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 September 30, 1997
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: September 30, 1997 - 5,704,958 shares
<PAGE>
OMNI INSURANCE GROUP, INC.
Form 10-Q
September 30, 1997
Table of Contents
Page
PART I. Financial Information Number
------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Earnings -
Three and nine months ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1997 and
1996 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 Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
OMNI INSURANCE GROUP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Investments:
Available for sale:
Fixed maturities, at fair value $ 80,945,870 $ 79,042,789
Equity securities, at fair value 275,438 212,063
Invested cash 13,772,440 5,264,275
----------- -----------
Total investments 94,993,748 84,519,127
Accrued investment income 1,452,312 1,525,704
Accounts receivable, principally premiums 58,590,389 43,696,603
Reinsurance recoverables 2,403,266 1,548,971
Prepaid reinsurance premiums 6,591,649 5,028,048
Federal income taxes receivable 186,895 27,942
Deferred policy acquisition costs 11,201,533 9,542,558
Deferred income taxes 1,719,000 1,250,000
Property and equipment, net 2,626,300 2,084,533
----------- -----------
Total assets $ 179,765,092 $ 149,223,486
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Unpaid losses and loss adjustment expenses $ 42,881,629 $ 33,176,563
Unearned premiums 64,544,232 49,722,892
Accounts payable and accrued expenses 6,012,987 6,543,261
Drafts payable 7,378,518 5,669,661
Reserve for premium tax assessment 1,460,000 1,460,000
Other liabilities 538,839 469,997
----------- ----------
Total liabilities 122,816,205 97,042,374
----------- ----------
Stockholders' equity:
Common stock, par value $.01, authorized 15,000,000
shares; issued and outstanding 5,704,958 and
5,700,150 shares, respectively 57,050 57,002
Additional paid-in capital 28,986,407 28,937,173
Net unrealized appreciation (depreciation) on
investment securities 407,470 (5,245)
Retained earnings 27,497,960 23,192,182
----------- -----------
Total stockholders' equity 56,948,887 52,181,112
Commitments and contingencies (note 2)
----------- -----------
Total liabilities and stockholders' equity $ 179,765,092 $ 149,223,486
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
OMNI INSURANCE GROUP, INC.
Consolidated Statements of Earnings
Unaudited
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Gross premiums written $ 39,502,164 $ 32,113,289 $ 120,751,878 $ 82,482,958
========== ========== =========== ==========
Net premiums written $ 35,499,023 $ 28,833,150 $ 108,619,972 $ 72,475,917
========== ========== =========== ==========
Revenues:
Net premiums earned $ 34,281,368 $ 23,058,409 $ 95,362,232 $ 64,851,843
Net investment income 1,149,384 1,016,762 3,312,337 3,047,838
Realized capital gains (losses) (96) (1,622) (26,500) 25,916
Other income (loss) (5,362) 18,458 (8,299) 22,504
---------- ---------- ----------- ----------
Total revenues 35,425,294 24,092,007 98,639,770 67,948,101
---------- ---------- ----------- ----------
Losses and expenses:
Losses and loss adjustment expenses, net 26,970,617 17,266,964 74,203,376 47,783,498
Acquisition and operating expenses, net 6,411,555 5,137,689 18,742,616 15,249,843
---------- ---------- ----------- ----------
Total losses and expenses 33,382,172 22,404,653 92,945,992 63,033,341
---------- ---------- ----------- ----------
Earnings before income taxes 2,043,122 1,687,354 5,693,778 4,914,760
---------- ---------- ----------- ----------
Income taxes (benefit):
Current 658,000 512,000 2,069,000 1,486,000
Deferred (118,000) (59,000) (681,000) (171,000)
---------- ---------- ----------- ----------
Total income taxes 540,000 453,000 1,388,000 1,315,000
---------- ---------- ----------- ----------
Net earnings $ 1,503,122 $ 1,234,354 $ 4,305,778 $ 3,599,760
========== ========== =========== ==========
Net earnings per share $ 0.26 $ 0.22 $ 0.75 $ 0.63
========== ========== =========== ==========
Weighted average shares outstanding 5,704,958 5,700,150 5,704,165 5,700,150
========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
OMNI INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,305,778 $ 3,599,760
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Amortization and depreciation 1,035,121 860,663
Deferred income taxes (681,000) (171,000)
Changes in:
Accounts receivable, principally premiums (14,893,786) (9,834,137)
Reinsurance recoverables (854,295) (112,084)
Prepaid reinsurance premiums (1,563,601) (3,408,028)
Federal income taxes (158,953) (164,000)
Deferred policy acquisition costs (1,658,975) (950,708)
Unpaid losses and loss adjustment expenses 9,705,066 (819,563)
Unearned premiums 14,821,340 11,032,101
Funds held for reinsurance - (4,832)
Accounts payable and accrued expenses 582,256 1,202,918
Drafts payable 1,708,857 790,859
Other, net 168,637 174,957
----------- ----------
Net cash provided from operating activities 12,516,445 2,196,906
----------- ----------
Cash flows from investing activities:
Purchases of investments (17,272,295) (7,122,888)
Maturities, calls and paydowns of fixed maturities 4,626,002 5,370,912
Sales of investments 10,769,385 3,157,068
Change in invested cash (8,508,165) (4,131,878)
Purchases of property and equipment (1,132,699) (394,633)
Sales of property and equipment 64,575 156,529
----------- ----------
Net cash used in investing activities (11,453,197) (2,964,890)
----------- ----------
Cash flows from financing activities:
Issuance of common stock 49,282 -
Cash overdraft (1,112,530) 767,984
----------- ----------
Net cash (used in) provided by financing activities (1,063,248) 767,984
----------- ----------
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 $ 2,150,000 $ 1,650,000
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
OMNI INSURANCE GROUP, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(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 1996 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 results 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.
