealized loss on marketable securities (65,579)
Retained earnings (deficit) (988,353)
3,429,188
Less: Cost of treasury stock - 3,726 shares (7,452)
Total stockholders' equity 3,421,736
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,573,028
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM I: AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
REVENUE:
Premiums $652,212 $660,751 $2,043,005 $2,123,575
Net investment income 70,904 71,070 216,458 217,786
Gross realized investment losses (2,325)
Other income 13,974 14,675 44,299 39,821
737,090 746,496 2,303,762 2,378,857
BENEFITS AND EXPENSES:
Benefits and claims 272,242 240,161 1,029,463 881,256
Amortization of deferred policy
acquisition costs 137,938 112,883 390,104 326,762
Interest expense 15,321 19,038 45,787 56,906
Salaries and employee
benefits 135,800 174,900 487,252 561,632
Actuarial and other
professional fees 23,560 26,564 96,069 112,495
Depreciation and
amortization expense 21,146 15,830 55,289 51,990
Other expenses 144,963 84,371 366,245 340,447
750,970 673,747 2,470,209 2,331,488
(LOSS) INCOME FROM CONTINUING
OPERATIONS (13,880) 72,749 (166,447) 47,369
DISCONTINUED OPERATIONS:
Income (loss) from operations 3,151 (3,558)
Gain on sale of agency subsidiary 47,133
3,151 43,575
NET (LOSS) INCOME ($ 13,880)$ 75,900 ($ 166,447) $ 90,944
NET (LOSS) INCOME PER COMMON SHARE:
(Loss) income from continuing
operations ($0.01) $0.01 ($0.03) $0.01
Discontinued operations .01 .01
Net (loss) income ($0.01) $0.02 ($0.03) $0.02
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,024,264 5,024,264 5,024,264 5,024,264
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
1996 1995
OPERATING ACTIVITIES:
Net (loss) income ($166,447) $ 90,944
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Discontinued operations (43,575)
Realized loss on sale of investments 2,325
Write-off of investment in U. S. Star subsidiary 30,000
Depreciation and amortization 55,289 51,990
Amortization of deferred
policy acquisition costs 390,104 326,762
Change in net assets of discontinued operations 39,800
Decrease in restricted cash 95,000 161,000
Decrease (increase) in accrued investment income,
accounts receivable and other assets 8,650 (32,320)
Policy acquisition costs deferred (473,654) (651,365)
Increase in liability for future policy benefits
and unpaid claims 319,152 218,183
Increase in unearned premiums and policyholders'
dividend accumulations 125,570 132,007
Decrease in accounts payable and other
liabilities (65,716) (252,183)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 287,948 73,568
INVESTING ACTIVITIES:
Cost of fixed maturities investments acquired(220,000) (429,368)
Proceeds from sales, maturities and repayments of
fixed-maturities investments 15,205 253,829
Property and equipment purchased (64,829) (96,494)
NET CASH USED IN INVESTING ACTIVITIES (269,624) (272,033)
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (Continued)
Nine Months Ended
September 30,
1996 1995
FINANCING ACTIVITIES:
Repayments of notes payable ($ 12,478) ($ 7,848)
NET CASH USED IN FINANCING ACTIVITIES (12,478) (7,848)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,846 (206,313)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 121,102 283,747
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $126,948 $ 77,434
SUPPLEMENTAL INFORMATION:
Non-cash activities:
Change in unrealized (loss) gain on marketable
securities ($113,000) $ 373,000
Sale of agency subsidiary in exchange for
note receivable $ 170,000
Interest paid $46,000 $ 57,000
Income taxes paid $9,000 $-0-
See notes to consolidated financial statements.
ITEM 1. Financial Information (Continued)
AMERICAN INVESTMENT NETWORK, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1996
(Unaudited)
Note 1. Basis of Presentation
The consolidated condensed unaudited interim financial statements
of American Investment Network, Inc. and its subsidiaries ("the
Company") have been prepared in accordance with generally accepted
accounting principles ("GAAP").
In the opinion of management, the attached unaudited financial
statements reflect all adjustments necessary for a fair
presentation of the financial position, results of operations, and
cash flows of the Company. The results of operations for the
interim periods are not indicative of results for the full year.
The consolidated interim financial statements should be read in
conjunction with the audited consolidated financial statements for
the year ended December 31, 1995, and the notes related thereto.
Note 2. Subsequent Event
On October 25, 1996, the Company signed a definitive written
agreement whereby Citizens Insurance Company of America, (CICA),
Austin, Texas, a wholly-owned subsidiary of Citizens, Inc.
(Citizens) will acquire 100% of the outstanding shares of the
Company for shares of Citizens Class A common stock.
Pursuant to the terms of the Agreement which is subject to approval
of regulatory authorities and shareholders of the Company, CICA
will issue one share of Citizens Class A common stock it owns for
each 7.2 shares of the Company's Class A and Class B common stock
issued and outstanding. CICA expects to issue approximately
700,000 shares of Citizens common stock to consummate the
transaction. The companies will continue to operate in their
respective locations under a combined management team with
consolidation of computer data processing on CICA's system.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
Total assets as of September 30, 1996 were $7,573,000, which
represented an increase of $87,000 when compared to December 31,
1995. Significant changes within the Company's composition of
assets and liabilities as compared to its most recent fiscal year
end related principally to (i) a general decline in the fair values
of the Company's fixed maturity and preferred stock securities
resulting from market and economic changes, (ii) the payment of
contingent liabilities resulting from the purchase of Financial
Security Life of Mississippi (FSL) with cash escrowed for such
purposes, and (iii) anticipated increases in the assets and
liabilities related to the Company's growth in the accident and
health insurance market. As of September 30, 1996, the Company's
unrealized loss on marketable securities was $65,000 compared to an
unrealized gain of $48,000 as of December 31, 1995 or an adverse
change of $113,000.
