May 13, 1997
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 ended March 31, 1997.
Enclosed are eight copies; one copy with manual signatures and seven copies with
printed signatures.
Sincerely,
H. Harold Crumpler
President, Treasurer and Chief Executive Officer
HHC:ll
Enclosures (8)
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: March 31, 1997
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 March 31, 1997, 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 MARCH 31, 1997
Page
PART I. Financial Information
Item 1. Consolidated Balance Sheet (Unaudited)
as of March 31, 1997 3
Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1997 and 1996 5-6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Part I. Financial Information
ITEM 1: AMERICAN INVESTMENT NETWORK AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
March 31, 1997
ASSETS:
SECURITIES AVAILABLE FOR SALE:
Fixed maturities $2,816,811
Equity securities 977,901
Total investments 3,794,712
OTHER ASSETS:
Cash and cash equivalents 118,450
Accrued investment income 85,262
Notes and accounts receivable 293,885
Reinsurance receivable 58,674
Property and equipment - net 729,472
Deferred policy acquisition costs 2,377,145
Intangible and other assets 236,345
TOTAL ASSETS $7,693,945
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Future policy benefits $2,624,374
Unpaid claims 180,246
Unearned premiums 142,152
Policyholder's dividend accumulations 841,753
Accounts payable and other liabilities 230,609
Note payable 504,429
Total liabilities 4,523,563
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 (75,902)
Retained earnings (deficit) (1,229,384)
3,177,834
Less: Cost of treasury stock - 3,726 shares (7,452)
Total stockholders' equity 3,170,382
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,693,945
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM I: AMERICAN INVESTMENT NETWORK AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31,
1997 1996
REVENUE:
Premiums $ 729,727 $661,522
Net investment income 76,547 68,068
Other income 14,563 14,911
820,837 744,501
BENEFITS AND EXPENSES:
Benefits and claims 548,168 360,474
Amortization of deferred policy acquisition costs 133,930 129,560
Interest expense 15,125 16,704
Salaries and employee benefits 164,289 167,178
Actuarial and other professional fees 73,835 33,167
Depreciation and amortization expense 23,954 21,472
Other expenses 91,542 97,003
1,050,843 825,558
NET LOSS ($ 230,006) ($ 81,057)
NET LOSS PER COMMON SHARE ($0.05) ($0.02)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,024,264 5,024,264
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
1997 1996
OPERATING ACTIVITIES:
Net loss ($230,006) ($ 81,057)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 23,954 21,472
Amortization of deferred policy acquisition costs 133,930 129,560
Decrease in restricted cash 95,000
(Increase) decrease in accrued investment income,
accounts receivable and other assets (1,570) 5,913
Policy acquisition costs deferred (205,710) (213,095)
Increase in liability for future policy benefits
and unpaid claims 236,156 133,491
Increase in unearned premiums and policyholders'
dividend accumulations 37,217 19,235
Increase (decrease) in accounts payable and other
liabilities 28,050 (101,697)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 22,021 8,822
INVESTING ACTIVITIES:
Purchases of investment securities available for sale (200,000)
Proceeds from sales, maturities and repayments of
fixed-maturities investments 31,751 13,414
Property and equipment purchased (12,900) (29,593)
NET CASH USED IN INVESTING ACTIVITIES (181,149) (16,179)
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Ended
March 31,
1997 1996
FINANCING ACTIVITIES:
Repayments of notes payable ($ 4,699) ($ 2,870)
NET CASH USED IN FINANCING ACTIVITIES (4,699) (2,870)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (163,827) (10,227)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 282,277 121,102
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $118,450 $110,875
SUPPLEMENTAL INFORMATION:
Non-cash activities:
Change in unrealized gain (loss) on marketable
securities available for sale ($ 60,759) $ 86,055
Interest paid $15,000 $16,000
Income taxes paid $ -0- $ -0-
See notes to consolidated financial statements.
