UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
-------------
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 0-21988
-----------------------------------
KAYE GROUP INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 13-3719772
- -------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
122 East 42nd Street, New York, N.Y. 10168
------------------------------------------
(Address of principal executive office)
(Zip code)
212-338-2100
----------------------------------------------------
(Registrant's telephone number, including area code)
.
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 3, 1999 - 8,438,990
- - Total number of pages filed including cover and under pages 27
--
- - Exhibit index is located on page 21
--
<PAGE>
KAYE GROUP INC.
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Income for the
three months and six months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the
Six months ended June 30, 1999 and 1998 7
Consolidated Statements of Comprehensive Income for the
three months and six months ended June 30, 1999 and 1998 8
Notes to Unaudited Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Year 2000 Compliance 17
Safe Harbor Disclosure 19
PART II OTHER INFORMATION 19
Item 1. Financial Statements
2
<PAGE>
KAYE GROUP INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(in thousands, except par value per share)
<TABLE>
<CAPTION>
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
INSURANCE BROKERAGE COMPANIES:
Current assets:
Cash and cash equivalents
(including short term investments, and funds held in a fiduciary
capacity of $27,038 and $33,218) $ 28,518 $ 34,267
Premiums and other receivables 36,136 40,572
Prepaid expenses and other assets 1,950 1,895
-------- --------
Total current assets 66,604 76,734
Fixed assets (net of accumulated depreciation of $6,238 and $5,662) 3,584 3,683
Intangible assets (net of accumulated amortization of $3,378 and $2,750) 9,958 6,795
Deferred income taxes 816
Other assets 251 205
-------- --------
Total assets insurance brokerage companies 80,397 88,233
-------- --------
PROPERTY AND CASUALTY COMPANIES:
Investments available-for-sale:
Fixed maturities, at market value (amortized cost: 1999, $45,386;
1998, $42,980) 44,985 43,597
Equity securities, at market value (cost:1999, $1,936; 1998, $696) 2,118 782
Short term investments, at cost, which approximates market value 2,200 2,950
-------- --------
Total investments 49,303 47,329
Cash and cash equivalents 3,771 10,806
Accrued interest and dividends 879 961
Premiums receivable 2,552 2,644
Premiums receivable insurance brokerage companies 1,817 3,041
Reinsurance recoverable on unpaid losses and loss expenses 3,808 3,220
Deferred acquisition costs 2,756 3,921
Deferred income taxes 1,098 586
Intercompany note receivable 3,000
Intercompany receivable 1,255 508
Other assets 3,888 2,466
-------- --------
Total assets property and casualty companies 74,127 75,482
-------- --------
CORPORATE:
Cash and cash equivalents 807 370
Prepaid income tax 722
Prepaid expenses and other assets 229 248
Investments:
Equity securities, at market value (cost:1999, $308, and 1998, $497) 308 615
Deferred income taxes 29
Intercompany receivable 1,451 2,118
-------- --------
Total assets corporate 3,546 3,351
-------- --------
Total assets $158,070 $167,066
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
Item 1. Financial Statements (continued)
KAYE GROUP INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(in thousands, except par value per share)
<TABLE>
<CAPTION>
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
LIABILITIES
INSURANCE BROKERAGE COMPANIES:
Current liabilities:
Premiums payable $ 53,109 $ 59,472
Premiums payable property and casualty companies 1,817 3,041
Accounts payable and accrued liabilities 7,522 9,045
Notes payable 380 718
Deferred income taxes 327 978
Intercompany payable 2,706 2,626
--------- ---------
Total current liabilities 65,861 75,880
Notes payable 1,097 1,369
Intercompany note payable 3,000
Other liabilities 504 1,005
--------- ---------
Total liabilities-insurance brokerage companies 70,462 78,254
--------- ---------
PROPERTY AND CASUALTY COMPANIES:
Liabilities:
Unpaid losses and loss expenses 22,891 21,567
Unearned premium reserves 8,734 12,327
Accounts payable and accrued liabilities 7,454 7,451
Other liabilities 233 143
--------- ---------
Total liabilities property and casualty companies 39,312 41,488
--------- ---------
CORPORATE:
Current liabilities:
Accounts payable and accrued liabilities 446 511
Loan payable 1,193 1,153
Deferred income taxes 20
Income taxes payable 568
--------- ---------
Total current liabilities 1,639 2,252
Loan payablelongterm 2,703 3,303
--------- ---------
Total liabilitiescorporate 4,342 5,555
--------- ---------
Total liabilities 114,116 125,297
--------- ---------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000 shares authorized;
none issued or outstanding
Common stock, $.01 par value; 20,000 shares authorized;
shares issued and outstanding (1999, 8,450; 1998, 8,474) 85 85
Paid in capital 17,956 17,942
Accumulated other comprehensive income, net of deferred
income tax (benefit) liability (1999, ($74); 1998, $280) (145) 541
Retained earnings 26,257 23,201
Treasury stock, 27 shares at cost (199)
--------- ---------
Total stockholders' equity 43,954 41,769
--------- ---------
Total liabilities and stockholders' equity $ 158,070 $ 167,066
========= =========
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE>
Item 1. Financial Statements (continued)
KAYE GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended June 30, 1999 and 1998
(in thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INSURANCE BROKERAGE COMPANIES
Revenues:
Commissions and fees net $ 10,016 $ 8,193 $ 18,580 $ 15,619
Investment income 255 372 605 882
-------- -------- -------- --------
Total revenues 10,271 8,565 19,185 16,501
-------- -------- -------- --------
Expenses:
Salaries and benefits 6,211 5,139 11,787 10,631
Amortization of intangibles 274 130 628 274
Other operating expenses 3,110 3,102 6,486 6,223
-------- -------- -------- --------