(3) Subsequent Events
On October 16, 1997, the Company announced it had entered into a definitive
agreement with Hartford Fire Insurance Company, a subsidiary of The Hartford
Financial Services Group, Inc. (The Hartford), for The Hartford to acquire for
cash all of the Company's outstanding shares at $31.75 per share. Reference
is made to the Company's press release, dated October 16, 1997, which is
included as an exhibit to the Form 8-K dated October 16, 1997, and filed by
the Company with the Securities and Exchange Commission on October 28, 1997.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Some matters discussed in this report constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company notes that a variety of risk factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements.
Reference is made in particular to the discussion of such risk factors set
forth as Exhibit 99.1 to the Company's Annual Report on Form 10-K dated
December 31, 1996, on file with the Securities and Exchange Commission.
Financial Condition
September 30, 1997, Compared to December 31, 1996
Total investments increased to $95.0 million at September 30, 1997 from $84.5
million at December 31, 1996. This increase was primarily the result of
positive operating cash flow for the first nine months of 1997. Primarily due
to changes in interest rates, the Company's gross unrealized gain in the
investment portfolio increased to approximately $1.4 million from $750,000
at year-end 1996.
The increase in accounts receivable by 34.1% to $58.6 million and unearned
premiums by 29.8% to $64.5 million at September 30, 1997 was the result of the
increase in gross premiums written compared to December 31, 1996.
The increase in deferred policy acquisition costs to $11.2 million at
September 30, 1997 from $9.5 million at December 31, 1996 was primarily the
result of the increase in deferrable acquisition expenses resulting from the
larger volume of gross premiums written for the nine months ended September 30,
1997, compared to December 31, 1996.
Unpaid losses and loss adjustment expenses increased to $42.9 million at
September 30, 1997 from $33.2 million at December 31, 1996. This increase is
the result of the growth in business and an increase in the average liability
for outstanding bodily injury claims.
Results of Operations
Three Months Ended September 30, 1997, Compared to Three Months Ended
September 30, 1996
Gross premiums written increased 23.0% to $39.5 million for the three months
ended September 30, 1997 from $32.1 million for the three months ended
September 30, 1996. The Company's three largest states are Texas at $9.6
million, Virginia at $9.2 million and Florida at $8.1 million. A sizable
portion of the Texas business has been written through an agency which has
multiple branch offices controlled by a common ownership. Indiana became
operational during the third quarter with minimal writings in line with our
modest expectations.
Net premiums written increased 23.1% to $35.5 million for the three months
ended September 30, 1997 from $28.8 million for the three months ended
September 30, 1996. The increase in net premiums earned to $34.3 million
during the three months ended September 30, 1997 from $23.1 million during the
three months ended September 30, 1996 was the result of the increase in gross
premiums written in the latter half of 1996 and throughout 1997.
Net investment income increased slightly to $1.1 million for the three months
ended September 30, 1997 from $1.0 million for the three months ended
September 30, 1996. This was primarily the result of an increase in average
investable assets. The average investment yield before investment expenses
decreased slightly due to an increase in the proportion of tax exempt
securities in the Company's investment portfolio.
Losses and loss adjustment expenses were $27.0 million for the three months
ended September 30, 1997 with a net loss ratio of 78.7%, compared to $17.3
million for the three months ended September 30, 1996 with a net loss ratio of
74.9%. With the increase in premium volume throughout 1997, the Company's
ratio of new business to renewals has increased. Since new business typically
has a higher loss experience than renewals, this change in the mix of new
versus renewal business has been a factor in the Company's loss and loss
adjustment expense ratio. In addition, third quarter 1997 had adverse
development on prior accident year reserves of approximately $0.7 million.
The Company also experienced adverse development on its second quarter 1997
accident quarter reserves. The Company continues to closely monitor the
adequacy of its rates and loss reserves and takes action when it believes
necessary.
7
<PAGE>
Acquisition and operating expenses increased to $6.4 million for the three
months ended September 30, 1997 from $5.1 million for the three months ended
September 30, 1996. The net expense ratio decreased to 18.7% from 22.3% for
these same periods, due to the increase in earned premiums without a
corresponding increase in expenses. Also, the net expense ratio has benefitted
from reinsurance treaty results and changes in estimated accruals.
The effective income tax rate for the three months ended September 30, 1997 was
relatively constant at 26.4% compared to 26.8% for the three months ended
September 30, 1996. The slight decrease is primarily attributable to an
increase in tax exempt interest as a percentage of total earnings before tax.
As a result of the foregoing factors, net earnings increased 21.8% to $1.5
million for the three months ended September 30, 1997 from $1.2 million for the
three months ended September 30, 1996, and earnings per share increased to
$0.26 per share from $0.22 per share for the same periods, respectively.