ITEM 1. Financial Information (Continued)
AMERICAN INVESTMENT NETWORK, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Months Ended March 31, 1997
(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,
1996, and the notes related thereto.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Proposed Sale of Company
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
shareholders of the Company, CICA will issue one share of Citizens Class
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.
Regulatory authorities have approved the sale and management anticipates that
the sale will occur during 1997.
Liquidity and Capital Resources
Management believes the Company's retained cash, its investment and lease
income, and its source for subsidiary dividends, as well as principal and
interest collections received from a note receivable relating to the sale of its
agency subsidiary's in-force business and certain other net assets in a prior
year, will be sufficient to finance its short-term operations and its present
forecast of long-term needs. The Company continues to monitor the volume of new
accident and health business written 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.
Financial Condition
Total assets as of March 31, 1997 were $7,694,000, an increase of $6,000 from
December 31, 1996. Significant changes within the Company's composition of
assets and liabilities compared to the 1996 year end related principally to a
general decline in the fair values of the Company's fixed maturity and preferred
stock securities resulting from market and economic changes and anticipated
increases in assets and liabilities related to the Company's growth in the
accident and health insurance market. As of March 31, 1997, the Company's
unrealized loss on marketable securities available for sale was $76,000
compared to an unrealized loss of $15,000 as of December 31, 1996.
Cash and cash equivalents decreased $164,000 as compared to December 31, 1996.
Included in this decrease was the purchase of an investment security of $200,000
and the deposit of the proceeds from one security sale of $31,000. As of March
31, 1997, the Company's deferred policy acquisition costs increased $29,000 as
compared to December 31, 1996 and future policy benefits, unpaid claims
liabilities and unearned premiums increased an aggregate of $268,000.
Substantially all of this increase is related primarily to the increased volume
of in-force accident and health products.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Notes and accounts receivable decreased $12,000 as compared to December 31,
1996. Of this decrease, approximately $4,000 related to collections on a note
receivable pursuant to the sale of the Company's insurance agency subsidiary's
inforce business and certain net assets to a former officer. This sale occurred
in 1995 and the note which bears interest at 7.5% per annum, is payable in
monthly installments of $2,006, including interest, and approximated $148,000 as
of December 31, 1996. Additionally, due and unreceived premiums, which are
included in notes and accounts receivable, decreased approximately $5,000 as
compared to December 31, 1996. This decrease was primarily related to the
timing of remittances by corporate employers of the premiums collected
through payroll deduction.
Other assets decreased $9,000 as compared to December 31, 1996. This was
primarily due to the use of prepaid guaranty fund assessment credits applied
against premium tax payments on returns filed.
Accounts payable and other liabilities increased approximately $28,000 in 1997
as compared to December 31, 1996. This increase included approximately $18,000
relative to amounts due to reinsurers for reinsurance premiums and $10,000
accrued relative to consulting arrangements with certain of its original
founders through a consulting group formed to promote the Company. This group
receives consulting fees based upon an 8.33% return on each respective founder's
original investment and is payable over twelve years. Included in accounts
payable and other liabilities as of March 31, 1997 and December 31, 1996 was
approximately $55,000 accrued as a minimum obligation under an executive
compensation plan for two executives. The plan provides for future and past
services in the form of benefits that could range from a minimum fixed benefit
of $20,000 to a maximum benefit of $100,000 annually for each of the executives
over a ten year period. Benefits in excess of the fixed minimum are based upon
a specified ratio of statutory net gain from operations to gross statutory
premiums of the insurance subsidiary. Payments under the plan approximated
$10,000 for the three months ended March 31, 1997 and 1996. Management
evaluates the propriety of the recorded obligation for past services at each
reporting period based upon their best estimates of anticipated future
statutory premium revenues and statutory operating gains.
Results of Operations
Total revenues for the three months ended March 31, 1997 were $821,000 compared
with revenues of $745,000 for the same comparable period in 1996 or an increase
of $76,000.