Total operating expenses 9,595 8,371 18,901 17,128
-------- -------- -------- --------
Interest expense 262 344
-------- -------- -------- --------
Income (loss) before income taxes-insurance
brokerage companies 414 194 (60) (627)
-------- -------- -------- --------
PROPERTY AND CASUALTY COMPANIES
Revenues:
Net premiums written 6,222 6,023 9,039 8,077
Change in unearned premiums 287 122 3,890 4,199
-------- -------- -------- --------
Net premiums earned 6,509 6,145 12,929 12,276
Net investment income 707 773 1,434 1,469
Net realized (loss) gain on investments (21) 21 (20) 33
Other income 17 64 35 127
-------- -------- -------- --------
Total revenues 7,212 7,003 14,378 13,905
-------- -------- -------- --------
Expenses:
Losses and loss expenses 2,114 2,227 4,296 4,573
Acquisition costs and general and
administrative expenses 2,507 2,212 4,875 4,228
-------- -------- -------- --------
Total expenses 4,621 4,439 9,171 8,801
-------- -------- -------- --------
Income before income taxes-property and
casualty companies 2,591 2,564 5,207 5,104
-------- -------- -------- --------
CORPORATE
Revenues:
Net investment income (loss) 256 (20) 259 (49)
Expenses:
Other operating expenses 98 86 195 200
Interest expense 85 103 164 251
-------- -------- -------- --------
Income (loss) before income taxes-corporate 73 (209) (100) (500)
-------- -------- -------- --------
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
Item 1. Financial Statements (continued)
KAYE GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended June 30, 1999 and 1998
(in thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income before income taxes 3,078 2,549 5,047 3,977
------- ------- ------- -------
Provision (benefit) for income taxes
Current 426 23 1,607 1,115
Deferred 529 792 (42) 157
------- ------- ------- -------
Total provision for income taxes 955 815 1,565 1,272
------- ------- ------- -------
Net income $ 2,123 $ 1,734 $ 3,482 $ 2,705
======= ======= ======= =======
EARNINGS PER SHARE
Basic $ 0.25 $ 0.20 $ 0.41 $ 0.32
======= ======= ======= =======
Diluted $ 0.25 $ 0.20 $ 0.40 $ 0.31
======= ======= ======= =======
Weighted average of shares outstanding basic 8,448 8,474 8,457 8,474
======= ======= ======= =======
Weighted average shares outstanding and
share equivalents outstanding diluted 8,590 8,595 8,600 8,595
======= ======= ======= =======
</TABLE>
See notes to unaudited consolidated financial statements
6
<PAGE>
Item 1. Financial Statements (continued)
KAYE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and 1998
(in thousands)
(UNAUDITED)
1999 1998
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,482 $ 2,705
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Deferred acquisition costs 1,165 1,289
Amortization of bond premium net 320 318
Deferred income taxes (42) 157
Net realized losses on investments 230 27
Depreciation and amortization expense 1,214 751
Change in assets and liabilities:
Accrued interest and dividends 82 94
Premiums and other receivables 4,843 (43,897)
Prepaid expenses and other assets (1,205) (153)
Premiums payable (7,497) 57,228
Accounts payable and accrued liabilities (1,678) (1,416)
Unpaid losses and loss expenses 1,324 576
Unearned premium reserves (3,593) (4,329)
Income taxes payable (1,290) (749)
-------- --------
Net cash (used in) provided by operating activities (2,645) 12,601
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments available for sale :
Purchase of fixed maturities (8,068) (6,902)
Purchase of equity securities (2,007) (200)
Sales of short term investments 750 1,280
Maturities of fixed maturities 2,005 2,865
Sales of fixed maturities 3,364 4,350
Sales of equity securities 721 200
Purchase of fixed assets (477) (1,236)
Purchase of expiration lists (3,668) (402)
Funds held under deposit contracts:
Sales of short term investments 123
-------- --------
Net cash (used in) provided by investing activities (7,380) 78
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition debt-repayment (375)
Notes and loan payable-repayment (795) (7,223)
Proceeds from issuance of common stock 14
Acquisition of treasury stock (744)
Payment of dividends (422) (425)
Payments under deposit contracts (95)
Proceeds from borrowings 5,000
-------- --------
Net cash used in financing activities (2,322) (2,743)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (12,347) 9,936
Cash and cash equivalents at beginning of period 45,443 31,307
-------- --------
Cash and cash equivalents at end of period $ 33,096 $ 41,243
-------- --------
Supplemental cash flow disclosure:
Interest expense $ 387 $ 251
Income taxes $ 2,897 $ 1,866
Noncash financing activity:
Reissuance of treasury stock for an acquisition $ 545
See notes to unaudited consolidated financial statements
7
<PAGE>
KAYE GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months and six months ended June 30, 1999 and 1998
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME $ 2,123 $ 1,734 $ 3,482 $ 2,705
Other comprehensive income:
Unrealized depreciation of investments available
forsale, net of deferred income tax benefit
(1999, ($300), ($416); 1998, ($8), ($34)) (583) (15) (807) (65)
Less: reclassification adjustment for loss included
in net income, net of deferred income tax
benefit (1999, $63, $62; 1998, $3, $9) 122 6 121 18
------- ------- ------- -------
Total other comprehensive income (461) (9) (686) (47)
------- ------- ------- -------
COMPREHENSIVE INCOME $ 1,662 $ 1,725 $ 2,796 $ 2,658
======= ======= ======= =======
</TABLE>
See notes to unaudited consolidated financial statements
8
<PAGE>
ITEM 1. - Financial Statements (continued)
KAYE GROUP INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1) General
The consolidated financial statements as of June 30, 1999 and for the three
months and six months ended June 30, 1999 and 1998 are unaudited, have been
prepared in accordance with generally accepted accounting principles and, in the
opinion of management, reflect all adjustments (consisting of normal, recurring
adjustments) necessary for a fair presentation of the results for such periods.
