<PAGE> 1
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 period ended June 30, 1996
or
{ } 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: 000-22142
OMNI INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1680624
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1000 Parkwood Circle, Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
(770) 952-4500
(Registrant's telephone number, including area code)
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 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
------------- -------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Common Stock, par value $.01
Issued and outstanding as of: June 30, 1996 - 5,700,150 shares
<PAGE> 2
OMNI INSURANCE GROUP, INC.
Form 10-Q
June 30, 1996
Table of Contents
Page
PART I. Financial Information Number
------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Earnings -
Three and six months ended
June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults by the Company on its 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 11
Signatures 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
OMNI INSURANCE GROUP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Investments:
Fixed maturities, at fair value $ 72,415,719 $ 75,540,655
Equity securities, at fair value 198,025 201,763
Invested cash 7,568,172 6,349,402
----------- -----------
Total investments 80,181,916 82,091,820
Accrued investment income 1,387,605 1,392,261
Accounts receivable, principally premiums 35,633,297 32,207,999
Reinsurance recoverables 1,221,174 1,019,551
Prepaid reinsurance premiums 3,534,706 985,013
Deferred policy acquisition costs 7,508,348 7,672,865
Deferred income taxes 1,453,000 795,000
Property and equipment, net 2,159,079 2,260,351
----------- -----------
Total assets $133,079,125 $128,424,860
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Unpaid losses and loss adjustment expenses $ 34,379,610 $ 35,822,327
Unearned premiums 39,005,034 34,606,009
Funds held for reinsurance - 4,832
Accounts payable and accrued expenses 3,126,773 2,821,321
Drafts payable 5,097,234 4,674,154
Federal income taxes payable 471,878 797,878
Reserve for premium tax assessment 1,460,000 1,460,000
Other liabilities 233,460 239,551
----------- -----------
Total liabilities 83,773,989 80,426,072
----------- -----------
Stockholders' equity:
Common stock, par value $.01, authorized
15,000,000 shares; issued 5,700,150 shares 57,002 57,002
Additional paid-in capital 28,937,173 28,937,173
Net unrealized (depreciation) appreciation
of securities (384,876) 674,182
Retained earnings 20,695,837 18,330,431
----------- -----------
Total stockholders' equity 49,305,136 47,998,788
Commitments and contingencies (note 2)
----------- -----------
Total liabilities and stockholders' equity $133,079,125 $128,424,860
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
OMNI INSURANCE GROUP, INC.
Consolidated Statements of Earnings
Unaudited
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Data:
Gross premiums written $25,759,536 $23,492,286 $50,369,669 $47,963,081
========== ========== ========== ==========
Net premiums written $23,395,083 $22,859,584 $43,642,767 $46,932,605
========== ========== ========== ==========
Revenues:
Net premiums earned $21,505,966 $22,165,438 $41,793,434 $42,823,928
Net investment income 1,008,896 1,062,676 2,031,076 2,108,609
Realized capital gains (losses) - (2,399) 27,538 (2,913)
Other income (loss) - (990) 4,046 9,953
---------- ---------- ---------- ----------
Total revenues 22,514,862 23,224,725 43,856,094 44,939,577
---------- ---------- ---------- ----------
Losses and expenses:
Losses and loss adjustment expenses, net 15,476,749 17,023,800 30,516,534 33,530,112
Acquisition and operating expenses, net 5,392,298 5,204,556 10,112,154 9,894,517
Reserve for premium tax assessment - 1,460,000 - 1,460,000
---------- ---------- ---------- ----------
Total losses and expenses 20,869,047 23,688,356 40,628,688 44,884,629
---------- ---------- ---------- ----------
Earnings (loss) before income taxes 1,645,815 (463,631) 3,227,406 54,948
---------- ---------- ---------- ----------
Income taxes (benefit):
Current 365,000 (313,000) 974,000 (302,000)
Deferred 73,000 61,000 (112,000) 97,000
---------- ---------- ---------- ----------
Total income taxes 438,000 (252,000) 862,000 (205,000)
---------- ---------- ---------- ----------
Net earnings (loss) $ 1,207,815 $ (211,631) $ 2,365,406 $ 259,948
========== ========== ========== ==========
Net earnings (loss) per share $ 0.21 $ (0.04) $ 0.41 $ 0.05
========== ========== ========== ==========
Weighted average shares outstanding 5,700,150 5,700,150 5,700,150 5,700,150
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
OMNI INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,365,406 $ 259,948
Adjustments to reconcile net earnings to net cash
provided from operating activities:
Amortization and depreciation 608,584 458,358
Increase in accounts receivable, principally premiums (3,425,298) (2,060,088)
(Increase) decrease in reinsurance recoverables (201,623) 659,010
(Increase) decrease in prepaid reinsurance premiums (2,549,693) 2,869,233
Decrease (increase) in deferred policy acquisition costs 164,517 (1,247,262)
Deferred income tax (benefit) expense (112,000) 97,000
(Decrease) increase in unpaid losses and loss adjustment
expenses (1,442,717) 754,847
Increase in unearned premiums 4,399,025 1,239,444
Decrease in funds held for reinsurance (4,832) (1,265,813)
Increase (decrease) in accounts payable and accrued expenses 196,219 (175,808)
Change in federal income taxes (326,000) (602,000)
Increase in reserve for premium tax assessment - 1,460,000
Other, net 394,103 (246,430)
--------- ---------
Net cash provided from operating activities 65,691 2,200,439
--------- ---------
Cash flows from investing activities:
Purchases of investments (5,336,694) (8,421,156)
Maturities, calls, and paydowns of fixed maturities 3,415,658 592,887
Sales of investments 3,157,068 88,500
(Increase) decrease in invested cash (1,218,770) 5,885,047
Purchases of property and equipment (239,715) (691,658)
Sales of property and equipment 47,529 71,639
--------- ---------
Net cash used in investing activities (174,924) (2,474,741)
--------- ---------
Cash flows from financing activities:
Cash overdraft 109,233 274,302
--------- ---------
Net cash provided by financing activities 109,233 274,302
--------- ---------
Net decrease in cash - -
Cash at beginning of period - -
--------- ---------
Cash at end of period $ - $ -
========= =========
Supplemental cash flow information - cash payments
during year for:
Income taxes $ 1,300,000 $ 300,000
========= =========
Supplemental schedule of noncash investing and
financing activities:
Retirement of treasury stock $ - $ 7,400,000
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
OMNI INSURANCE GROUP, INC.
Notes to Consolidated Financial Statements
June 30, 1996
(1) Basis of Presentation
The unaudited consolidated financial statements include the accounts of Omni
Insurance Group, Inc. ("Company"), a holding company, and its wholly owned
insurance subsidiary, Omni Insurance Company ("Omni Insurance"). Omni Insurance
owns all the issued and outstanding common stock of Omni Indemnity Company and
Omni General Agency, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in
conformity with generally accepted accounting principles (GAAP). However, all
of the footnotes required by GAAP have not been included and reference should
be made to the "Notes to Consolidated Financial Statements" included in the
Company's 1995 Annual Report. In the opinion of management, all necessary
adjustments have been reflected for a fair presentation of the results of
operations, financial position and cash flows in the accompanying unaudited
consolidated financial statements. The results for the periods are not
necessarily indicative of the result for the entire year.
Certain items in the prior period financial statements have been reclassified
to conform to the current presentation.
(2) Contingencies
As previously disclosed, the Florida Department of Revenue ("Department") has
conducted an audit of the premium tax returns filed by Omni Insurance for the
years 1987 through 1991. The Department made adjustments to these returns that
increase the premium tax liability, including penalties and interest. No audit
has been conducted for years 1992 and 1993; however, similar issues may exist
for these two years which could result in an additional assessment. Due to the
redomestication of Omni Insurance, no similar exposure exists after 1993.