Total premiums earned by the Company's insurance subsidiary for the first
quarter of 1997 increased $68,000 compared to 1996. The primary reason for the
increase relates to the increase in the insurance subsidiary's accident and
health business. Life premiums decreased approximately $45,000 to $176,000 for
the three months of 1997 compared to $221,000 in 1996. This is the result
of the Company's increasing focus on growth in the accident and health business.
Accident and health premiums continued to increase for the first quarter of 1997
with premium revenues of $554,000 through March 31, 1997 compared with $440,000
for the three months ended March 31, 1996. The Company began issuing accident
and health products in latter 1993 and anticipates this will represent its major
market emphasis in 1997. The insurance subsidiary offers limited pay accident
and health products principally through a mass marketing payroll deduction
process.
Net investment income increased $9,000 or 12% for 1997 as compared to the prior
year. This increase related principally to an increase in invested assets when
compared to the corresponding period.
Policy benefits and claims increased $188,000 for the three month period ended
March 31, 1997 as compared to the same period for 1996. This increase is
principally related to the growth in accident and health business. During the
first quarter of 1997, accident and health benefits approximated $431,000
compared to total accident and health benefits for the first quarter of 1996 of
$283,000. This included an increase in claims paid of approximately $61,000 and
an increase in accident and health future policy benefits and unpaid claim
liabilities of $87,000. The increase in future policy benefits relates to
additional unearned premium reserves required for Medicare supplement policies
written with annual modal premiums. Management has notified its agency force to
discontinue writing annual modal policies on this product type due to the
effects on statutory surplus of the unearned premium reserves required. In
addition, claims paid, net of reinsurance, on life policies increased by
approximately $35,000 as a result of two death claims incurred in 1997. The
remaining change related to a net increase in policyholder dividends of
approximately $5,000.
Amortization of deferred policy acquisition costs increased $4,000 for 1997 as
compared to the same period of the prior year. This net increase includes
approximately $31,000 of anticipated increases related to the amortization of
accident and health acquisition costs which approximated $78,000 in 1997 as
compared to $47,000 in 1996 and a decrease of $27,000 related to the reducing
in-force life business.
Actuarial and other professional fees increased from $33,000 for the three
month period ended March 31, 1996 to $74,000 for the first quarter of 1997 or
an increase of $41,000. This increase included additional legal and accounting
fees related to the pending sale of the Company to Citizens of approximately
$38,000 and an increase in actuarial fees of approximately $3,000.
Other general and operating expenses decreased approximately $6,000 for 1997 as
compared to 1996. This decrease was a combination of several factors including
a decrease in computer expenses of approximately $12,000 resulted from
management efforts to better utilize current data processing capabilities
available from the Company's own computer equipment and partially offset by
increased postage cost of $5,000 related to shareholder correspondence and
mailings.
PART II.
ITEM 1. Legal Proceedings.
Included herewith by reference to Form 10-KSB for year ended December 31, 1996.
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 1996.
ITEM 3. Default Upon Senior Securities.
The Registrant has no senior securities.
ITEM 4. Submission of Matters to a Vote of Security Holders
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
Mr. Shannon Williford, Chairman of the Board of Directors for American
Investment Network, Inc. and its subsidiary United Security Life Insurance
Company, Jackson, Mississippi has announced that H. Harold Crumpler was named
President, Treasurer and Chief Executive Officer of both companies on May 8,
1997. Mr. Crumpler is a graduate of Wake Forest University and has done post
graduate work at King's School of Business, the Life Office Management
Association and the Society of Financial Examiners. He has 43 years experience
in life, accident and health insurance management.
Mr. Crumpler replaces Mr. John S. Camara, who died April 30, 1997.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
NONE
(b) Reports on Form 8-K:
NONE
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)
May 13, 1997 /s/ H. Harold Crumpler
H. Harold Crumpler, President, Treasurer and
Chief Executive Officer
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)
May 13, 1997
Date H. Harold Crumpler, President, Treasurer and
Chief Executive Officer
5/13/97- 4 -- 1 -- 12 - - 13 -