The results of operations for the three months and six months ended June 30,
1999 are not indicative of results for the full year.
These financial statements should be read in conjunction with the financial
statements and related notes in the Company's 1998 Form 10-K. The December 31,
1998 Consolidated Balance Sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.
Certain prior year information has been reclassified to conform with the
current year presentation. In order to more accurately present Insurance
Brokerage Companies salaries and benefits, the Company has reclassified employee
producer commission expense to salaries and benefits on the Consolidated
Statements of Income for all periods presented. Prior to September 30, 1999,
this expense was netted against commissions and fees. The amount of the
reclassification for the three months and six months ended June 30, 1998 was
321,000 and $582,000, respectively.
2) Business Segments
Kaye Group Inc. (the "Company"), a Delaware corporation, is a holding
company which, through its subsidiaries, is engaged in a broad range of
insurance brokerage, underwriting and related activities. The Company operates
in two insurance business segments - the Insurance Brokerage Companies
Operations comprised of the Retail Brokerage Business and the Program Brokerage
Business, and the Property and Casualty Companies Operations ("Property and
Casualty Companies" or "Insurance") comprised of the Insurance Companies and
Claims Administration Corporation.
The Insurance Brokerage Companies derive their revenue principally from
commissions associated with the placement of insurance coverage for corporate
clients. These commissions are paid by the insurance carriers and are usually a
fixed percentage of the total premiums. Certain of these commissions are
contingent upon the level of volume and profitability of the related coverage to
the insurance companies. There is normally a lag between receipt of funds from
the insured and payment to the insurance company. Investment of these funds over
this period generates additional revenue in the form of interest income.
The Insurance business underwrites property and casualty risks for insureds
in the United States and is sold principally through specially designed
Programs, covering various types of businesses and properties which have similar
risk characteristics. The Insurance business generally underwrites the first
layer of insurance under the Programs and unaffiliated Program insurers provide
coverage for losses above the first layer of risk. Substantially all of the
Insurance
9
<PAGE>
business revenues are derived from premiums on this business, plus the
investment income generated by the investment portfolio of the Insurance
business.
Corporate Operations include those activities that benefit the Company in
its entirety and cannot be specifically identified to either the Insurance
Brokerage Companies or the Property and Casualty Companies. Such activities
primarily include debt servicing and public company expenses, including investor
relations. In addition, Corporate Operations include an investment in Arista
Investors Corp.
The identifiable segment assets, operating profits and income before income
taxes are shown on the accompanying Consolidated Balance Sheets and Statements
of Income. The following table is a summary of certain other segment information
for the three months and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Business Segments - 1999
- ---------------------------------------------------------------------------------------------------
3 months ended June 30, 1999 6 months ended June 30, 1999
---------------------------- ----------------------------
Insurance Property & Insurance Property &
(in thousands) Brokerage Casualty Brokerage Casualty
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue from external sources $ 9,060 $ 6,509 $17,431 $12,929
Revenue from other segments 956 17 1,149 35
Depreciation expense 291 8 576 10
Amortization expense 274 2,010 628 3,983
Capital expenditures 181 477
</TABLE>
<TABLE>
<CAPTION>
Business Segments - 1998
- ---------------------------------------------------------------------------------------------------
3 months ended June 30, 1998 6 months ended June 30, 1998
---------------------------- ----------------------------
Insurance Property & Insurance Property &
(in thousands) Brokerage Casualty Brokerage Casualty
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue from external sources $ 7,262 $ 6,099 $14,480 $12,276
Revenue from other segments 931 18 1,139 35
Depreciation expense 226 6 465 10
Amortization expense 130 1,893 274 3,775
Capital expenditures 509 1,236
</TABLE>
3) Loan Payable
On June 23, 1998, the Company paid in full the $6,094,000 bank revolving
line of credit, and replaced it with a $5,000,000 term loan (the "Loan") with
another bank. The Loan is collateralized by the stock of the Property and
Casualty Companies. The Loan bears interest at a fixed rate per year of 7.8%. At
June 30, 1999, $3,896,000 was outstanding under the Loan. In addition, the
Company has available a $4,500,000 revolving line of credit with the same bank,
also collateralized by the stock of the Property and Casualty Companies. The
proceeds are available for general operating needs and acquisitions. As of June
30, 1999, no amount was outstanding on the revolving line of credit. A quarterly
fee is assessed in the amount of 0.05% on the unused balance. Among other
covenants, the Loan agreement requires maintenance of minimum consolidated GAAP
net worth, statutory surplus, ratio of net premiums written to surplus, and
minimum debt service coverage. As of June 30, 1999, the Company was in
compliance with the covenants of the Loan agreement.
10
<PAGE>
The Company's required principal payments on the Loan for the respective
years are $585,000 in 1999, $1,241,000 in 2000, $1,343,000 in 2001, and $727,000
in 2002. Interest expense for the loans mentioned above for the three months and
six months ended June 30, 1999 and 1998 were $85,000 and $164,000 for 1999,
respectively, and $103,000 and $251,000 for 1998, respectively.
4) Earnings Per Share
Effective December 31, 1997, the Company adopted SFAS No. 128, Earnings Per
Share, which requires an enterprise to present basic and diluted earnings per
share on the face of the income statement. Basic earnings per share, which is
calculated by dividing net income by the weighted average number of common
shares outstanding, replaces primary earnings per share from the prior standard.
Diluted earnings per share include the effect of all potentially dilutive
securities.