Omni Insurance administratively protested the assessment proposed by the
Department for the years 1987 through 1991. In May 1995, Omni Insurance
received notice from the Department that it had denied Omni Insurance's protest
and issued a notice of final assessment. As a result, Omni Insurance filed
suit against the Department to further contest the assessment. Following the
July 1995 filing of such suit, a Florida trial court rendered a decision in
another case involving similar issues. This decision was adverse to the
taxpayer, after the taxpayer had initially been granted summary judgment in its
favor. The taxpayer appealed that case and filed a brief on appeal of the
verdict previously rendered. During the quarter ended June 30, 1996, the
Appeals Court rendered a decision that was adverse to the taxpayer, denied its
claim for rehearing and denied its request to be heard by the Florida Supreme
Court.
Omni Insurance strongly disagreed with the decision of the trial court and
filed an Amicus Brief supporting the unrelated taxpayer's position. Based on
the trial court verdict, Omni management considered it prudent and necessary to
establish a reserve to cover any possible loss exposure related to this issue.
Accordingly, a reserve of $1,460,000 was established during 1995. Omni
Insurance's suit is still pending.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Effective January 1, 1996, the Company entered into a catastrophe reinsurance
treaty with a reinsurer rated A+ by A.M. Best (hereinafter, the "new
reinsurance treaty"). This treaty reinsures 80% of all comprehensive premiums
and provides protection in the event of a large weather-related loss. The
commencement of this treaty impacted a number of the accounts and ratios of the
Company during the first and second quarters of 1996 but resulted in a decrease
in net income of only approximately $0.01 and $0.02 per share for the three and
six months ended June 30, 1996, respectively.
Financial Condition
June 30, 1996, Compared to December 31, 1995
Total investments decreased to $80.2 million at June 30, 1996 from $82.1
million at December 31, 1995. This decrease was primarily the result of an
unrealized loss of approximately $1.6 million in the investment portfolio which
resulted in an after tax decrease of $1.1 million to stockholders' equity. The
unrealized loss was a result of an increase in interest rates and the
requirements of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
The increase in accounts receivable to $35.6 million and unearned premiums to
$39.0 million at June 30, 1996 is the result of the increase in gross premiums
written compared to December 31, 1995.
Prepaid reinsurance premiums and deferred policy acquisition costs were
impacted by the new reinsurance treaty. Prepaid reinsurance premiums increased
to $3.5 million at June 30, 1996 from $1.0 million at December 31, 1995 due to
the cession of the unearned comprehensive premium reserve. The decrease in
deferred policy acquisition costs to $7.5 million at June 30, 1996 from $7.7
million at December 31, 1995 was primarily the result of the deferral of the
unearned portion of commission on the new reinsurance treaty.
Unpaid losses and loss adjustment expenses decreased to $34.4 million at
June 30, 1996 from $35.8 million at December 31, 1995. The decrease is
attributable to a reduction in our loss ratio and our ability to speed the
claims settlement process through the use of staff adjusters.
Results of Operations
Three Months Ended June 30, 1996, Compared to Three Months Ended June 30, 1995
Gross premiums written increased 9.7% to $25.8 million for the three months
ended June 30, 1996 from $23.5 million for the three months ended June 30,
1995. As previously disclosed, the Company began writing business in Texas
in the third quarter of 1995. Since that time, the Company's Texas premiums
have grown steadily, and for the three months ended June 30, 1996, Texas
accounted for approximately 18% of the Company's gross premiums written. A
sizable portion of the Texas business has been written through an agency which
has multiple branch offices, but these branch offices are controlled by common
ownership.
Net premiums written increased 2.3% to $23.4 million for the three months ended
June 30, 1996 from $22.9 million for the three months ended June 30, 1995.
This increase was partially offset by the new reinsurance treaty whereby
approximately $1.6 million in premiums were ceded to the reinsurer.
Net premiums earned decreased 3.0% to $21.5 million during the three months
ended June 30, 1996 from $22.2 million during the three months ended June 30,
1995. Without the new reinsurance treaty, net premiums earned would have been
$23.0 million for an increase of $0.8 million or 3.6%.
Net investment income decreased slightly to $1.0 million for the three months
ended June 30, 1996 from $1.1 million for the three months ended June 30, 1995.
This was the result of a decrease in average investable assets and a decrease
in the average investment yield as higher yielding securities have matured and
been replaced by lower yielding securities.
<PAGE> 8
Losses and loss adjustment expenses were $15.5 million for the three months
ended June 30, 1996 with a net loss ratio of 72.0%, compared to $17.0 million
for the three months ended June 30, 1995 with a net loss ratio of 76.8%. These
decreases are primarily attributable to improvement in the Florida personal
injury protection business due to previous rate increases and agency management
steps taken. Also aiding in the reduction of the loss and loss adjustment
expense ratio was our ability to use Omni staff appraisers to adjust more of
our auto damage claims. The Company continues to closely monitor the adequacy
of its rates and loss reserves and takes action when necessary.
Acquisition and operating expenses increased to $5.4 million for the three
months ended June 30, 1996 from $5.2 million for the three months ended
June 30, 1995, and the net expense ratio increased to 25.1% from 23.5% for
these same periods. The increases are due primarily to increased staffing
levels and certain other expenses without a corresponding increase in net
premiums earned.
During the three month period ending June 30, 1995, the Company established a
reserve for the premium tax assessment by the Florida Department of Revenue in
the amount of $1.5 million. The net impact on earnings was $999,000 or $0.18
per share. See Note (2) in the "Notes to Consolidated Financial Statements."
The effective income tax rate for the three months ended June 30, 1996 was
26.6% compared to 21.0%, before the reserve for the premium tax assessment, for
the three months ended June 30, 1995. The increase is primarily attributable
to a decrease in tax exempt interest as a percentage of total earnings before
tax.
As a result of the foregoing factors, net earnings increased to $1.2 million
for the three months ended June 30, 1996 from a net loss of $212,000 for the
three months ended June 30, 1995, and earnings per share increased to $0.21 per
share from ($0.04) per share for the same periods, respectively.
Six Months Ended June 30, 1996, Compared to Six Months Ended June 30, 1995
Gross premiums written increased 5.0% to $50.4 million for the six months ended
June 30, 1996 from $48.0 million for the six months ended June 30, 1995. As
previously disclosed, the Company began writing business in Texas in the third
quarter of 1995. Since that time, the Company's Texas premiums have grown
steadily, and for the period ended June 30, 1996, Texas accounted for
approximately 21% of the Company's gross premiums written. A sizable portion
of the Texas business has been written through an agency which has multiple
branch offices, but these branch offices are controlled by common ownership.
Net premiums written decreased 7.0% to $43.6 million for the six months ended
June 30, 1996 from $46.9 million for the six months ended June 30, 1995. This
decrease was the result of the new reinsurance treaty whereby $5.3 million in
premiums were ceded to the reinsurer.
Net premiums earned decreased 2.4% to $41.8 million during the six months ended
June 30, 1996 from $42.8 million during the six months ended June 30, 1995.
Without the new reinsurance treaty, net premiums earned would have been $44.6
million for an increase of $1.8 million or 4.2%.
Net investment income decreased slightly to $2.0 million for the six months
ended June 30, 1996 from $2.1 million for the six months ended June 30, 1995.
This was the result of a decrease in average investable assets and a decrease
in the average investment yield as higher yielding securities have matured and
been replaced by lower yielding securities.
Losses and loss adjustment expenses were $30.5 million for the six months ended
June 30, 1996 with a net loss ratio of 73.0%, compared to $33.5 million for the
six months ended June 30, 1995 with a net loss ratio of 78.3%. These decreases
are primarily attributable to improvement in the Florida personal injury
protection business due to previous rate increases and agency management steps
taken. Also aiding in the reduction of the loss and loss adjustment expense
ratio was our ability to use Omni staff appraisers to adjust more of our auto
damage claims. The Company continues to closely monitor the adequacy of its
rates and loss reserves and takes action when necessary.
Acquisition and operating expenses increased slightly to $10.1 million for the
six months ended June 30, 1996 from $9.9 million for the six months ended June
30, 1995, and the net expense ratio increased to 24.2% from 23.1% for these
same periods. The increases are due primarily to increased staffing levels and
certain other expenses without a corresponding increase in net premiums earned.