Nine months Ended September 30, 1997, Compared to Nine months Ended September
30, 1996
Gross premiums written increased 46.4% to $120.8 million for the nine months
ended September 30, 1997 from $82.5 million for the nine months ended
September 30, 1996. The Company's three largest states are Florida at $27.1
million, Virginia at $26.2 million and Texas at $25.6 million. A sizable
portion of the Texas business has been written through an agency which has
multiple branch offices controlled by a common ownership. Since the beginning
of 1997, the Company has begun operations in two states: Illinois in the first
quarter and Indiana in the third quarter. Writings in both states have been
modest and in line with our initial expectations.
Net premiums written increased 49.9% to $108.6 million for the nine months
ended September 30, 1997 from $72.5 million for the nine months ended
September 30, 1996. The increase in net premiums earned to $95.4 million
during the nine months ended September 30, 1997 from $64.9 million during the
nine months ended September 30, 1996 is the result of the increase in gross
premiums written in the latter half of 1996 and throughout 1997.
Net investment income increased to $3.3 million for the nine months ended
September 30, 1997 from $3.0 million for the nine months ended September 30,
1996. This was primarily due to an increase in average investable assets.
Partially offsetting this increase was a slight decrease in the average
investment yield before investment expenses due to an increase in the
proportion of tax exempt securities in the Company's investment portfolio.
Losses and loss adjustment expenses were $74.2 million for the nine months
ended September 30, 1997 with a net loss ratio of 77.8%, compared to $47.8
million for the nine months ended September 30, 1996 with a net loss ratio of
73.7%. With the increase in premium volume in 1997, the Company's ratio of new
business to renewals has increased. Since new business typically has a higher
loss experience than renewals, this change in the mix of new versus renewal
business has been a factor in the Company's loss and loss adjustment expense
ratio. In addition, the Company had approximately $4.0 million of adverse
development on the reserves established at year-end 1996. This development is
primarily attributable to the increase in the liability for outstanding bodily
injury claims mentioned earlier. In response to these and other factors, rate
changes have been implemented in all of our major operating states during this
nine month period. The Company continues to closely monitor the adequacy of
its rates and loss reserves and takes action when it believes necessary.
Acquisition and operating expenses increased to $18.7 million for the nine
months ended September 30, 1997 from $15.2 million for the nine months ended
September 30, 1996. The net expense ratio decreased to 19.7% from 23.5% for
these same periods, due to the increase in earned premiums without a
corresponding increase in expenses. Also, the net expense ratio has benefitted
from reinsurance treaty results and changes in estimated accruals.
Settlement of the 1992-1993 Internal Revenue Service audit occurred during the
first quarter of 1997. Consequently, $80,000 of the amount previously reserved
was released, resulting in a decrease in the effective income tax rate to 24.4%
for the nine months ended September 30, 1997 compared to 26.8% for the nine
months ended September 30, 1996.
As a result of the foregoing factors, net earnings increased 19.6% to $4.3
million for the nine months ended September 30, 1997 from $3.6 million for the
nine months ended September 30, 1996, and earnings per share increased to $0.75
per share from $0.63 per share for the same periods, respectively.
8
<PAGE>
Liquidity and Capital Resources
The Company's major sources of operating funds are dividends from Omni
Insurance Company (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 are net premiums
collected, 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 flows provided by operating activities were $12.5 million for the nine
months ended September 30, 1997 compared with net cash provided of $2.2 million
for the nine months ending September 30, 1996. This improvement in cash flow
has primarily been due to the increase in gross premiums written and improved
profitability.
Net funds used in investing activities were $11.5 million for the nine months
ended September 30, 1997 compared to $3.0 million for the nine months ended
September 30, 1996. 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. The
Company does not presently anticipate any requirements which would cause
liquidation of 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 $3.7
million of dividends to the Company during 1997.
Effective with the 1994 statutory annual statement which is filed with the
state Departments of Insurance, property/casualty insurers must disclose their
risk-based capital (RBC) position. RBC prescribes the level of capital and
surplus which regulators deem necessary in order for an insurance company to
prudently support its business and investments risks. For 1996, Omni Insurance
and its insurance subsidiary, Omni Indemnity Company, each had total adjusted
capital in excess of any current requirement.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Omni Insurance is a party to a legal proceeding with the Florida Department of
Revenue. See Note 2 to the Company's financial statements set forth in Part I
of this Report.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
10
<PAGE>
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 By-laws of the Company, as amended 33-64346 3.2
3.2A By-laws of the Company, as amended and adopted April 1, 1997 June 30, 1997
Form 10-Q 3.2A
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
10.5C Sublease between Omni Insurance Company and Suburban Lodges of September 30, 1996
America, Inc. Form 10-Q 10.5C
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
11
<PAGE>
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
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
10.18A Endorsements Nos. 4, 5 and 6 to the Agreement of Reinsurance between
General Reinsurance Corporation and Omni Insurance Company 1996 Form 10-K 10.18A
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. and Gainsco County September 30, 1995
Mutual Insurance Company Form 10-Q 10.22
10.22A Amendment 1 to the Agency Agreement between Omni General June 30, 1996
Agency, Inc. and Gainsco County Mutual Insurance Company Form 10-Q 10.22A
10.22B Amended and restated Agency Agreement between Omni General Agency,
Inc. and Gainsco County Mutual Insurance Company, dated June 25, 1997 * 10.22B
10.23 Quota Share Reinsurance Agreement between Gainsco County September 30,1995
Mutual Insurance Company and Omni Insurance Company Form 10-Q 10.23
10.23A Amendment 2 to the Quota Share Reinsurance Agreement between Gainsco June 30, 1996
County Mutual Insurance Company and Omni Insurance Company Form 10-Q 10.23A
10.24 Management and Service Agreement between Omni General Agency, September 30, 1995
Inc. and Omni Insurance Company Form 10-Q 10.24
12
<PAGE>
10.25 Trust Agreement between Gainsco County Mutual Insurance September 30, 1995
Company, Omni Insurance Company and The Northern Trust Company Form 10-Q 10.25
10.26 Split-Dollar Insurance Agreement between Omni Insurance Company March 31, 1996
and D. Jack Sawyer, Jr. as Trustee under The DLMB Family Trust Form 10-Q 10.26
10.27 Cover Note CT1350-96 regarding reinsurance agreement between Omni March 31, 1996
Insurance Company and Transatlantic 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 June 30, 1996
Reinsurance Company Form 10-Q 10.27A
10.28 Executive Incentive Common Stock Plan of Omni Insurance Group, Inc. June 30, 1996
Form 10-Q 10.28
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) *
99.1 Forward Looking Statements 1996 Form 10-K 99.1
</TABLE>
(b) Reports on Form 8-K.