Earnings per common share has been computed below in accordance with SFAS
No. 128, based upon weighted average common and dilutive shares outstanding (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (numerator) $2,123 $1,734 $3,482 $2,705
------ ------ ------ ------
Weighted average common shares and effect of
dilutive shares used in the computation of
earnings per share:
Average shares outstanding-basic 8,448 8,474 8,457 8,474
Effect of dilutive shares 142 121 143 121
------ ------ ------ ------
Average shares outstanding-diluted
(denominator) 8,590 8,595 8,600 8,595
------ ------ ------ ------
Earnings per common share:
Basic $ 0.25 $ 0.20 $ 0.41 $ 0.32
Diluted $ 0.25 $ 0.20 $ 0.40 $ 0.31
</TABLE>
5) Dividends
On June 21, 1999, the Board of Directors declared a quarterly dividend of
$.025 per share, payable July 20, 1999 to stockholders of record on June 30,
1999.
11
<PAGE>
6) Contingent Liabilities
In the ordinary course of business, the Company and its subsidiaries are
subject to various claims and lawsuits in connection with the placement of
insurance. In the opinion of management, the ultimate resolution of all asserted
and potential claims will not have a material adverse effect on the consolidated
financial position of the Company.
7) Acquisition
Effective January 1, 1999, the Company, through its insurance brokerage
subsidiary, Kaye Insurance Associates, Inc., purchased the assets, including
customer lists and certain liabilities of Woodbury, N.Y. based broker Seaman,
Ross, & Wiener, Inc. ("SRW") and related entities for an initial purchase price
of $2,430,000 in cash and $500,000 in stock of the Company. Additional payments
of $810,000 in cash and $42,000 in stock of the Company have been made through
June 30,1999. The total purchase price is contingent on future billings related
to the acquired customer lists and will increase significantly from the initial
purchase price. This acquisition is being accounted for using the purchase
method of accounting. Accordingly, intangible assets (including customer lists)
of approximately $3.8 million, resulting from the allocation of the preliminary
purchase price and payments made through June 30, 1999, are being amortized by
using the straight-line method over a period of not more than twenty years.
The above acquisition has been included in the Company's consolidated
financial statements from the effective date. The following unaudited pro forma
summary presents the consolidated results of operations of the Company as if the
SRW acquisition had occurred on January 1, 1998. The pro forma results are shown
for illustrative purposes only and do not purport to be indicative of the
results which would have been reported if the acquisition had occurred on the
dates indicated or which may occur in the future.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in thousands except per share amounts)
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Pro forma revenues - Insurance Brokerage Companies $ 10,271 $ 9,347 $ 19,185 $ 18,303
Pro forma net income $ 2,123 $ 1,810 $ 3,482 $ 3,021
Pro forma earnings per share - basic $ 0.25 $ 0.21 $ 0.41 $ 0.36
Pro forma earnings per share- diluted $ 0.25 $ 0.21 $ 0.40 $ 0.35
</TABLE>
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Kaye Group Inc. (the "Company"), a Delaware corporation, is a holding
company which, through its subsidiaries, is engaged in a broad range of
insurance brokerage, underwriting and related activities. The Company operates
in two insurance business segments - the Insurance Brokerage Companies
Operations comprised of the Retail Brokerage Business and the Program Brokerage
Business, and the Property and Casualty Companies Operations ("Property and
Casualty Companies" or "Insurance") comprised of the Insurance Companies and
Claims Administration Corporation.
Overview
The Insurance Brokerage Companies derive their revenue principally from
commissions associated with the placement of insurance coverage for corporate
clients. These commissions are paid by the insurance carriers and are usually a
fixed percentage of the total premiums. Certain of these commissions are
contingent upon the level of volume and profitability of the related coverage to
the insurance companies. There is normally a lag between receipt of funds from
the insured and payment to the insurance company. Investment of these funds over
this period generates additional revenue in the form of interest income.
The Insurance business underwrites property and casualty risks for insureds
in the United States and is sold principally through specially designed
Programs, covering various types of businesses and properties which have similar
risk characteristics. The Insurance business generally underwrites the first
layer of insurance under the Programs and unaffiliated Program insurers provide
coverage for losses above the first layer of risk. Substantially all of the
Insurance business revenues are derived from premiums on this business, plus the
investment income generated by the investment portfolio of the Insurance
business.
Corporate Operations include those activities that benefit the Company in
its entirety and cannot be specifically identified to either the Insurance
Brokerage Companies or the Property and Casualty Companies. Such activities
primarily include debt servicing and public company expenses, including investor
relations. In addition, Corporate Operations include an investment in Arista
Investors Corp. ("Arista").
Results of Operations
Three months ended June 30, 1999
compared with three months ended June 30, 1998
Net Income
Net Income for the three months ended June 30, 1999 increased by $389,000
to $2,123,000 or basic earnings per share of $0.25 compared to $1,734,000 or
$0.20 for the same period last year as explained below.
13
<PAGE>
Insurance Brokerage Companies
Income before income taxes increased by $220,000 to $414,000 in 1999 from
$194,000 in 1998. The increased operating result was primarily due to increased
revenues offset by an increase in salaries and benefits and interest expense, as
discussed below.
Total revenues in 1999 were $10,271,000 compared with $8,565,000 in 1998,
an increase of $1,706,000 (20%). Gross commissions and fees grew by $2,365,000
(24%) as a result of new business ($1,686,000) and acquisitions ($1,613,000)
exceeding lost business. The commission expense rate incurred to produce new and
renewal business increased from 16% to 18%. Investment income decreased by
$117,000 (31%) primarily due to lower fiduciary investments as a result of
certain lost business and lower interest rates.
Salaries and benefits increased by $1,072,000 (21%) to $6,211,000 in 1999
compared to $5,139,000 in 1998. The increase was the result of acquisitions,
higher annual incentive based compensation accruals, and salary increments
offset partially by headcount reductions.