Restricted cash decreased $95,000 (as well as the corresponding
liability included in accounts payable and other liabilities) as a
result of the settlement of certain liabilities and contingencies
of FSL for which seller funds were escrowed. As of September 30,
1996, the Company's deferred policy acquisition cost increased
$84,000 as compared to December 31, 1995 and future policy benefit
and unpaid claims liabilities increased an aggregate of $319,000.
This increase principally related to accident and health products.
Policyholders' dividend accumulations increased $76,000 and relates
to the dividend scale of the Company's participating life policies.
Results of Operations
Total revenues for the nine months ended September 30, 1996 were
$2,304,000 compared with revenues of $2,379,000 at the same period
in 1995 or a decrease of $75,000.
Accident and health premiums increased during the first nine months
of 1996 by $72,000 or 6%. Life premiums, however, continued their
decreasing trend and reflected a reduction of $153,000 when
compared to 1995. This trend is expected to continue due to the
Company's emphasis in its accident and health lines. Other income
increased in 1996 by $5,000 principally as a result of increased
rental income from its home office facility.
Policy benefits and claims increased $148,000 for the nine month
period ended September 30, 1996 over the same period ended
September 30, 1995. This increase is principally related to the
growth in accident and health business and related claims and
increases in dividend benefits related to the Company's Lifetime
Accumulator participating policies.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Amortization of deferred policy acquisition cost increased $63,000
for the nine month period ended September 30, 1996 as compared to
1995. The amortization of deferred policy acquisition cost related
to accident and health business increased $14,000 resulting from
increases in business volume. The remaining increase of $49,000
resulted from the increase in anticipated lapses and terminations
in the Company's declining life insurance business.
Salaries and wages reflected a decrease of $74,000 or 13% for the
first nine months of 1996. This decrease principally results from
the accrual of $55,000 in compensation cost in 1995 as a result of
the obligation relative to past services resulting from the
adoption of an executive compensation plan in May 1995 and salary
continuation payments to certain retired executives in 1995 of
$27,000.
Actuarial and other professional fees decreased from $112,000 for
the first nine months of 1995 to $96,000 for the nine months ended
September 30, 1996. This $16,000 decrease was the direct result of
less legal and actuarial services in 1996. During 1995 legal fees
approximated $25,000 and included final billings relative to
previously accrued litigation settlements and cost relating to the
sale of certain assets. In 1996, legal fees approximated $17,000.
Additionally actuarial fees decreased approximately $12,000 due to
less cost related to new product development.
Other general operating expenses increased by $26,000 for the first
nine months of 1996 as compared to the same period in 1995. This
net increase was a combination of several factors including (i) an
increase in non-deferrable renewal commissions of $69,000; (ii) an
increase of $31,000 resulting from director fees under the
executive compensation plan; (iii) a decrease in the cost of
outside computer processing of $51,000 due to a migration to in-
house processing; (iv) a decrease in 1996 of $30,000 as compared
to 1995 resulting from the write-off of the Company's remaining
investment in U. S. Star during the first quarter of 1995, and (v)
cost containment measures in controllable expenses.
Management believes that the cash flow generated from the Company's
insurance operations, investment income and proceeds from sales and
maturities of investments will be sufficient to meet its current
and future operating requirements. The Company is monitoring the
volume of new accident and health business written in 1996 in order
to manage the possible cash flow and statutory surplus effects
resulting from the related acquisition expenses to secure such
business in the first year.
PART II.
ITEM 1. Legal Proceedings.
Included herewith by reference to Form 10-KSB for year ended
December 31, 1995. There have been no significant changes in these
matters since the filing of the Form 10-KSB.
ITEM 2. Changes in Securities.
There have been no changes in securities since 1995.
ITEM 3. Default Upon Senior Securities.
The Registrant has no senior securities.
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 7, 1996, shareholders of the Company approved the adoption
of an Agents' Stock Option Plan for eligible agents licensed with
the Company wherein 200,000 shares of Class A common stock was
reserved for option as directed by the Board of Directors. Under
the terms of the plan, agents writing premiums which exceed certain
minimum levels will be granted options at an exercise price equal
to fair value at the date of grant.
In addition, on May 7, 1996, the shareholders approved the change
of the Company's name from Great American Investment Network, Inc.
to American Investment Network, Inc.
There have been no matters submitted to a vote of security holders,
through the solicitation of proxies or otherwise, since the last
annual meeting held May 7, 1996.
ITEM 5. Other Information
There is no other information to be disclosed in this Form 10-QSB.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
NONE
(b) Reports on Form 8-K:
On October 30, 1996, a Form 8-K was filed disclosing that
on October 25, 1996 the Company had entered into a written
agreement wherein 100% of its outstanding stock would be
acquired in a stock exchange with another company, subject
to regulatory and shareholder approval.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN INVESTMENT NETWORK, INC.
(Registrant)
November 8, 1996 /s/ H. Harold Crumpler
H. Harold Crumpler, Executive Vice
President/Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN INVESTMENT NETWORK, INC.
(Registrant)
Date H. Harold Crumpler, Executive Vice
President/Treasurer