<PAGE> 9
During the six month period ending June 30, 1995, the Company established a
reserve for the premium tax assessment by the Florida Department of Revenue in
the amount of $1.5 million. The net impact on earnings was $999,000 or $0.18
per share. See Note (2) in the "Notes to Consolidated Financial Statements."
The effective income tax rate for the six months ended June 30, 1996 was 26.7%
compared to 16.9%, before the reserve for the premium tax assessment, for the
six months ended June 30, 1995. The increase is primarily attributable to a
decrease in tax exempt interest as a percentage of total earnings before tax.
As a result of the foregoing factors, net earnings increased to $2.4 million
for the six months ended June 30, 1996 from $260,000 for the six months ended
June 30, 1995, and earnings per share increased to $0.41 per share from $0.05
per share for the same periods, respectively.
Liquidity and Capital Resources
The Company's major sources of operating funds are dividends from Omni
Insurance and payments received pursuant to a tax-sharing agreement between the
Company and its subsidiaries. Therefore, the Company's liquidity will be
dependent upon the earnings of Omni Insurance and the subsidiaries' ability to
pay dividends and make tax-sharing payments to the Company.
The principal sources of funds for the insurance subsidiaries result from the
collection of net premiums written, investment income and proceeds from
investments that have been sold, matured or repaid.
The Company's principal uses of funds are the payment of general corporate
expenses. The principal uses of funds for the insurance subsidiaries are the
payment of claims, acquisition and operating expenses and the purchase of
investments.
Net cash provided by operating activities was $66,000 for the six months ending
June 30, 1996 compared with net cash provided of $2.2 million for the six
months ending June 30, 1995. Cash flow for the prior year period was impacted
by the receipt of $3.6 million from the cancellation of a reinsurance treaty.
Absent the $3.6 million receipt in 1995, the Company's cash from operations for
the six months ended June 30, 1996 improved by approximately $1.3 million.
This improvement is due to the Company's lower loss ratio compared to the prior
year and the increase in gross premiums written.
Net funds used in investing activities was $175,000 for the six months ending
June 30, 1996 compared with $2.5 million for the six months ending June 30,
1995. Company estimates of policy liabilities generally develop and are
resolved over a period of less than three years; therefore, the Company has a
relatively predictable schedule of cash needs. The Company also manages its
investment activities to maintain adequate liquidity for operating purposes and
to protect its policyholders and stockholders (that is, by attempting to match
its liquidity with cash requirements). The Company's portfolio is heavily
weighted toward intermediate fixed maturity securities, substantially all of
which are investment grade. The Company has no real estate investments or
mortgage loans. Historically, the Company has not experienced any "mismatches"
related to liquidity management and none are anticipated. There are no
foreseeable requirements to liquidate any investments prior to their scheduled
maturities.
Illinois (Omni Insurance's state of domicile) insurance laws and regulations
impose certain restrictions on the amount of dividends that a company domiciled
in the state may pay without prior regulatory approval. As a result, the
maximum amount of dividends that Omni Insurance may pay without prior
regulatory approval is the greater of (i) ten percent of the statutory
policyholders' surplus as of the preceding December 31, or (ii) the statutory
net income for the preceding calendar year, including a portion of its capital
gains for such year, provided that dividends may only be paid to the extent of
earned surplus. Omni Insurance has the ability to pay approximately $3.5
million of dividends to the Company during 1996.
See accompanying notes to consolidated financial statements.
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults by the Company on its Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On May 7, 1996, the Company held its Annual Meeting of Stockholders. The
following items were submitted to vote by all shares of Common Stock held of
record on March 22, 1996:
(1)Election of Directors to serve as Director until the next annual meeting:
<TABLE>
<CAPTION>
For Against Abstain Non-Vote Total
--------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Randolph G. Brown 5,380,455 - 3,310 316,385 5,700,150
John E. Cay, III 5,380,455 - 3,310 316,385 5,700,150
Donald L. Chapman 5,380,455 - 3,310 316,385 5,700,150
J. Paul Kennedy 5,380,455 - 3,310 316,385 5,700,150
Dudley L. Moore, Jr. 5,380,455 - 3,310 316,385 5,700,150
John W. Rooker 5,380,455 - 3,310 316,385 5,700,150
S. Stephen Selig, III 5,380,455 - 3,310 316,385 5,700,150
</TABLE>
Mr. Moore (Chairman of the Board) also serves as the Company's Chief
Executive Officer and Mr. Kennedy also serves as the Company's President
and Chief Operating Officer.
(2)Proposal to ratify the appointment of the independent public accountants of
the Company:
<TABLE>
<CAPTION>
For Against Abstain Non-Vote Total
--------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
KPMG Peat Marwick LLP 5,383,155 310 300 316,385 5,700,150
</TABLE>
Item 5. Other Information
None
<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Filed Herewith (*),
Nonapplicable (NA), or
Incorporated by Reference from
OMGR
Exhibit Registration No. Exhibit
Number or Report Number
- - ----- --------- ------
<S> <S> <S> <S>
2.0 Plan of acquisition, reorganization, arrangement,
liquidation or succession NA
3.1 Articles of Incorporation of the Company, as amended 33-64346 3.1
3.2 Bylaws of the Company, as amended 33-64346 3.2
4.1 Specimen certificate of the Registrant's Common Stock 33-64346 4.1
10.1 Charter of Omni Insurance Company 33-64346 10.1
10.2 By-Laws of Omni Insurance Company 33-64346 10.2
10.3 Amended and Restated Loan Agreement between Omni
Insurance Group, Inc. and Dresdner Bank A.G., Grand
Cayman Branch, dated September 8, 1988 33-64346 10.3
10.4 Promissory Note in the original principal amount of
$5,500,000 payable by the Company, Dudley L. Moore,
Jr. and Hannover Holdings, Inc. to Dresdner Bank
A.G., Grand Cayman Branch dated September 8, 1988 33-64346 10.4
10.5 Lease Agreement between Omni Insurance Group, Inc.
and Boston Parkwood Company dated August 21, 1991,
as amended by letter agreement dated January 30,
1992 33-64346 10.5
10.5A First Amendment to Lease between Omni Insurance
Group, Inc. and Boston Parkwood Company dated
August 21, 1991, and amended by letter agreement
dated January 30, 1992 1994 Form 10-K 10.5A
10.5B Second Amendment to Lease between Omni Insurance
Group, Inc. and Boston Parkwood Company dated
August 21, 1991, and amended by letter agreement
dated January 30, 1992 1994 Form 10-K 10.5B
10.6 Employment Agreement between Omni Insurance Group,
Inc. and J. Paul Kennedy dated April 28, 1986
as amended 33-64346 10.6
10.7 Stock Purchase Agreement among the Company, Dudley
L. Moore, Jr. and Hannover Holdings, Inc. dated
May 19, 1993 33-64346 10.7
10.8 Promissory Note of the Company payable to First
Union National Bank of North Carolina in the
principal amount of $10,500,000 dated June 8, 1993 33-64346 10.8
10.9 Loan Agreement between Omni Insurance Group, Inc.
and First Union National Bank of North Carolina
dated June 8, 1993 33-64346 10.9
<PAGE> 12
10.10 Pledge Agreement between Dudley L. Moore, Jr. and
First Union National Bank of North Carolina dated
June 8, 1993 33-64346 10.10
10.11 Pledge Agreement between J. Paul Kennedy and First
Union National Bank of North Carolina dated
June 8, 1993 33-64346 10.11
10.12 Share Transfer Agreement effective March 31, 1993
among Dudley L. Moore, Jr., J. Paul Kennedy and
the Company 33-64346 10.12
10.13 Omni Insurance Group 401(k) Retirement Plan 33-64346 10.13
10.14 1993 Incentive Stock Option Plan of the Company 33-64346 10.14
10.15 1993 Nonqualified Stock Option Plan of the Company 33-64346 10.15
10.16 1993 Nonemployee Director Nonqualified Stock Option
Plan of the Company 33-64346 10.16
10.17 Executive Split-Dollar Insurance Plan of the Company 33-64346 10.17
10.18 Agreement of Reinsurance between General Reinsurance
Corporation and Omni Insurance Company 33-64346 10.18
10.19 Private Passenger Automobile Quota Share Reinsurance
Agreement between Omni Insurance Company and
Transatlantic Reinsurance Company 33-64346 10.19
10.20 Cover Note No. CT 1297-95 regarding reinsurance
agreements between Omni Insurance Company and
Reliance Insurance Company 1994 Form 10-K 10.20
10.20A Quota Share Reinsurance Agreement between Omni
Insurance Company and Reliance Insurance Company 1995 Form 10-K 10.20A
10.21 Not used
10.22 Agency Agreement between Omni General Agency, Inc. September 30,1995
and Gainsco County Mutual Insurance Company Form 10-Q 10.22
10.22A Amendment 1 to the Agency Agreement between Omni
General Agency, Inc. and Gainsco County Mutual
Insurance Company *
10.23 Quota Share Reinsurance Agreement between Gainsco
County Mutual Insurance Company and Omni September 30,1995
Insurance Company Form 10-Q 10.23
10.23A Amendment 2 to the Quota Share Reinsurance Agreement
between Gainsco County Mutual Insurance Company and
Omni Insurance Company *
10.24 Management and Service Agreement between Omni General September 30,1995
Agency, Inc. and Omni Insurance Company Form 10-Q 10.24
10.25 Trust Agreement between Gainsco County Mutual
Insurance Company, Omni Insurance Company and The September 30,1995
Northern Trust Company Form 10-Q 10.25
10.26 Split-Dollar Insurance Agreement between Omni
Insurance Company and D. Jack Sawyer, Jr. as March 31,1996
Trustee under The DLMB Family Trust Form 10-Q 10.26
<PAGE> 13
10.27 Cover Note CT1350-96 regarding reinsurance agreement
between Omni Insurance Company and Transatlantic March 31,1996
Reinsurance Company Form 10-Q 10.27
10.27A Automobile Physical Damage Quota Share Reinsurance
Agreement between Omni Insurance Company, Omni
Indemnity Company and Transatlantic Reinsurance
Company *
10.28 Executive Incentive Common Stock Plan of Omni
Insurance Group, Inc. *
11.0 Statement regarding computation of per share earnings NA
15.0 Letter regarding unaudited interim financial
information NA
18.0 Letter regarding change in accounting principles NA
19.0 Report furnished to security holders NA
22.0 Published report regarding matters submitted to vote
of security holders NA
23.0 Consents of accountants, experts and counsel NA
24.0 Power of attorney NA
27.1 Financial data schedule (electronic filers only) *
99.0 Additional exhibits NA
</TABLE>
(b) Reports on Form 8-K.
None
<PAGE> 14
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.
OMNI INSURANCE GROUP, INC.
Registrant
Date: August 9, 1996 /s/ J. Paul Kennedy
-------------------------------
J. Paul Kennedy, President
Date: August 9, 1996 /s/ Susan H. Scalf
-------------------------------
Susan H. Scalf, Senior Vice
President & Treasurer
<PAGE> 15
AMENDMENT 1 to the
AGENCY AGREEMENT
Between
GAINSCO COUNTY MUTUAL INSURANCE COMPANY
And
OMNI GENERAL AGENCY, INC.
This Amendment made on this 1st day of April 1996, changes the Agency Agreement
and the related Exhibit A and Exhibit B entered into by the parties on
July 24, 1995, as follows:
1. Section I., H., is deleted and replaced with the following:
"H. Accept applications and to appoint agents and producers on
behalf of Insurer. MGA is responsible for assuring that the
agent or producer appointed is at all times lawfully licensed
to transact the type of insurance for which he is appointed
and is not serving on Insurer's or MGA's Board of Directors.
All contracts made with such agents or producers shall be made
directly with MGA. Payment of all commissions paid on policies
secured by such agent or producer shall be made directly to the
agent or producer by MGA and those agents or producers shall
have no claims whatsoever against Insurer for commissions,
expenses, costs or otherwise, whether based on tort law,
contract law, statutory law (including but not limited to
Art. 21.11-1, Texas Insurance Code), a regulation or any other
legal or equitable theory. MGA shall be responsible to Insurer
and its reinsurers for the fidelity and honesty of its agents
or producers and for all funds collected or business done by
or entrusted to said agents or producers. MGA shall indemnify
and save Insurer and its reinsurers harmless from all losses,
claims, demands, expenses, legal fees and court costs, causes
of action, damages, judgments and settlements resulting from
or growing out of the acts or transactions of its employees or
its agents or producers.
MGA shall be authorized to terminate agents and producers
appointed to Insurer for this program only after prior written
approval of Insurer.
Insurer retains the right to reject or terminate any agent or
producer appointed by MGA to Insurer or to revoke this
appointment and termination authority given MGA by Insurer
immediately upon written notice.
As a result of the authority granted above, MGA shall report,
<PAGE> 16
in a form agreeable to Insurer, the appointments and
terminations of its agents made during each month, as well as
the most current, cumulative list of outstanding agent
appointments. This report shall be due to Insurer within
fifteen (15) days of each monthend."
2. Exhibit A, Classifications, Amounts and Stipulations is amended by
replacing the maximum annual premium volume amount of "$20 million"
with "$45 million."
The parties agree that this Amendment is effective on April 1, 1996.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in duplicate originals by their duly authorized representatives as of
the date first mentioned above.
GAINSCO COUNTY MUTUAL
INSURANCE COMPANY
Scott A. Marek By: Norman Alberigo
- - ------------------------- --------------------------------
Witness
4/17/96 Title:Vice President
- - ------------------------- -----------------------------
Date
OMNI GENERAL AGENCY, INC.
Wayne K. Whiten By: Joseph John Graziano
- - ------------------------- --------------------------------
Witness
4/23/96 Title:President
- - ------------------------- -----------------------------
Date
<PAGE> 17
AMENDMENT 2 to the
100% QUOTA SHARE REINSURANCE AGREEMENT
Between
GAINSCO COUNTY MUTUAL INSURANCE COMPANY
And
OMNI INSURANCE COMPANY
This Amendment made on this 1st day of April 1996, changes the 100% Quota Share
Reinsurance Agreement and the related Schedule A and Schedule B entered into by
the parties on July 24, 1995, as follows:
1. Article X, Special Liability, new Paragraphs (F) and (G) shall be added
as follows:
"(F) It is also agreed that the Reinsurer shall indemnify and hold
harmless the Company from any losses, claims, demands,
expenses, legal fees and court costs, causes of action,
damages, judgments and settlements ("Damages") resulting from
the authority granted Omni General Agency, Inc. in the Agency
Agreement between the Company and Omni General Agency, Inc. to
appoint and terminate agents or producers to the Company. The
Reinsurer shall also indemnify and hold harmless the Company
from any and all losses, claims, demands, expenses, legal fees
and court costs, causes of action, damages, judgments and
settlements ("Damages") which the Company may incur as a result
of the actions or non-actions of any agent or producer
submitting business through the Company under this program,
whether such agent or producer was properly licensed, appointed
or otherwise and regardless of whether such actions or non-
actions of any agent or producer are outside the scope of the
agent's or producer's authority or outside the terms of the
policies issued pursuant to this Agreement. The Reinsurer's
obligation under this section includes, but is not limited to,
all liability for agent's balances; return commissions and
premiums; DTPA or extra-contractual liability; any obligation
or liability of MGA to the Company arising under Article I.
Section H. of the Agency Agreement referenced above; premium,
policy fees, premium taxes and other charges (whether collected
or not); and any Damages associated with or arising out of any
agreement or arrangement with a premium finance company.
(G) It is the intention of the Company and the Reinsurer that the
Company shall bear no risk of loss whatsoever with respect to
the policies issued pursuant to this Agreement, including, but
not limited to, business, credit, insurance, or underwriting
risks, and the Reinsurer shall hold the Company harmless and
shall indemnify it, as provided for herein, for these and all
<PAGE> 18
other risks arising pursuant to this Agreement and/or that
certain Agency Agreement by and between Omni General Agency,
Inc. and the Company."