Amortization of intangibles increased by $144,000 to $274,000 in 1999
compared with $130,000 in 1998 due to amortization of acquisition related
intangibles on 1998 and 1999 acquisitions.
Other operating expenses increased slightly to $3,110,000 from $3,102,000.
The increase was mainly due to acquisitions offset by reduced rent charges and
insurance costs.
Interest expense increased by $262,000 as a result of acquisition
indebtedness and a note payable to the Property and Casualty Companies.
Property and Casualty Companies
Income before income taxes increased by $27,000 (1%) to $2,591,000 in 1999
from $2,564,000 in 1998. This increase was due to an increase in net premiums
earned and a decrease in the combined ratio.
Net premiums earned for 1999 increased by $364,000 (6%) to $6,509,000 from
$6,145,000 in 1998. The Company's efforts to develop new Alternative Risk
Transfer programs and broaden the distribution network of existing programs and
coverage types has contributed to the growth of premium volume.
Net investment income decreased by $66,000 (9%) to $707,000 in 1999 from
$773,000 in 1998. The decrease was due to a decrease in investments.
The loss ratio (losses incurred expressed as a percentage of premiums
earned) decreased to 32% in 1999 from 36% in 1998. The decrease was due to lower
loss and loss expenses under the property programs resulting from mild weather
partially offset by an increase in assumed general liability losses which
traditionally experience a higher loss frequency.
The acquisition costs and general and administrative expenses ratio was 39%
and 36% for 1999 and 1998, respectively. The increase was due to higher general
and administrative expenses.
14
<PAGE>
Corporate
Income before income taxes increased in 1999 by $282,000 to $73,000 from a
loss of $209,000 in 1998. The segment's sole investment in Arista was reduced
due to a liquidating distribution. Arista's management has indicated its
intention to sell its remaining asset, its license to operate, and its stock.
During the quarter the liquidating distribution, partially offset by the
corresponding reduction in fair market value of Arista stock, was included in
net investment income and is the primary reason for the positive variance.
Six months ended June 30, 1999
compared with six months ended June 30, 1998
Net Income
Net Income for the six months ended June 30, 1999 increased by $777,000 to
$3,482,000 or basic earnings per share of $0.41 compared to $2,705,000 or $0.32
for the same period last year as explained below.
Insurance Brokerage Companies
Loss before income taxes decreased by $567,000 to $60,000 in 1999 from
$627,000 in 1998. The increased operating result was primarily due to increased
revenues partially offset by an increase in salaries and benefits, as discussed
below.
Total revenues in 1999 were $19,185,000 compared with $16,501,000 in 1998,
an increase of $2,684,000 (16%). Gross commissions and fees grew by $4,115,000
(23%) as a result of new business ($3,443,000) and acquisitions ($3,477,000)
exceeding lost business. The commission expense rate incurred to produce new and
renewal business increased from 14% to 17%. Investment income decreased by
$277,000 (31%) primarily due to lower fiduciary investments as a result of
certain lost business and lower interest rates.
Salaries and benefits increased by $1,156,000 (11%) to $11,787,000 in 1999
compared to $10,631,000 in 1998. The increase was the result of acquisitions and
salary increments offset partially by headcount reductions and lower annual
incentive based compensation accruals.
Amortization of intangibles increased by $354,000 to $628,000 in 1999
compared with $274,000 in 1998 due to amortization of acquisition related
intangibles on 1998 and 1999 acquisitions.
Other operating expenses increased by $263,000 (4%) to $6,486,000 in 1999
compared with $6,223,000 in 1998. The increase was mainly due to acquisitions
and increased consulting expenses partially offset by reduced rent and insurance
costs.
Interest expense increased by $344,000 as a result of acquisition
indebtedness and a note payable to the Property and Casualty Companies.
15
<PAGE>
Property and Casualty Companies
Income before income taxes increased by $103,000 (2%) to $5,207,000 in 1999
from $5,104,000 in 1998. The increase was due to an increase in net premiums
earned and a decrease in the combined ratio.
Net premiums earned for 1999 increased by $653,000 (5%) to $12,929,000 from
$12,276,000 in 1998. The Company's efforts to develop new Alternative Risk
Transfer programs and broaden the distribution network of existing programs and
coverage types has contributed to the growth of premium volume.
Net investment income decreased by $35,000 (2%) to $1,434,000 in 1999 from
$1,469,000 in 1998. The decrease was due to a decrease in investments.
The loss ratio (losses incurred expressed as a percentage of premiums
earned) decreased to 33% in 1999 from 37% in 1998. The decrease was due to lower
loss and loss expenses under the property programs resulting from mild weather
offset by an increase in assumed general liability losses which traditionally
experience a higher loss frequency.
The acquisition costs and general and administrative expense ratio was 38%
and 34% for 1999 and 1998, respectively. Exclusive of bad debt recovered in
1998, the ratio would have been 38% and 36% for 1999 and 1998, respectively. The
increase was due to higher general and administrative expenses.
Corporate
Net expenses before income taxes decreased in 1999 by $400,000 to $100,000
from $500,000 in 1998. The segment's sole investment in Arista was reduced due
to a liquidating distribution. Arista's management has indicated its intention
to sell its remaining asset, its license to operate, and its stock. The
liquidating distribution, partially offset by the corresponding reduction in
fair market value of Arista stock, was included in net investment income and is
the primary reason for the positive variance along with lower interest expense
due to the June 1998 restructuring of corporate debt.
Financial Condition and Liquidity
Management believes that the Company's operating cash flow, along with the
cash equivalents and short term investments will provide sufficient sources of
liquidity and capital to meet the Company's anticipated needs during the next
twelve months and the foreseeable future. The Company has no capital commitments
that are material individually or in the aggregate.