A report on Form 8-K was filed with the Securities and Exchange
Commission on October 28, 1997, regarding the merger agreement between
the Company and The Hartford Financial Services Group, Inc. This report
is incorporated herein by reference.
13
<PAGE>
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: November 12, 1997 /s/ J. Paul Kennedy
-------------------------
J. Paul Kennedy
President &
Chief Operating Officer
Date: November 12, 1997 /s/ Susan H. Scalf
-------------------------
Susan H. Scalf,
Senior Vice President &
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from Omni
Insurance Group, Inc.'s September 30, 1997 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 80,946
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 275
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 94,994
<CASH> 0
<RECOVER-REINSURE> 2,403
<DEFERRED-ACQUISITION> 11,202
<TOTAL-ASSETS> 179,765
<POLICY-LOSSES> 42,882
<UNEARNED-PREMIUMS> 64,544
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 57
<OTHER-SE> 56,892
<TOTAL-LIABILITY-AND-EQUITY> 179,765
95,362
<INVESTMENT-INCOME> 3,312
<INVESTMENT-GAINS> (26)
<OTHER-INCOME> (8)
<BENEFITS> 74,203
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 18,743
<INCOME-PRETAX> 5,694
<INCOME-TAX> 1,388
<INCOME-CONTINUING> 4,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,306
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
AGENCY AGREEMENT
THIS AGREEMENT is effective June 25, 1997 between OMNI GENERAL AGENCY,
INC., 2911 Turtle Creek Blvd., Suite 300, Office 23, Dallas, Texas, 75219
("General Agent"), and GAINSCO COUNTY MUTUAL INSURANCE COMPANY, 500 Commerce
Street, Fort Worth, Texas 76102-5439 ("Insurer"), a Texas county mutual
insurance company, and supersedes any Agency Agreement previously executed
between said parties.
W I T N E S S E T H:
WHEREAS, Insurer is a county mutual insurance company in the business of
insuring various risks against certain hazards as authorized by Chapter 17,
Texas Insurance Code; and
WHEREAS, General Agent is in the business of underwriting, causing to be
issued and servicing insurance policies and in supervising local agency and
field operations on behalf of insurance companies; and
NOW THEREFORE, in consideration of the mutual benefits to be derived by
the parties hereto, it is agreed as follows:
I. AUTHORITY OF GENERAL AGENT
General Agent is an independent contractor, not an employee or partner of
Insurer, and nothing in this Agreement shall be construed to create an
employer/employee, partnership, or joint venture relationship between
Insurer and General Agent.
Subject to requirements imposed by law, the terms of this Agreement, and
the underwriting policies, rules and guidelines of Insurer as specifically
provided to General Agent, General Agent is authorized to:
A. Subject to the absolute right of Insurer to reject, cancel or not
renew any policy or risk to the extent permitted by applicable law or
regulation, General Agent is authorized on behalf of Insurer, during
the effective period of this Agreement, to underwrite, cause to be
issued, and service insurance policies within the scope and limits
granted in the schedules attached hereto as Exhibit A and Exhibit B,
which schedules may from time to time be amended pursuant to Section
IV herein.
B. Only upon review and prior written approval of any reinsurers and
reinsurance agreements by Insurer:
1. Bind reinsurance or retrocessions on behalf of Insurer;
2. Collect a payment from a reinsurer; and
3. Commit Insurer to a claim settlement with a reinsurer.
1
General Agent shall promptly forward a report to Insurer for any
actions taken pursuant to such prior approval. General Agent, on
behalf of Insurer, shall neither cede reinsurance to a company which
does not qualify for reinsurance credit under Article 5.75-1 of the
Texas Insurance Code, nor cede, arrange, facilitate or bind Insurer
to a reinsurer that General Agent knows is or will be unable to
fulfill its obligations under the reinsurance agreement. It is the
intent of the parties hereto that General Agent indemnify Insurer
from any loss or damage which may result from reinsurance placed by
General Agent for Insurer which arises from any act, error or
omission by General Agent after the date of this Agreement. If as of
the effective date of the Agreement, first written above, or at any
time thereafter, General Agent is unable to provide reinsurance as
required by the terms of this Section, it is understood and agreed
that General Agent will not bind or write any policy on behalf of
Insurer to take effect at or after said date, and that General Agent
shall immediately cancel any policy that it may have bound or written
on behalf of Insurer to take effect at or after said date. General
Agent shall have no authority to commit Insurer to participate in
insurance or reinsurance syndicates.