2. Schedule B, Volume of Business Authorized is amended by replacing the
maximum annual gross written premium volume amount of "$20 million"
with "$45 million."
The parties agree that this Amendment is effective on April 1, 1996.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in duplicate originals by their duly authorized representatives as of
the date first mentioned above.
GAINSCO COUNTY MUTUAL
INSURANCE COMPANY
Scott A. Marek By: Norman Alberigo
- - ------------------------- --------------------------------
Witness
4/17/96 Title:Vice President
- - ------------------------- -----------------------------
Date
OMNI INSURANCE COMPANY
Wayne K. Whiten By: J.Paul Kennedy
- - ------------------------- --------------------------------
Witness
4/18/96 Title:President
- - ------------------------- -----------------------------
Date
<PAGE> 19
CT1350-96
AUTOMOBILE PHYSICAL DAMAGE
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
OMNI INSURANCE COMPANY
OMNI INDEMNITY COMPANY
Atlanta, Georgia
(hereinafter referred to collectively as the "Company")
and
THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE
INTERESTS AND LIABILITIES CONTRACT(S)
WHICH ATTACH TO THIS AGREEMENT
(hereinafter referred to collectively as the "Reinsurer")
Term: Local Standard Time, January 1, 1996 through
Local Standard Time, December 31, 1998, both days inclusive.
06/10/96
<PAGE> 20
CONTENTS CT1350-96
ARTICLE PAGE
- - ------- ----
PREAMBLE 1
I BUSINESS COVERED 2
II TERRITORY 2
III COMMENCEMENT AND TERMINATION 2
IV EXCLUSIONS 3
V ORIGINAL CONDITIONS 4
VI LIMIT OF LIABILITY 4
VII NET RETAINED LIABILITY 5
VIII PREMIUM AND COMMISSION 5
IX ADJUSTMENT OF CEDING COMMISSION 6
X REPORTS AND REMITTANCES 7
XI LOSS, LOSS ADJUSTMENT EXPENSES AND SALVAGE 7
XII OFFSET 8
XIII ERRORS AND OMISSIONS 8
XIV INSOLVENCY 8
XV ACCESS TO RECORDS 9
XVI SERVICE OF SUIT 9
XVII CURRENCY 10
XVIII ARBITRATION 10
XIX TAXES 11
XX THIRD PARTY BENEFICIARY 11
XXI INTERMEDIARY 11
EXECUTION 12
06/10/96
<PAGE> 21
CT1350-96
AUTOMOBILE PHYSICAL DAMAGE
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
OMNI INSURANCE COMPANY
OMNI INDEMNITY COMPANY
Atlanta, Georgia
(hereinafter referred to collectively as the "Company")
and
THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE
INTERESTS AND LIABILITIES CONTRACT(S)
WHICH ATTACH TO THIS AGREEMENT
(hereinafter referred to collectively as the "Reinsurer")
PREAMBLE
- - --------
In consideration of the mutual covenants hereinafter contained the parties
hereto agree as follows:
The retention of the Company and the liability of the Reinsurer and all other
benefits accruing to the Company, as provided in this Agreement or any
amendments thereof, shall apply to the parties comprising the Company as a
group and not separately to each of the parties. Payments by the Reinsurer
under this Agreement to any of the parties comprising the Company shall
constitute payment to the Company.
-1-
06/10/96
<PAGE> 22
CT1350-96
ARTICLE I - BUSINESS COVERED
- - -----------------------------
The Company shall cede to the Reinsurer and the Reinsurer shall accept from
the Company on a quota share basis a pro rata share of the net retained
liability of the Company under all policies, binders and contracts of
insurance or reinsurance (hereinafter referred to as "policies") issued by or
on behalf of the Company and classified by the Company as Comprehensive
Coverage under all Private Passenger Automobile Physical Damage business
(including reinsurance assumed from the Gainsco County Mutual Insurance
Company Group in Texas).
The liability of the Reinsurer for each cession hereunder shall commence
obligatorily and simultaneously with that of the Company, subject to the
terms and conditions hereinafter set forth.
ARTICLE II - TERRITORY
- - -----------------------
This Agreement shall apply only to losses occurring within the territorial
limits of the Company's original policies.
ARTICLE III - COMMENCEMENT AND TERMINATION
- - -------------------------------------------
This Agreement shall be effective for the period January 1, 1996 through
December 31, 1998, both days inclusive, Local Standard Time, and shall
apply to business in force at inception hereof and to business written or
renewed during such period. "Local Standard Time" shall mean Standard
Time at the home office of the Company.
This Agreement may be cancelled by the Reinsurer at the first or second
anniversary during the period upon 15 days prior written notice to the
Company. The Company may cancel this Agreement or reduce the cession
percentage at the first or second anniversary during the period provided the
Reinsurer has earned a full 5% margin and that similar quota share coverage
is not purchased.
In the event of cancellation of this Agreement, the Company shall have the
option to continue the liability of the Reinsurer for all subject business in
force at the date of cancellation for a period not to exceed 12 months, or to
reassume from the Reinsurer the Reinsurer's share of the Company's
unearned premium reserve for subject business in force at the date of
cancellation, net of provisional ceding commission previously allowed
thereon.
-2-
06/10/96
<PAGE> 23
CT1350-96
In the event the Company elects to continue the Reinsurer's liability for
subject business in force at the date of cancellation of this Agreement, the
minimum commission to the Company shall be thirty five percent (35%) for
the unearned premium reserve applicable to such business.
ARTICLE IV - EXCLUSIONS
- - ------------------------
This Agreement shall not cover any liability assumed by the Company with
respect to:
(1) All Collision losses;
(2) Insolvency funds per the attached "Insolvency Fund Exclusion
Clause";
(3) Nuclear Energy Risks per the attached "Nuclear Incident Exclusion
Clause - Physical Damage - Reinsurance - USA";
(4) War risk, bombardment, invasion, insurrection, rebellion, revolution,
military or usurped power, or confiscation by order of any government
or public authority, as excluded under a standard policy containing a
standard war exclusion clause;
(5) Extra Contractual Obligations incurred by the Company under policies
covered by this Agreement;
(6) Loss incurred by the Company in excess of the limits of policies
covered by this Agreement;
(7) Automobile Physical Damage Business with respect to insurance
relating to the ownership, maintenance or use of:
(a) Fire or police department or salvage patrol apparatus or
equipment;
(b) Ambulances;
(c) Automobiles used in exhibitions, races or speed contests;
(d) Automobiles owned or used by law enforcement agencies or a
government, or fire departments;
(e) Automobiles making newspaper deliveries or collections in
cities of more than 100,000 population;
-3-
06/10/96
<PAGE> 24
CT1350-96
(f) Public automobiles as defined in the manuals of the Insurance
Services Office;
(g) Leasing, renting or hiring out of motorized vehicles or
trailers;
(h) Commercial automobiles;
(i) Owned motor vehicles registered and licensed outside the
United States;
(j) Exotic or unusual models as per the underwriting guidelines of
the Company.
If any business falling within the scope of one or more of the exclusions
under subparagraph 7. above is assigned to the Company under an
Automobile Insurance Assigned Risk Plan, such exclusion(s) shall not apply
to the portion of the limits of liability prescribed by the Automobile
Insurance Assigned Risk Plan which come within the retention of the
Company and the limits of liability of the Reinsurer.
Business which is beyond the terms, conditions and limitations of
subparagraph 7. above may be submitted to the Reinsurer for special
acceptance hereunder; and such business, if accepted by the Reinsurer, shall
be subject to all of the terms, conditions and limitations of this Agreement
except as modified by the special acceptance.
ARTICLE V - ORIGINAL CONDITIONS
- - --------------------------------
The reinsurance provided under this Agreement shall be subject to the same
terms, rates, conditions, and waivers, and to the same modifications,
alterations and cancelments as the respective policies, contracts, and binders
of the Company.
The Reinsurer shall be credited with its exact proportion of the original
premiums received by the Company.