Total assets decreased by $8,996,000 (5%) to $158,070,000 at June 30, 1999
from $167,066,000 at December 31, 1998. Total liabilities decreased by
$11,181,000 (9%) to $114,116,000 at June 30, 1999 from $125,297,000 at December
31, 1998. Due to the cyclical nature of the business, premiums receivable and
premiums payable fluctuate significantly from period to period. Lower second
quarter 1999 billings compared to the fourth quarter 1998 accounted for lower
fiduciary cash, premiums and other receivables, and premiums payable.
16
<PAGE>
Stockholders' equity increased by $2,185,000 (5%) to $43,954,000 at June
30, 1999, from $41,769,000 at December 31, 1998. The increase in equity resulted
from net income of $3,482,000 and $14,000 for shares issued related to the
exercise of options, offset by an increase in net unrealized depreciation of
investments of $686,000, dividends of $422,000, and $199,000 for net purchases
of treasury stock.
The Company's cash and cash equivalents decreased by $12,347,000 for the
six months ended June 30, 1999. Operating activities used cash of $2,645,000
primarily as result of premiums paid to insurance markets. Investing activities
used cash of $7,380,000 primarily for the purchase of investments and
acquisition payments. Financing activities used cash of $2,322,000 for payments
of dividends, loan repayments and treasury stock purchases.
The Company maintains a substantial level of cash and liquid short term
investments which are used to meet anticipated payment obligations, primarily
premiums payable to insurance markets. As of June 30, 1999, the Company had cash
and short term investments of $33,096,000. Of the Company's total investments,
certain amounts are pledged or deposited into trust funds to collateralize the
Company's obligations under reinsurance agreements.
Year 2000 Compliance
Many computers, software programs and microprocessors embedded in certain
equipment (collectively, "systems") were designed to accommodate only two-digit
date fields to represent a given year (e.g., "98" represents 1998). It is
possible that such systems will not be able to accurately process data
containing information relating to dates before, during or after the year 2000.
It is possible that such systems could fail entirely, although in many instances
the consequences of a system not being "year 2000 complaint" are unknown. In
response to this issue, the Company has evaluated its applications and operating
software and is in the process of evaluating its hardware and software products,
end user computing activities, third-party data exchanges and business
relationships, and has established a project team responsible for overseeing
progress on the Company's compliance program and periodically reporting to
management.
As of June 30, 1999 the Company has completed approximately 95% of its
efforts to bring its own applications software and hardware in compliance, with
the objective of having all critical production systems year 2000 compliant by
the end of August 1999. Testing of critical applications is being accomplished
through the use of a special system testing environment that simulates system
operations in the year 2000. The Company also purchased and implemented new
operational and accounting software in 1998. In addition to being year 2000
compliant, these new systems are intended to add increased functionality to the
Company. The Company has completed its assessment of its servers and client
server operating software. The results of this assessment were identification of
hardware and software issues requiring remediation in order to assure year 2000
compliance.
The total cost (both current and future) to modify these existing
production systems, which includes both internal and external costs of
programming, coding and testing is estimated to be $406,000 and has been
reflected in the financial statements.
17
<PAGE>
In addition to addressing hardware/software information technology ("IT"),
the Company has also been assessing year 2000 issues with respect to non-IT
systems such as telephones and various building services which may rely on
embedded microprocessors. Failure of non-IT systems such as telephone service
could disrupt the Company's business. The Company's communications with the
relevant vendors have identified voicemail system year 2000 problems which will
be brought into compliance by the end of September 1999.
The Company believes that if systems were not complaint for year
2000-related problems there could be a material adverse impact on the Company's
financial statements. The Company believes that it is taking the necessary
measures to address issues that may arise relating to year 2000-related problems
and that its systems should be compliant. The Company realizes, however, that
non-compliance by these parties could impact its business. The Company's plan
addresses potential year 2000 issues related to the processing of transactions
with third parties. The possibility exists that some of the Company's external
business contacts may not be compliant. The Company began contacting its
external business contacts and continues to do so to determine their status of
compliance and to assess the impact of noncompliance to the Company. The Company
is working closely with all critical business relationships to minimize its
exposure to year 2000-related problems. It should be noted, however, that there
can be no assurance that the systems of other companies will be year 2000
compliant, or that their conversion will be comparable with information included
in the Company's systems without having a material adverse effect on the
Company.
Although it has considered various scenarios concerning the possible
effects of the year 2000 issues, the Company does not have formal contingency
plans relating to either its internal processing environment or its external
business contacts. As it completes the upgrading and testing of non-compliant
systems and continues to monitor the status of its important external contacts
into mid 1999, the Company will develop contingency plans if deemed necessary
for critical systems and relationships.
A comprehensive review was performed by the Company of the insurance
policies written by its Insurance Companies and their underwriting guidelines to
determine year 2000 exposure. The Insurance Companies primarily issue policies
covering all or part of an insured's self-insured retention, with limits
generally up to $25,000, that follow the form of the policies for coverage in
excess of the Insurance Companies' policies. The Insurance Companies have not
issued exclusions on these policies. The Insurance Companies have also issued a
number of policies with greater limits of coverage, and have included a year
2000 exclusion on such policies. The Company is aware that year 2000 liabilities
may be deemed not to be fortuitous in nature and, therefore, not covered under
the policies underwritten by the Insurance Companies. Moreover, based upon the
classes of insurance primarily underwritten by the Insurance Companies, the
Company believes that its coverage exposure with respect to year 2000 losses
will not be material. However, changes in social and legal trends may establish
coverage unintended for Year 2000 exposures by re-interpreting insurance
contracts and exclusions.