C. Provide all usual and customary services of a managing general agent
on all insurance contracts placed by General Agent with Insurer.
D. Collect (net of commissions due producers or brokers), account for,
receipt for, and pay premiums on business General Agent writes, and,
as full compensation, to retain commissions out of premiums so
collected in amounts as specified in Exhibit A. General Agent agrees
that all premiums, including return premiums received by General
Agent, are Insurer's property.
E. Exercise General Agent's authority through authorized employees or
affiliates of General Agent.
F. Represent other companies.
G. Exercise exclusive and independent control of General Agent's time
and conduct.
H. Accept applications and 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
2
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, 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 month end.
II. DUTIES AND RESPONSIBILITIES OF GENERAL AGENT
General Agent shall:
A. Return to Insurer, upon demand after termination of this Agreement,
all unused policies, forms, applications, advertising material, and
any other forms or documents which bear Insurer's name. Such items
shall be the property of Insurer. General Agent shall fully
cooperate with and assist Insurer in recovering such items from third
parties, if any. If General Agent fails to deliver said property
within sixty (60) days after date of receipt of notice of intent to
terminate this Agreement, General Agent shall bear any expenses which
Insurer may expend in obtaining such items. In the event that
policies cannot be accounted for by General Agent or have been
destroyed, lost or mislaid, General Agent agrees to protect, forever
defend and hold Insurer harmless against all persons and claims
whatsoever on said policies.
B. Maintain separately for Insurer and each other insurer with which
General Agent does business, complete and current records and
accounts, including underwriting and claim files, which General Agent
shall retain for a minimum of five (5) years and for such longer
period as may be required by any applicable laws, unless otherwise
specified herein. Prior to the destruction of any such records, the
parties shall agree what, if any, microfilming, computer storage, or
other record preservation should be availed.
3
C. Refund return commissions on policy cancellations or premium
reductions, in each case, at the same rate at which such commissions
were originally retained, but in no case shall General Agent be
required to return, as commission or return commission, monies
greater than the total commission paid or otherwise payable to
General Agent.
D. On behalf of Insurer, handle the settlement of all claims under said
insurance policies; provided that, without the approval of Insurer,
General Agent shall not pay or commit Insurer to pay a claim over an
amount equal to one percent (1%) of Insurer's policyholder surplus as
of December 31 of the last completed calendar year or $30,000,
whichever is greater.
General Agent shall report the following claims to Insurer within ten
(10) days of determination that:
1. Any claim involves single or multiple fatalities.
2. Any claim involves incapacitating brain injury or blindness.
3. Any claim involves paraplegia or quadriplegia or amputation.
4. Any claim involves extensive third degree burns over forty
percent (40%) of the body.
5. Any claim involves total disability or inability to return to
previous occupation.
6. Any claim involves or is likely to involve Insurer as a
defendant and involves a non-claims matter, punitive or
exemplary damages, claims for extra-contractual damages,
negligent or bad faith claim handling or violation of any
insurance code or regulation or other statute or regulation
(including deceptive trade practices or unfair claims settlement
practices).
In such cases, Insurer shall be entitled to participate in such
action or to assume the defense of such action. If Insurer
assumes the defense of any such action, it shall not be liable
to General Agent for any legal or other expenses subsequently
incurred by General Agent in connection with such action.
7. Any claim involves a coverage dispute.
8. Any claim includes a demand in excess of policy limits.
General Agent will furnish to Insurer a monthly loss and expense
incurred claim report within ten (10) days after the end of each
calendar month. General Agent shall report all other claims to
Insurer in a timely and regular manner.
General Agent shall maintain a claim file relating to each reported
claim. These claim files shall be maintained for the period of time
set forth in this Agreement. General Agent shall send Insurer a copy
of any claim file, upon request by Insurer, within a reasonable time
period.
4
All claim files will be the joint property of Insurer and General
Agent; provided, however, upon an order of liquidation of Insurer
such files shall become the sole property of Insurer or its estate,
but General Agent shall have reasonable access to and the right to
copy such files on a timely basis. Insurer retains final authority
over disputes concerning claims settlement and setting of claim
reserves.
E. Maintain a complete record of any and all complaints received
regarding this program. General Agent shall retain this record for
a minimum of three (3) years or for such other time as any applicable
law or regulation may require.
F. Indemnify and hold harmless Insurer for a ny costs or fines or
penalties levied against Insurer by the Texas Department of Insurance
or any authorized regulatory body for any matter relating to General
Agent's failure to comply, either directly or indirectly, with any
statutory or regulatory reporting requirement in a timely manner, or
otherwise.
G. Comply with the reasonable written instructions of Insurer with
respect to proprietary or confidential information made available to
General Agent by Insurer.
H. Hold all premiums and any other monies belonging to Insurer,
including return premiums received by General Agent, in a fiduciary
capacity for Insurer. Except as otherwise authorized by this
Agreement, General Agent shall maintain such premium monies in a
separate bank account in a bank that is a member of the Federal
Reserve System and is insured by the Federal Deposit Insurance
Corporation. This account shall not be used for any purpose other
than payments to or on behalf of Insurer.