ARTICLE VI - LIMIT OF LIABILITY
- - --------------------------------
The Company shall cede to the Reinsurer and the Reinsurer shall accept as
reinsurance of the Company a fixed eighty percent (80%) share of the
Company's net retained liability, each loss, each risk, subject to a maximum
cession to the Reinsurer of $60,000 (being 80% of $75,000) each loss, each
risk.
-4-
06/10/96
<PAGE> 25
CT1350-96
For limits reinsured under this Agreement, the Company shall retain, net and
unreinsured, an amount equal to twenty percent (20%) of its net retained
liability, each loss, each risk.
ARTICLE VII - NET RETAINED LIABILITY
- - -------------------------------------
"Net retained liability" shall mean that portion of the Company's Gross
Liability on all policies the subject matter of this Agreement which may
remain after deduction of any reinsurance inuring to the benefit of this
Agreement. The amount of the Reinsurer's liability hereunder in respect of
any loss or losses shall not be increased by reason of the inability of the
Company to collect from any other reinsurers, whether specific or general,
any amounts which may become due from them whether such inability arises
from the insolvency of such other reinsurers or otherwise.
For the purposes of this Agreement, the Company warrants that it shall
maintain other reinsurance on business the subject matter of this Agreement
which limits the Company's net retained liability protected hereunder to the
$75,000 any one risk or so deemed.
ARTICLE VIII - PREMIUM AND COMMISSION
- - --------------------------------------
As soon as practicable after the effective date of this Agreement, the
Company shall cede to the Reinsurer eighty percent (80%) of the Company's
subject unearned premium reserve as of December 31, 1995, less a
provisional ceding commission of forty percent (40%).
"Subject unearned premium reserve" shall mean the Company's reserve
applicable to the unexpired term of the Company's policies covered under
this Agreement as of the inception date hereof, net of cancellations and
returns and net of the unearned portion of premiums paid by the Company
for all inuring reinsurances applicable to losses under such policies with a
date of loss in 1996.
In addition to the above, the Company shall pay to the Reinsurer eighty
percent (80%) of the Company's Gross Net Written Premium during the term
of this Agreement for business covered hereunder less a provisional ceding
commission of forty percent (40%).
"Gross Net Written Premium" shall be defined as the Company's subject
Original Gross Written Premium for Comprehensive Coverage under all
Private Passenger Automobile Physical Damage coverage, less returns and
-5-
06/10/96
<PAGE> 26
CT1350-96
less any premium paid for reinsurance inuring to the benefit of this
Agreement.
It is understood that the ceding commission payable to the Company under
this Agreement (including any commission adjustments) is in allowance for
agents commissions and general overhead incurred by the Company
ARTICLE IX - ADJUSTMENT OF CEDING COMMISSION
- - ---------------------------------------------
The provisional ceding commission allowed the Company under this
Agreement shall be subject to adjustment, separately for each twelve month
period during the term of this Agreement, in accordance with the following
formula:
If the Reinsurer's loss ratio under this Agreement is fifty-five percent
(55%) or higher, the Reinsurer shall allow the Company a minimum
ceding commission of forty percent (40%). If the Reinsurer's loss
ratio under this Agreement is less than fifty-five percent (55%), the
minimum ceding commission allowed the Company shall be increased
by one percent (1%) for each one percent (1%) decline in the
Reinsurer's loss ratio to a maximum commission of ninety-five percent
(95%) at a zero loss ratio. If the loss ratio for a twelve month period,
including any debit carried forward is more than 55%, the difference
in percentage between the actual loss ratio and 55% shall be multiplied
by premiums written for the twelve month period and the product shall
be carried forward to the commission adjustment of the next twelve
month period as a debit to losses.
Within 45 days following the end of each calendar quarter beginning March
31, 1996, the Company shall calculate in accordance with the above formula
the commission due on the premiums written during the quarter. If the
commission already allowed exceeds the adjusted commission, the Company
shall refund the difference to the Reinsurer. If the commission already
allowed is less than the adjusted commission, the Reinsurer shall refund the
difference to the Company. Adjusted commission shall continue to be
calculated quarterly until all losses occurring during each separate twelve
month period during the term of this Agreement have been settled or
otherwise concluded as mutually agreed by the parties to this Agreement, at
which time the ceding commission shall be final. Upon verification of each
calculation by the Company, any balance due either party from provisional
commission previously paid or refunded shall be reflected in the quarterly
account.
In the event of cancellation of this Agreement, should the Company elect to
continue the Reinsurer's liability for subject business in force at the date of
-6-
06/10/96
<PAGE> 27
CT1350-96
cancellation, the adjusted commission for the unearned premium reserve shall
be calculated as for a separate twelve month period.
"Loss Ratio" shall mean the quotient of the total losses paid by the Reinsurer
under subject policies for losses occurring during each separate twelve month
period divided by the Reinsurer's share of the Company's subject Gross Net
Written Premium for the same twelve month period.
ARTICLE X - REPORTS AND REMITTANCES
- - ------------------------------------
Within forty-five (45) days after the end of each calendar quarter, the
Company shall render to the Reinsurer in a format mutually agreed the
following:
1. A ceded reinsurance premium report (premium earned and
unearned including details on cancellations and endorsements);
plus
2. A ceded claims report (paid loss and reserves for losses
outstanding including IBNR for ceded business); plus
3. Adjusted ceding commission.
The debtor party as shown in the quarterly reports shall remit the balance due
within 30 days of the date of the quarterly report.
ARTICLE XI - LOSS, LOSS ADJUSTMENT EXPENSES AND SALVAGE
- - --------------------------------------------------------
All loss settlements by the Company, whether under the strict policy
conditions or by way of compromise, shall be unconditionally binding upon
the Reinsurer in proportion to its participation, and the Reinsurer shall
benefit proportionately in all salvages and recoveries. All loss adjustment
expenses incurred by the Company under subject matter business shall be
included in loss hereunder and the sum of indemnity payments plus loss
adjustment expense shall be recoverable subject to the limit of this
Agreement.
The Company, wherever it deems such action to be appropriate, agrees to
enforce its rights to salvage or subrogation relating to any loss and to
prosecute all claims arising out of such rights. All salvage and recoveries
received subsequent to a loss settlement under this Agreement shall be
applied as if received prior to said loss settlement, and the loss shall be
refigured on the basis on which it would have been settled had the amount of
salvage or recovery been known at the time the loss hereunder was originally
determined.
-7-
06/10/96
<PAGE> 28
CT1350-96
ARTICLE XII - OFFSET
- - ---------------------
Each party hereto shall have, and may exercise at any time and from time to
time, the right to offset any balance or balances, whether on account of
premiums or on account of losses or otherwise, due from each party to the
other (or, if more than one, any other) party hereto under this Agreement;
provided, however, that in the event of the insolvency of party hereto, offsets
shall be allowed only in accordance with the provisions of applicable
insurance law.
ARTICLE XIII - ERRORS AND OMISSIONS
- - ------------------------------------
Inadvertent delay, error or omission made in connection with this Agreement
shall not relieve either party from any liability which should have attached to
either party had such delay, error or omission not occurred. Such delay,
error or omission shall be rectified upon discovery.
ARTICLE XIV - INSOLVENCY
- - -------------------------
In the event of the insolvency of one or more than one of the Companies
reinsured by this Agreement, this reinsurance shall be payable directly to the
insolvent Company(ies), or to its liquidator, receiver, conservator or
statutory successor, on the basis of the liability of the insolvent
Company(ies) without diminution because of the insolvency of one or more than
one of the Companies reinsured by this Agreement or because the liquidator,
receiver, conservator or statutory successor of the insolvent Company(ies)
has failed to pay all or a portion of any claim. It is agreed, however, that
the liquidator, receiver, conservator or statutory successor of the insolvent
Company(ies) shall give written notice to the Reinsurer of the pendency of a
claim against the insolvent Company(ies), indicating the policy or bond
reinsured, which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that during
the pendency of such claim the Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses that it may deem available to the
insolvent Company(ies) or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by the Reinsurer shall be chargeable,
subject to the approval of the Court, against the insolvent Company(ies) as
part of the expense of conservation or liquidation to the extent of a pro rata
share of the benefit which may accrue to the insolvent Company(ies) solely as
a result of the defense undertaken by the Reinsurer.