18
<PAGE>
Safe Harbor Disclosure
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Form 10-Q or any other written or
oral statements made by or on behalf of the Company may include forward-looking
statements which reflect the Company's current views with respect to future
events and financial performance. These forward-looking statements are subject
to certain uncertainties and other factors that could cause actual results to
differ materially from such statements. These uncertainties and other factors
(which are described in more detail elsewhere in documents filed by the Company
with the SEC) include, but are not limited to, uncertainties relating to
government and regulatory policies, volatile and unpredictable developments
(including storms and catastrophes), the legal environment, the uncertainties of
the reserving process and the competitive environment in which the Company
operates. The words "believe", "anticipate", "project", "plan", "expect" and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to lawsuits arising in the normal course of
business. Virtually all pending lawsuits in which the Insurance Companies are a
party, involve claims under policies underwritten or reinsured by such
Companies. Management believes these lawsuits have been adequately provided for
in its established loss and loss expense reserves and that the resolution of
these lawsuits will not have a material adverse effect on the Company's
financial condition or results of operations.
The Insurance Brokerage Companies are subject to various claims and
lawsuits from both private and governmental parties, which include claims and
lawsuits in the ordinary course of business. The majority of pending lawsuits
involve insurance claims, errors and omissions, employment claims, and breaches
of contract. The Company believes that the resolution of these lawsuits will not
have a material adverse effect on the Company's financial condition or results
of operations.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
19
<PAGE>
Item 4. Submission of Matters to a Vote of Securities Holders
On May 24, 1999, the Company's Annual Meeting of Shareholders was held and
the following matters were submitted to the shareholders for action or approval.
1. The shareholders elected eight directors of the Company, each to serve
until the next Annual Meeting of Shareholders and until his successor is
duly elected and qualified or until his earlier resignation or removal. The
votes for these directors are set forth below.
FOR AGAINST
--- -------
Bruce D. Guthart 6,125,517 13,876
Howard Kaye 6,094,202 45,191
Michael P. Sabanos 6,125,517 13,876
Robert L. Barbanell 6,125,517 13,876
Richard B. Butler 6,125,517 13,876
Elliot S. Cooperstone 6,003,579 135,814
David Ezekiel 6,125,517 13,876
Ned L. Sherwood 6,125,517 13,876
Other matters voted upon and approved by the shareholders at the Meeting, and
the number of votes cast with respect to each such matter, were as follows:
2. The shareholders approved a proposal to create the Company's 1999 Equity
Incentive Compensation Plan.
FOR AGAINST ABSTAIN BROKER NON VOTES
--- ------- ------- ----------------
5,542,842 102,497 38,700 455,354
3. The shareholders approved a proposal to amend the Company's Supplemental
Stock Option plan to increase the number of shares available for grant of
awards from 350,000 to 650,000.
FOR AGAINST ABSTAIN BROKER NON VOTES
--- ------- ------- ----------------
5,412,259 235,480 36,300 455,354
20
<PAGE>
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
- ------ -----------
11 Statement regarding computation of earnings per share
27 Financial Data Schedule
b) Reports on Form 8-K
There were no reports on Form 8-K for the period April 1, 1999 to June 30, 1999.
21
<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.
KAYE GROUP INC.
Registrant
August 11, 1999 /s/ Bruce D. Guthart
-------------------------------------------------
Bruce D. Guthart, Chairman, President and
Chief Executive Officer
August 11, 1999 /s/ Michael P. Sabanos
-------------------------------------------------
Michael P. Sabanos, Senior Vice President and
Chief Financial Officer
KAYE GROUP INC EXHIBIT 11
Earnings Per Share Calculation Page 1 of 4
For the Three Months Ended June 30, 1999
Shares outstanding at 12/31/98 8,474,435 (A)
Less: Net purchase of Treasury Stock (1/1 - 6/30/99) (27,445)
Plus: Shares issued on exercise of options 2,900
----------
Balance @ 6/30/99 8,449,890 (B)
Balance @ 3/31/99 8,446,435 (C)
----------
Weighted average 8,448,163 [(B)+(C)] /2
==========
Three months
ended
June 30,1999
============
Net Income $2,123,000 (1)
I. Average Shares: 8,448,163 (2)
II. Basic EPS 0.2513 (1)/(2)
==========
III. Diluted EPS
Weighted Average Shares 8,448,163 (2)
Dilution 142,123 (3)
----------
8,590,286 (4)
==========
Diluted EPS 0.2471 (1)/(4)
==========
<PAGE>
KAYE GROUP INC EXHIBIT 11
Earnings Per Share Calculation Page 2 of 4
For the Three Months Ended June 30,1999
IV Outstanding at June 30, 1999
<TABLE>
<CAPTION>
Weighted
Units Price/Share Proceeds Average Proceeds
=========== =========== ============= =========== ============
<S> <C> <C> <C> <C> <C>
A. Options (8/17/93) 75,750 $ 10.000 $ 757,500
Options (1/24/94 5,000 10.910 54,550
Options (2/3/94) 500 11.630 5,815
Options (9/13/95) 15,000 7.880 118,200
Options (10/25/95) 40,200 8.430 338,886