I. Comply with all regulatory requirements including, but not limited
to, the cancellation, nonrenewal, or conditional renewal of policies.
J. Indemnify and hold harmless Insurer, its successors, and assigns from
any and all losses, claims, demands, causes of action, damages,
judgments, settlements, costs, expenses, including all court costs,
legal expenses and attorney's fees, and any extra-contractual
obligations which Insurer may at any time sustain because of the
failure of General Agent or any authorized producers or brokers to
comply fully with the terms, provisions, and obligations of this
Agreement, including but not limited to, the payment to Insurer, and
its reinsurers, of all sums of money due, the delivery of all
premiums, notes, policies, accounts, and notices which may become
due from General Agent hereunder.
K. Indemnify and hold harmless Insurer, its successors, and assigns from
any and all losses, claims, demands, cause of action, judgments,
settlements, expenses and costs, or any punitive, exemplary,
compensatory or consequential damages, including any other
5
extra-contractual obligations arising out of the conduct of
General Agent or any authorized producers or brokers in the sale of
any policy covered under this Agreement, or in the investigation,
trial, or settlement of any claim or failure to pay or delay in
payment of any benefits under any policy, in connection with the
investigation or settlement or contesting the validity of claims or
losses covered under this Agreement.
L. Indemnify and hold harmless Insurer against any loss incurred by
Insurer as a result of General Agent or any authorized producers or
brokers accepting any risk except as described in Exhibit A attached
hereto and made a part hereof.
M. Maintain Errors and Omissions coverage with a limit of liability of
not less than $500,000 per claim/aggregate. General Agent shall give
evidence to Insurer of such coverage and its continued renewal.
N. Maintain in force a Fidelity Bond protecting General Agent against
acts of dishonesty by its employees in the amount of $250,000.
General Agent shall give evidence to Insurer of such Bonds and its
continued renewal.
III. ACCOUNTING AND REPORTING PROCEDURES
General Agent shall:
A. Within thirty (30) days after the end of each month, remit to Insurer
funds due Insurer in settlement of its proportionate part of
premiums, claims and commissions for such month. Balances due
General Agent shall be paid on the same basis as General Agent is
obligated to pay. General Agent may not offset balances due to
Insurer hereunder against balances due General Agent under any other
contract with Insurer. General Agent is liable to Insurer for all
premiums due regardless of whether or not insureds, agents or
producers have paid such premiums to General Agent, and General Agent
shall bear the sole responsibility and risks for collection of any
advanced monies for payment of premiums.
B. With regard to business placed by General Agent with Insurer
hereunder, furnish to Insurer in such form as Insurer shall designate
from time to time:
1. Within fifteen (15) days after the end of each month, a report
of written, earned and unearned premiums; claims and claim
adjustment expenses paid and outstanding; claims and claim
adjustment expenses incurred; claims and claim adjustment
expenses incurred but not reported; commissions earned by
General Agent; and such other information as may be reasonably
requested by Insurer, which information Insurer shall maintain
on file for three years and shall make available to insurance
regulatory authorities for review. Insurer agrees to allow
preliminary claim and claim adjustment expense reserve
information to be furnished per above within fifteen (15) days
6
after the end of each month, but in no circumstances shall final
claim and claim adjustment expense reserve information
(including IBNR) be furnished to Insurer later than twenty-five
(25) days after the end of each month;
2. Within fifteen (15) days after the end of each month, receivable
and payable reports for all insurance and reinsurance
transactions.
3. Within fifteen (15) days after the end of each calendar quarter,
such detail and summary reports as are required to meet all
reporting requirements of state regulatory or taxation
authorities including, but not limited to:
a. direct premiums (written and earned) and claims (paid,
outstanding and incurred) by class. Insurer agrees to
allow preliminary claim and claim adjustment expense
reserve information to be furnished per above within
fifteen (15) days after the end of each calendar quarter,
but in no circumstances shall final claim and claim
adjustment expense reserve information (including IBNR) be
furnished to Insurer later than twenty-five (25) days after
the end of each calendar quarter;
b. reinsurance ceded to and claims (including paid claims and
claim adjustment expense on outstanding known cases and
claims incurred but not reported) recoverable by
reinsurers;
c. letters of credit, funds or other collateral held on behalf
of Insurer which relates to reinsurance ceded;
d. unearned premiums and in-force premium data; and
e. such other information as may be reasonably requested by
Insurer.
4. By the first business day of February of each year, all
information required to complete Insurer's annual statutory
financial statements.
C. Furnish to Insurer, quarterly and annual financial statements of
General Agent and any affiliates in such form agreeable to Insurer.
D. Supply all information necessary for the proper and timely filings
associated with the Texas Private Passenger Automobile Statistical
Plan, and any other filings required by the Texas Department of
Insurance or any regulatory agency to whom Insurer is required to
report.
IV. CHANGES IN AGREEMENT
A. This Agreement may be revised by mutual agreement of General Agent
and Insurer and such revision shall be evidenced by a written
agreement duly executed by authorized representatives of General
Agent and Insurer, which specifies the effective date thereof.