-8-
06/10/96
<PAGE> 29
CT1350-96
Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expenses shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company(ies).
The reinsurance shall be payable by the Reinsurer to the insolvent
Company(ies) or to its liquidator, receiver, conservator or statutory
successor, except (1) where the Agreement specifically provides another
payee of such reinsurance in the event of the insolvency of the Company(ies)
and (2) where the Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the insolvent Company(ies) as direct
obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the insolvent Company(ies) to such payees.
ARTICLE XV - ACCESS TO RECORDS
- - -------------------------------
The Company shall place at the disposal of the Reinsurer and the Reinsurer
shall have the right to inspect, through its authorized representatives, at all
reasonable times, the books, records and papers of the Company pertaining
to the reinsurance provided hereunder and all claims made in connection
therewith.
ARTICLE XVI - SERVICE OF SUIT
- - ------------------------------
(This Article is applicable only to an unauthorized Reinsurer in the State of
New York or to the Reinsurer who is domiciled outside the United States of
America.)
In the event of the failure of the Reinsurer to pay any amount claimed to be
due hereunder, the Reinsurer, at the request of the Company, will submit to
the jurisdiction of any Court of competent jurisdiction within the United
States and will comply with all requirements necessary to give such Court
jurisdiction, and all matters arising hereunder shall be determined in
accordance with the law and practice of such Court.
Service of process in such suit may be made upon Messrs. Mendes and
Mount, 750 Seventh Avenue, New York, New York 10019-6829, and in any
suit instituted, the Reinsurer will abide by the final decision of such Court
or of any Appellate Court in the event of an appeal.
The above named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the
Company to give a written undertaking to the Company that they will enter a
-9-
06/10/96
<PAGE> 30
CT1350-96
general appearance upon the Reinsurer's behalf in the event such a suit shall
be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereby
designates the Superintendent, Commissioner or Director of Insurance or
other officer specified for that purpose in the statute, or his successor or
successors in office, as his true and lawful attorney upon whom may be
served any lawful process in any action, suit or proceeding instituted by or
on behalf of the Company or any beneficiary hereunder arising out of this
Agreement, and hereby designates the above named as the firm to whom the
said officer is authorized to mail such process or a true copy thereof.
ARTICLE XVII - CURRENCY
- - ------------------------
Wherever the word "Dollars" and the sign "$" appear in this Agreement,
they shall be construed to mean United States Dollars, and all premiums and
losses hereunder shall be payable in United States Currency.
ARTICLE XVIII - ARBITRATION
- - ----------------------------
As a condition precedent to any right of action hereunder, any dispute arising
out of this Agreement, whether arising before or after termination, shall be
submitted to the decision of a board of arbitration composed of two
arbitrators and an umpire, meeting in Atlanta, Georgia unless otherwise
agreed.
The members of the board of arbitration shall be active or retired,
disinterested officials of insurance or reinsurance companies or Lloyd's of
London Underwriters, or underwriting members of any Exchange formed for
the purpose of writing insurance or reinsurance. Each party shall appoint its
arbitrator, and the two arbitrators shall choose an umpire before instituting
the hearing. If the respondent fails to appoint its arbitrator within four
weeks after being requested to do so by the claimant, the claimant shall also
appoint the second arbitrator. If the two arbitrators fail to agree upon the
appointment of an umpire within four weeks after their nominations, each of
them shall name three, of whom the other shall decline two, and the decision
shall be made by drawing lots.
The claimant shall submit its initial brief within 20 days from the
appointment of the umpire. The respondent shall submit its brief within 20
days thereafter, and the claimant may submit a reply brief within 10 days
after filing of the respondent's brief.
-10-
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<PAGE> 31
CT1350-96
The board shall make its decision with due regard to the custom and usage of
the insurance and reinsurance business. The board shall issue its decision in
writing based upon a hearing in which evidence may be introduced without
following strict rules of evidence but in which cross-examination and rebuttal
shall be allowed. The board shall make its decision within 60 days following
the termination of the hearings unless the parties consent to an extension.
The majority decision of the board shall be final and binding upon all parties
to the proceeding. Judgment may be entered upon the award of the board in
any court having jurisdiction thereof.
If more than one reinsurer is involved in the same dispute, all such reinsurers
shall constitute and act as one party for purposes of this Article, and
communications shall be made by the Company to each of the reinsurers
constituting the one party, provided that nothing therein shall impair the
rights of such reinsurers to assert several, rather than joint, defenses or
claims, nor be construed as changing the liability of the reinsurers under the
terms of this Agreement from several to joint.
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the expense of the umpire. The remaining
costs of the arbitration proceedings shall be allocated by the board.
ARTICLE XIX - TAXES
- - --------------------
The Company shall not claim a deduction in respect of the premium hereon
when making tax returns, other than income or profits tax returns, to any
state or territory of the United States of America or the District of Columbia.
ARTICLE XX - THIRD PARTY BENEFICIARY
- - -------------------------------------
Except as expressly provided for in the Article entitled INSOLVENCY, the
provisions of this Agreement are intended solely for the benefit of the
Company and the Reinsurer. Nothing in this Agreement shall in any manner
create or be construed to create any obligations to or establish any rights
against any party to this Agreement in favor of any other persons not party to
this Agreement.
ARTICLE XXI - INTERMEDIARY
- - ---------------------------
Alexander Reinsurance Intermediaries, Inc., One Whitehall Street, New
York, New York 10004-2109, is hereby recognized as the intermediary by
whom this Agreement was negotiated and through whom all communications
-11-
06/10/96
<PAGE> 32
CT1350-96
relating hereto (including but not limited to notices, statements, premiums,
return premiums, commissions, taxes, losses, loss adjustment expenses,
salvage and loss settlements) shall be transmitted to both parties. It is
understood, as regards remittances due either party hereunder, that payment
by the Company to Alexander Reinsurance Intermediaries, Inc. shall
constitute payment to the Reinsurer, but payment by the Reinsurer to
Alexander Reinsurance Intermediaries, Inc. shall constitute payment to the
Company only to the extent such payments are actually received by the
Company.
EXECUTION
- - ---------
This Agreement is executed by the Company and each Subscribing
Reinsurer(s) by the signing, in duplicate, of the Interests and Liabilities
Contract(s) which attach to this Agreement.
-12-
06/10/96
<PAGE> 33
CT1350-96
INTERESTS AND LIABILITIES CONTRACT
(hereinafter referred to as the "Contract")
between
OMNI INSURANCE COMPANY
OMNI INDEMNITY COMPANY
Atlanta, Georgia
(hereinafter referred to collectively as the "Company")
and
TRANSATLANTIC REINSURANCE COMPANY
(hereinafter referred to as the "SUBSCRIBING REINSURER")
in respect of the
AUTOMOBILE PHYSICAL DAMAGE
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
IT IS AGREED that the SUBSCRIBING REINSURER shall have a 100% share in the
Interest and Liabilities of the Reinsurer as set forth in the above
Agreement to which this Contract is attached. This Contract and the above
Agreement shall be effective from January 1, 1996 to December 31, 1998,
both days inclusive, Local Standard Time.
The share of the SUBSCRIBING REINSURER in the Interest and Liabilities
of the Reinsurer under the above Agreement shall be several and not joint
with the shares of any other subscribing reinsurers, and in no event shall
the SUBSCRIBING REINSURER participate in the Interest and Liabilities of any
other subscribing reinsurer.
06/10/96
<PAGE> 34
CT1350-96
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Contract, in duplicate, as of the
dates undermentioned.
Signed on this 12th day of June 1996,
OMNI INSURANCE COMPANY
OMNI INDEMNITY COMPANY
Atlanta, Georgia
Susan H. Scalf Senior Vice President
------------------------------------------------
and on this 17th day of July 1996.
TRANSATLANTIC REINSURANCE COMPANY
C. L. Gallagher
------------------------------------------------
06/10/96
<PAGE> 35
EXECUTIVE INCENTIVE COMMON STOCK PLAN
OMNI INSURANCE GROUP, INC.
