SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 15, 1997
HOME STATE HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22016 13-3429087
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Three South Revmont Drive, Shrewsbury, NJ 07702
(Address of Principal Executive Offices) (zip code)
Registrant's telephone number, including area code (908) 935-2600
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(Former Name or Former Address, if Changed Since Last Report
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Item 4. Changes in Registrant's Certifying Accountant
On July 15, 1997 the Registrant dismissed its independent accountants,
Coopers & Lybrand L.L.P. ("C&L"). The decision to dismiss C&L was approved by
the Audit Committee of the Registrant.
In a July 15, 1997 letter to the Registrant, C&L, which had audited the
Registrant's financial statements for the years ended December 31, 1993, 1994,
1995 and 1996, indicated that information has come to C&L's attention leading it
to conclude that the internal controls necessary for the Registant to develop
reliable financial statements do not exist; C&L is no logner able to rely on
management's representations; and C&L is unwilling to be associated with the
financial statements prepared by management of Registrant. Members of the Audit
Committee and Board of Directors of Registrant discussed such letter with C&L on
July 15, 1997. At that time, C&L expressed its intent to resign on July 16,
1997. C&L was dismissed later in the day on July 15, 1997.
C&L's reports on the Registrant's financial statements for the past two
years did not contain an adverse opinion or a disclaimer of opinion and such
reports were not qualified or modified as to uncertainty, audit scope or
accounting principles. However, as reported in the Registrant's Current Report
on Form 8-K filed June 9, 1997, the Registrant has not filed its Form 10-Q for
the first quarter of 1997 as it continues to investigate the causes for the
substantial operating losses in such quarter, and was consulting with such
independent accountants to determine whether there was any effect on periods
previously recorded. The June 9, 1997 Form 8-K advised that until such
determination is made, the Registrant's financial statements for the year ended
December 31, 1996, and the related audit report by C&L thereon, should not be
relied upon.
In connection with the aforementioned investigation, C&L advised the
Registrant that its reserve for insurance losses and loss adjustment expense
reserves as of December 31, 1996 may have been materially misstated based upon
information that was available at that date, but which had not been processed by
management. The Registrant asserted, based on preliminary and incomplete
information of the details of C&L's comments, that the necessary increases in
reserves were primarily a result of new information obtained during the first
quarter of 1997. This initial difference of opinion was discussed with
management and certain members of the Audit Committee and the Board of
Directors, who requested additional information from C&L. The initial difference
of opinion was not resolved prior to C&L's dismissal.
Except for the matter reported in the preceding paragraph, during the
Registrant's two most recent fiscal years and the subsequent interim periods
preceding C&L's dimissal, the Registrant does not know of any disagreements
with the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of C&L, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report.
Subsequent to June 9, 1997, management discussed with C&L a possible
under-accrual of reinsurance balances payable for the year ended December 31,
1995. C&L advised that, if further investigated, this matter may materially
impact the fairness and reliability of the Registrant's financial statements for
the years ended December 31, 1996 and December 31, 1995. The investigation was
not completed prior to C&L's dismissal.
The Registrant is currently investigating the foregoing matters.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
16.1 Letter from Coopers & Lybrand, L.L.P. to the Securities and Exchange
Commission dated July , 1997. (To be filed by amendment)
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 hereunto duly authorized.
Date: July 22, 1997 HOME STATE HOLDINGS, INC.
By: /s/ Eric A. Reehl
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Eric A. Reehl Executive Vice President