Options (5/15/96) 10,000 7.060 70,600 10,000 70,600
Options (12/27/96) 15,000 5.000 75,000 15,000 75,000
Options (2/1/97) 35,000 5.000 175,000 35,000 175,000
Options (2/25/97) 175,350 5.060 887,271 176,350 892,331
Options (4/15/97) 200,000 5.000 1,000,000 200,000 1,000,000
Options (7/1/97) 10,000 4.970 49,700 10,000 49,700
Options (10/31/97) 15,000 8.030 120,450
Options (12/31/97) 5,000 6.640 33,200 5,000 33,200
Options (07/01/98) 10,000 6.700 67,000 10,000 67,000
Options (10/30/98) 20,000 6.170 123,400 20,000 123,400
Options (12/10/98) 24,500 6.600 161,700 24,500 161,700
Options (2/19/99) 800 7.410 5,928
Options (12/10/98) 40,000 7.380 295,200
----------- ------------- ----------- ------------
697,100 $ 4,339,400 505,850 (5) 2,647,931 (6)
=========== ============= =========== ============
Dilutive Shares 505,850 (5) 2,647,931 (6)
=========== =============
</TABLE>
V. Average market value/share
<TABLE>
<CAPTION>
Average Close on
Close last day
============= =========
<S> <C> <C>
January 7.081
February 7.352
March 7.500 7.125
-------------
Hash total 3 mths 21.933
=============
April 7.058
May 7.235
June 7.547 7.500
-------------
Hash total 3 mths 21.840
=============
/ 3
-------------
Average price per share Three mths 7.280
=============
</TABLE>
VI. Diluted
Three Months
-------------
Total Proceeds from exercise $ 2,647,931 (6)
Divided by average price 7.280
Repurchase shares of 363,727
Shares issued (options) 505,850 (5)
-------------
Dilution - Shares (3) 142,123
=============
<PAGE>
KAYE GROUP INC EXHIBIT 11
Earnings Per Share Calculation Page 3 of 4
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Shares outstanding at 12/31/98 8,474,435 (A)
Less: Net purchase of Treasury Stock (1/1 - 3/31/99) (27,445)
PLUS:Shares issued on exercise of options 2,900
-----------
Balance @ 6/30/99 8,449,890 (B)
Balance @ 3/31/99 8,446,435 (C)
-----------
Weighted average 8,456,920 [(A)+(B)+(C)] /3
===========
Six months
ended
June 30,1999
------------
Net Income $ 3,482,000 (1)
-----------
I. Average Shares: 8,456,920 (2)
II. Basic EPS 0.4117 (1) / (2)
===========
III. Diluted EPS
Weighted Average Shares 8,456,920 (2)
Dilution 142,898 (3)
8,599,818 (4)
Diluted EPS 0.4049 (1) / (4)
===========
</TABLE>
<PAGE>
KAYE GROUP INC EXHIBIT 11
Earnings Per Share Calculation Page 4 of 4
For the Six Months Ended June 30,1999
IV Outstanding at June 30, 1999
<TABLE>
<CAPTION>
Weighted
Units Price/Share Proceeds Average Proceeds
=========== =========== ========== =========== ===========
<S> <C> <C> <C> <C> <C>
A. Options (8/17/93) 75,750 $ 10.000 $ 757,500
Options (1/24/94 5,000 10.910 54,550
Options (2/3/94) 500 11.630 5,815
Options (9/13/95) 15,000 7.880 118,200
Options (10/25/95) 40,200 8.430 338,886
Options (5/15/96) 10,000 7.060 70,600 10,000 70,600
Options (12/27/96) 15,000 5.000 75,000 15,000 75,000
Options (2/1/97) 35,000 5.000 175,000 35,000 175,000
Options (2/25/97) 175,350 5.060 887,271 176,350 892,331
Options (4/15/97) 200,000 5.000 1,000,000 200,000 1,000,000
Options (7/1/97) 10,000 4.970 49,700 10,000 49,700
Options (10/31/97) 15,000 8.030 120,450
Options (12/31/97) 5,000 6.640 33,200 5,000 33,200
Options (07/01/98) 10,000 6.700 67,000 10,000 67,000
Options (10/30/98) 20,000 6.170 123,400 20,000 123,400
Options (12/10/98) 24,500 6.600 161,700 24,500 161,700
Options (2/19/99) 800 7.410 5,928
Options (12/10/98) 40,000 7.380 295,200
----------- ---------- ----------- -----------
697,100 $ 4,339,400 505,850 (5) 2,647,931
=========== ========== =========== ===========
Dilutive Shares 505,850 (5) 2,647,931 (6)
=========== ==========
</TABLE>
V.Average market value/share
<TABLE>
<CAPTION>
Average Close on
Close last day
========== ===========
<S> <C> <C>
January 7.081
February 7.352
March 7.500 7.125
----------
Hash total 3 mths 21.933
==========
April 7.058
May 7.235
June 7.547 7.500
----------
Hash total 3 mths 21.840
==========
----------
Hash total 6 mths 43.773
==========
/ 6
----------
Average price per share Six mths 7.296
==========
</TABLE>
VII. Diluted
Six Months
----------
Total Proceeds from exercise $ 2,647,931 (6)
Divided by average price 7.296
Repurchase shares of 362,952
Shares issued (options) 505,850 (5)
----------
Dilution - Shares (3) 142,898
==========
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
In thousands, except per share amounts
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 44,985
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,426
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 49,611
<CASH> 33,096
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 2,756
<TOTAL-ASSETS> 158,070
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 8,734
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 5,373
0
0
<COMMON> 85
<OTHER-SE> 43,869
<TOTAL-LIABILITY-AND-EQUITY> 158,070
12,929
<INVESTMENT-INCOME> 2,298
<INVESTMENT-GAINS> 20
<OTHER-INCOME> 18,615
<BENEFITS> 4,296
<UNDERWRITING-AMORTIZATION> 3,983
<UNDERWRITING-OTHER> 892
<INCOME-PRETAX> 5,047
<INCOME-TAX> 1,565
<INCOME-CONTINUING> 3,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,482
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.40
<RESERVE-OPEN> 21,567
<PROVISION-CURRENT> 4,655
<PROVISION-PRIOR> (143)
<PAYMENTS-CURRENT> 375
<PAYMENTS-PRIOR> 2,813
<RESERVE-CLOSE> 22,891
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