THIS EXECUTIVE INCENTIVE COMMON STOCK PLAN OF OMNI INSURANCE GROUP, INC.
(the "Plan") is made and entered into effective as of the 1st day of
January, 1996, by OMNI INSURANCE GROUP, INC. (the "Corporation") for the
benefit of certain of its key employees.
W I T N E S S E T H:
WHEREAS, the board of directors of the Corporation has authorized the
grant of its common stock to certain of its key employees, as may be determined
by the compensation committee of the Corporation;
WHEREAS, the Corporation desires to encourage such employees to continue
their employment with the Corporation and thereby contribute to the growth and
prosperity of the Corporation for the benefit of all stockholders.
NOW, THEREFORE, as an employment incentive for such employees and as
encouragement for them to carry out the goals of the Corporation as
stockholders of the Corporation, the Corporation hereby establishes the Plan on
the following terms and conditions:
1. Selection of Recipients.
The compensation committee of the Corporation shall be authorized to
determine which of its key employees are eligible to receive shares of its
common stock (the "Stock") in accordance with the previously stated goals of
the Corporation. In making such determination, the compensation committee
shall only consider employees who have attained the position of vice president
of the Corporation or higher, and the compensation committee shall develop
appropriate selection and award criteria consistent with the previously stated
goals of the Corporation. In addition to determining those key employees who
are eligible to receive shares of Stock hereunder, the compensation committee
shall also determine the number of shares of Stock that each selected employee
("Employee") is entitled to receive and the applicable plan year(s), as
hereinafter defined, to which such authorization relates. In the event that
the compensation committee elects to award a block of Stock to a particular
Employee without designating the plan year(s) to which such award relates,
then such award shall be deemed to relate equally (33 %) to the plan year of
the award and to the following two (2) plan years.
<PAGE> 36
2. Issuance of Stock.
The Corporation shall issue the Stock to each selected Employee within
ninety (90) days following the close of the plan year, as hereinafter defined,
during which such Employee becomes entitled to receive shares of Stock in
accordance with section 1 above.
3. Plan Year.
The plan year for all purposes hereunder shall be the calendar year.
4. Vesting.
An Employee shall vest in the Stock only when it is received, and he or
she shall not accrue any rights of ownership in the Stock until it is received.
If the Employee's employment with the Corporation is terminated for any reason,
whether voluntarily or involuntarily, prior to receipt of all or a portion of
the Stock, then the Employee shall forfeit his or her right to receive such
shares of Stock.
5. No Contract of Employment.
This Plan shall not be deemed to constitute a contract of employment
between the Corporation and any Employee or be deemed to be consideration or an
inducement for the employment of such Employee. This Plan shall not be deemed
to give any Employee the right to be retained in the service of the Corporation
or to interfere with the right of the Corporation to discharge such Employee at
any time. This Plan shall not be deemed to give the Corporation the right to
require any Employee to remain in the employ of the Corporation or to restrict
such Employee's right to terminate his or her employment at any time.
6. Representations and Warranties of the Employee.
Prior to or upon receipt of the Stock, the compensation committee may
require that each Employee submit an investment letter to the Corporation, in
form and content satisfactory to legal counsel for the Corporation, containing
certain representations and warranties to the Corporation that may be required
by applicable federal and state securities laws. These representations and
warranties to the Corporation may include without limitation the following: (a)
that the Employee is acquiring or will acquire the Stock for the Employee's own
account as an investment and without an intent to distribute or resell the
Stock, and (b) that the Employee acknowledges that the Stock has not been and
will not be registered under the United States Securities Act of 1933, the
Georgia Securities Act of 1973, or any other state securities laws, and that it
may not be resold or transferred by the Employee without appropriate
registration or the availability of an exemption from such requirements.
Certificates representing the Stock will bear a legend evidencing the
provisions of this paragraph 6 and the Employee shall, if requested by the
<PAGE> 37
Corporation, provide to the Corporation written evidence of his investment
intention (in form and substance provided by the Corporation) with respect to
the Stock. In addition, the Corporation may require that the Employee's
investment letter contain such other provisions as it may deem appropriate to
carry out the terms and conditions of this Plan.
7. Amendment or Termination of the Plan. Except to the extent
hereinafter provided, the Corporation may amend or terminate this Plan at any
time in its sole and absolute discretion. Any such amendment or termination
shall not adversely affect the rights of any Employee to any award of Stock
previously granted to him or her.
8. Miscellaneous.
(a) Entire Plan.
This Plan represents the entire plan of the Corporation for the
award of Stock to certain of its key employees. The Plan shall be binding upon
the Corporation and inure to the benefit of the Employees and their respective
heirs at law, successors in interest, transferees and assigns, subject to the
terms and conditions contained herein.
(b) Notices.
All notices, requests, consents and other communications
required or permitted under this Plan shall be in writing (including telex and
telegraphic communication) and shall be, at the discretion of the person giving
such notice, either hand delivered by messenger or courier service,
telecommunicated, or mailed (airmail, if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to the
Employee at the address on file with the Corporation or to such other address
as the Employee may designate by notice to the Corporation from time to time,
and to the Corporation as its then current business address. Each such notice
shall be deemed delivered (a) on the date delivered if by personal delivery;
(b) on the date telecommunicated if by telegraph; (c) on the date of
transmission with confirmed answer back if by telex, telecopy or other
telegraphic method; and (d) on the date upon which the return receipt is signed
or delivery is refused, or the notice is designated by the postal authorities
as not deliverable, as the case may be, if mailed.
(c) Headings.
The headings contained in this Plan are for convenience of
reference only, are not to be considered a part of this Plan, and shall not
limit, extend, or otherwise affect in any way the meaning or interpretation of
this Plan.
<PAGE> 38
(d) Severability.
Each and every covenant and agreement contained in this Plan
shall be construed as separate and independent. All rights, powers and
remedies provided herein may be exercised only to the extent that the exercise
thereof does not violate applicable law and shall be limited to the extent
necessary to render this Plan valid and enforceable. If any term, provision or
covenant of this Plan, or the application thereof to any person or
circumstance, shall be held to be invalid, illegal or unenforceable, the
validity of the remainder of this Plan, or the application of such term,
provision or covenant to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be effected thereby. If any
provision of this Plan may be construed in two or more ways, one of which would
render the provision invalid or otherwise voidable or unenforceable and another
of which would render the provision valid and enforceable, such provision shall
have the meaning which renders it valid and enforceable.
(e) Interpretation.
This Plan and all awards of Stock, vesting of Stock, rights of
Employees to such Stock, and all other transactions contemplated by this Plan
shall be interpreted by the compensation committee of the Corporation in its
sole and absolute discretion. This Plan shall be governed by the internal laws
of the State of Georgia without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the following duly authorized officers have
hereunto executed this Plan on behalf of the Corporation for the purposes and
upon the terms and conditions set forth herein.
Attest: OMNI INSURANCE GROUP, INC.
By: J. Paul Kennedy By: Dudley L. Moore, Jr. [L.S.]
-------------------------------- ---------------------------
Title: President Title: Chairman/CEO
----------------------------- ------------------------------
[CORPORATE SEAL]
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from Omni
Insurance Group, Inc.'s June 30, 1996 financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000906786
<NAME> OMNI INSURANCE GROUP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 72,416
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 198
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 80,182
<CASH> 0
<RECOVER-REINSURE> 1,221
<DEFERRED-ACQUISITION> 7,508
<TOTAL-ASSETS> 133,079
<POLICY-LOSSES> 34,380
<UNEARNED-PREMIUMS> 39,005
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 57
<OTHER-SE> 49,248
<TOTAL-LIABILITY-AND-EQUITY> 133,079
41,793
<INVESTMENT-INCOME> 2,031
<INVESTMENT-GAINS> 28
<OTHER-INCOME> 4
<BENEFITS> 30,517
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 10,112
<INCOME-PRETAX> 3,227
<INCOME-TAX> 862
<INCOME-CONTINUING> 2,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,365
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