7
B. Except with regard to the policy-issuing capacities provided for in
section I.A, Insurer may revise this Agreement to conform to any
change in statute, rule, or regulation, or to any other Department of
Insurance mandate in a reasonable manner by giving General Agent at
least sixty (60) days advance written notice, or such other period of
notice as allowed by the above statute, rule, regulation or
Department of Insurance mandate if less than sixty (60) days. The
notice shall set forth the proposed revision(s) and their effective
date(s).
V. TERMINATION OF AGREEMENT
A. This Agreement shall remain in force unless cancelled as of any date
by either party giving the other party at least ninety (90) days
advance written notice of the intent to cancel.
B. This Agreement may be terminated immediately by Insurer upon giving
written notice to General Agent in the event of:
1. The misappropriation by General Agent of any of Insurer's funds
or property;
2. Willful failure to render timely and proper premium accounting.
3. The fraud, gross negligence or willful misconduct of General
Agent;
4. An assignment by General Agent for the benefit of creditors; the
dissolution or liquidation of General Agent; the appointment of
a receiver or liquidator for a substantial part of General
Agent's property; the institution of bankruptcy, insolvency or
similar proceedings by or against General Agent;
5. Material violation by General Agent of any provision of this
Agreement;
6. Issuance of any insurance policy not authorized pursuant to this
Agreement;
7. Any public authority suspends, cancels or declines to renew
General Agent's managing general agent's license or such license
is not renewed or General Agent otherwise allows it to lapse,
which has not been remedied by General Agent within thirty (30)
days of notice or discovery;
8. Improper market conduct by General Agent. General Agent is
expected to exercise sound underwriting practices and charge
rates that will earn a profit. If it is determined by Insurer
that General Agent is not following the above requirements,
Insurer reserves the right to immediately terminate the
Agreement upon giving written notice, recommend higher rates
or perform some other action Insurer deems appropriate under the
circumstances.
C. This Agreement may be terminated at any time by mutual written
agreement.
8
D. In the event of the termination of this Agreement:
1. General Agent duties and responsibilities as contained in
Section II shall survive unless Insurer otherwise notifies
General Agent in writing.
2. General Agent shall, unless notified in writing to the contrary
by Insurer:
a. Continue to represent Insurer for the purpose of servicing
insurance contracts placed by General Agent with Insurer
which are in force on, or renewed at Insurer's election, or
as required by law, after the date of termination of this
Agreement and continue to receive its normal compensation
for such services.
b. Issue and countersign appropriate endorsements on contracts
of insurance in force, provided that without prior written
approval of Insurer, such endorsement shall not increase or
extend Insurer's liability or extend the term of any
insurance contract.
c. Collect and receipt for premiums and retain commissions out
of premiums collected as full compensation.
3. General Agent's records, use and control of expirations shall
remain the property and be left in the possession of General
Agent, provided all amounts due Insurer under this Agreement are
paid. If all such amounts due Insurer are not paid within the
thirty (30) days of demand, the records, use and control of all
expirations of business placed with Insurer shall be vested in
Insurer. Upon written request from Insurer, General Agent will
make all of such records and expirations immediately available
to Insurer.
4. If in disposing of such records and expirations Insurer does not
realize sufficient money to discharge in full General Agent's
indebtedness to Insurer and any expense incurred by Insurer
relative to the disposition (including, but not limited to,
legal fees), General Agent shall remain liable for the balances
of such indebtedness and expense. Any amount realized in excess
of such indebtedness and expense shall be returned to General
Agent.
E. Any notice issued pursuant to this Section shall be effective on the
day after it is received by General Agent.
VI. SUSPENSION OF AGENT'S AUTHORITY
A. Insurer may, in lieu of terminating this Agreement, by notice to
General Agent, immediately suspend General Agent's authority to bind
or write new or renewal business and/or change any existing insurance
policy and/or settle any claim during the pendency of any of the
following events:
1. General Agent is delinquent in payment of any monies due
Insurer; or
2. Any dispute exists between General Agent and Insurer regarding
the existence of any of the events listed in Section V.B.
9
B. Such suspension shall remain in effect until delinquency is cured or
dispute is resolved and General Agent receives written notification
from Insurer to that effect. If such delinquency is not cured within
fifteen (15) days from the date of receipt of written notification by
General Agent of such delinquency, Insurer may exercise its right to
terminate this Agreement under Section V.B.
C. Unless otherwise notified in writing to the contrary by Insurer,
General Agent's obligation under this Agreement shall continue during
the suspension of General Agent's authority under this Agreement.
D. Any notice of suspension issued pursuant to this Section shall be
effective on the day after it is received by General Agent.
VII. MISCELLANEOUS
A. General Agent shall not commit Insurer to any expenses or obligations
not specifically provided for herein without the prior written
permission of Insurer.
B. Insurer shall have the right to oversee and supervise the operation
of this Agreement, including but not limited to the right at all
reasonable times, to have access to and to copy at Insurer's expense
General Agent's books and records as they relate to this Agreement in
a form usable by Insurer, which rights shall survive the termination
or expiration of this Agreement. The Commissioner of Insurance of
Texas shall have at all reasonable times the right of access to all
books and records and bank accounts of General Agent in a form usable
by such official.
C. Insurer shall conduct and make available to the Commissioner of
Insurance for review a semi-annual examination of General Agent.
Such examination must remain on file with Insurer for three (3) years
or for such other time as any applicable law or regulation may
require, and contain, at a minimum, the following information:
1. Claims procedures;
2. Timeliness of claims payments;
3. Timeliness of premium reporting and collection;
4. Compliance with underwriting guidelines; and
5. Reconciliations of policy inventory.
D. If within any thirty (30) day period, Insurer's aggregate premium
volume increases by thirty percent (30%) or more, Insurer shall
conduct, within ninety (90) days of said period, an examination of
General Agent if General Agent:
(i) Writes greater than twenty percent (20%) of Insurer's
aggregate premium volume; and
10
(ii) Has experienced an increase of twenty percent (20%) or
more of premium volume during the thirty (30) day period.
E. The provisions of this Agreement shall be deemed to be severable, and
if any phrase, clause, sentence or provision of this Agreement is
adjudged void or unenforceable, the remainder of the Agreement shall
remain in full force and effect. Any provision of this Agreement
which conflicts with applicable law or regulation will be amended to
the minimum extent necessary to effectuate compliance with such law
or regulation.
F. General Agent shall not have authority to represent Insurer on an
exclusive basis with respect to any policy form, line, class or
subclass of business, unless otherwise authorized in writing by
Insurer.
G. Failure of either party to enforce compliance with any term or
condition of this Agreement shall not constitute a waiver of such
term or condition. No waiver of any breach or default hereunder
shall be valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
H. This Agreement shall be construed in accordance with the laws of the
State of Texas.
I. If any dispute shall arise between Insurer and General Agent with
reference to the interpretation of this Agreement, the dispute shall
be referred to three (3) arbitrators, one to be chosen by each party
and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days after the
receipt of written notice from the other party requesting it to do
so, the requesting party may nominate two arbitrators who shall
choose the third. The third arbitrator shall be chosen within thirty
(30) days of nomination of the previous two arbitrators. Should the
two arbitrators not be able to agree on the choice of the third, then
the appointment shall be left to the Commissioner of Insurance of
Texas. Each party shall submit its case to the arbitrators within
thirty (30) days after the appointment of the arbitrators. The
arbitrators shall be relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of a
majority of the arbitrators shall be final and binding on both
Insurer and General Agent. The expense of the arbitration, including
the fees of the arbitrators, shall be equally divided between Insurer
and General Agent. Any such arbitration shall take place in Fort
Worth, Texas, unless some other location is mutually agreed upon by
Insurer and General Agent. The arbitrators shall be disinterested
parties and shall be active or retired officers or executives of
property and casualty insurance or reinsurance companies. The laws
of the State of Texas shall apply to the interpretation of any
provision herein.
11
J. This Agreement may not be directly or indirectly assigned by either
party in whole or in part, nor may General Agent appoint a sub
managing general agent.
K. Except as otherwise herein provided, any notice or other
communications required or permitted hereunder shall be sufficiently
given if sent by certified or registered mail, postage prepaid, to
the addresses to stated at the beginning of this Agreement or such
other address as notified by either party to the other.
L. General Agent shall notify Insurer in writing within thirty (30) days
if there is a change in:
1. ownership of ten percent (10%) or more of the outstanding voting
stock of General Agent;
2. any principal officer of General Agent; or
3. any director of General Agent.
M. All business coming within the scope of this Agreement shall be
reinsured on a 100% Quota Share basis with Omni Insurance Company.
Omni Insurance Company, because of the nature of said reinsurance
agreement, shall have the right to act on all such matters coming
within the scope of this Agreement as though it were the Insurer, but
by doing so or not doing so, shall not invalidate the right of the
Insurer to act hereunder.
N. If General Agent or any agent uses Insurer's name in any form of
advertising, a copy of the proposed advertisement shall be forwarded
to Insurer prior to its use. No advertisement is to be used without
the prior written permission of Insurer. In the event an
advertisement containing Insurer's name is used by General Agent or
any producer or broker, General Agent shall maintain a copy of the
advertisement and full details concerning where, when, and how it was
used, and comply with all legal requirements regarding content,
review and approval of advertising and maintenance of records. Upon
written permission of General Agent, Insurer may use, in whole or in
part, any forms, endorsements, applications, rate cards, brochures,
advertisements, advertising ideas, or any other similar material
designed and/or developed by General Agent relating to the business
covered by this Agreement.
O. Insurer shall not be responsible for any expenses of General Agent,
including but not by way of limitation, expenses such as rentals,
transportation facilities, clerk hire, non-claim related attorney's
fees (including General Counsel fees), municipal taxes, county taxes,
occupational taxes, not based on premiums, commissions to producers
or brokers, and any other agency expenses of whatever kind or
description. Fees for the licensing of local agents, producers or
brokers shall also be expenses of General Agent.
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P. The headings of the various sections herein are for convenience of
reference only and shall not define or limit any of the terms or
provisions hereof.
Q. The commission allowed General Agent in Exhibit A shall represent
the full compensation for all services rendered. Insurer shall have
no obligation for payment of commissions, fees or other compensation
to any producer or broker under this program.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
GAINSCO COUNTY MUTUAL INSURANCE COMPANY
/s/ Gaye S. LeBoutillier By: /s/ Norman Alberigo
- ---------------------------------- ---------------------------------
Witness
August 20, 1997 Title: Vice President
- ---------------------------------- ------------------------------
Date
OMNI GENERAL AGENCY, INC.
/s/ Wayne K. Whiten By: /s/ Joseph John Graziano
- ---------------------------------- --------------------------------
Witness
9-4-97 Title: President
- ---------------------------------- -----------------------------
Date
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