<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from _______________ to ___________________
Commission File Number 0-22316
PENN-AMERICA GROUP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2731409
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 SOUTH YORK ROAD, HATBORO, PENNSYLVANIA 19040
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(215) 443-3600
----------------------------------------------------
(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 other 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
--- ---
At July 8, 1997, 6,801,384 shares of the registrant's common stock $.01 par
value, were outstanding.
PAGE 1
<PAGE> 2
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Unaudited Balance Sheets - June 30, 1997 and
December 31, 1996 3
Consolidated Unaudited Statements of Earnings - For the three
and six month periods ended June 30, 1997 and 1996 4
Consolidated Unaudited Statement of Stockholders' Equity -
For the six month period ended June 30, 1997 5
Consolidated Unaudited Statements of Cash Flows -
For the six month periods ended June 30, 1997 and 1996 6
Notes to Unaudited Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION 13
</TABLE>
PAGE 2
<PAGE> 3
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Investments:
Fixed Maturities:
Available for sale, at fair value (amortized cost 1997 $53,839; 1996 $49,244) $ 53,554 $ 48,954
Held to maturity, at amortized cost (fair value 1997 $51,932; 1996 $44,111) 52,362 44,227
Equity securities, at fair value (cost 1997 $10,634; 1996 $10,597) 12,704 12,390
Short-term investments, at cost, which approximates fair value 3,648 7,000
--------- ---------
Total Investments 122,268 112,571
Cash 4,361 2,979
Receivables:
Accrued investment income 1,901 1,671
Premiums receivable, net 11,799 10,494
Reinsurance recoverable 16,920 15,719
Note receivable, affiliate -- 275
--------- ---------
Total receivables 30,620 28,159
Prepaid reinsurance premiums 2,872 2,668
Deferred policy acquisition costs 8,310 7,231
Capital leases 1,908 1,950
Deferred income tax 2,265 2,211
Income tax recoverable 304 249
Other assets 507 587
--------- ---------
Total assets $ 173,415 $ 158,605
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $ 77,976 $ 70,728
Unearned premiums 34,733 30,865
Accounts payable and accrued expenses 1,270 1,773
Capitalized lease obligations 1,975 2,030
Notes payable, bank 9,000 9,000
Other liabilities 1,723 1,872
--------- ---------
Total liabilities 126,677 116,268
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; authorized 2,000,000 shares;
none issued -- --
Common stock, $.01 par value, authorized 1997, 20,000,000 shares
and 1996, 10,000,000 shares; issued and outstanding
1997, 6,801,384 shares and 1996, 6,676,131 shares 68 67
Additional paid-in capital 22,833 21,844
Unrealized investment gains, net of tax 1,147 993
Retained earnings 22,763 19,533
--------- ---------
46,811 42,437
Unearned compensation from restricted stock awards (73) (100)
--------- ---------
Total stockholders' equity 46,738 42,337
--------- ---------
Total liabilities and stockholders' equity $ 173,415 $ 158,605
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 3
<PAGE> 4
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned $23,034 $16,485 $43,933 $32,108
Net investment income 1,985 1,650 3,925 3,248
Net realized investment gains 108 79 109 102
------- ------- ------- -------
Total revenues 25,127 18,214 47,967 35,458
------- ------- ------- -------
Losses and expenses:
Losses and loss adjustment expenses 14,390 10,253 27,607 20,105
Amortization of deferred policy acquisition costs 6,274 4,223 11,971 8,211
Other underwriting expenses 1,471 1,189 2,615 2,250
Interest expense 192 221 385 438
------- ------- ------- -------
Total losses and expenses 22,327 15,886 42,578 31,004
------- ------- ------- -------
Earnings before income tax 2,800 2,328 5,389 4,454
Income tax 781 756 1,620 1,453
------- ------- ------- -------
Net earnings $ 2,019 $ 1,572 $ 3,769 $ 3,001
======= ======= ======= =======
Net earnings per share (note 1) $ 0.30 $ 0.24 $ 0.56 $ 0.45
======= ======= ======= =======
Weighted average number of shares outstanding (note 1) 6,748 6,663 6,719 6,656
Cash dividends per share (note 1) $ 0.04 $ 0.03 $ 0.08 $ 0.05
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 4
<PAGE> 5
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
UNEARNED
COMPENSATION
UNREALIZED FROM
ADDITIONAL INVESTMENT RESTRICTED
COMMON STOCK PAID-IN GAINS RETAINED STOCK
SHARES AMOUNT CAPITAL (LOSSES), NET EARNINGS AWARDS TOTAL
------ ------ ------- ------------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 6,676,131 $67 $21,844 $ 993 $19,533 $(100) $42,337
Net earnings 3,769 3,769
Issuance of common stock 125,253 1 989 990
Amortization of unearned compensation from
restricted stock awards 27 27
Unrealized investment gains, net 185 185
Unrealized loss on fixed maturities
transferred to held to maturity (50) (50)
Accretion of net loss on fixed maturities
transferred to held to maturity 19 19
Cash dividends paid (539) (539)
-----------------------------------------------------------------------------------
Balance at June 30, 1997 6,801,384 $68 $22,833 $1,147 $22,763 $(73) $46,738
===================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
PAGE 5
<PAGE> 6
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,769 $ 3,001
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Amortization and depreciation expense 163 152
Net realized investment gains (109) (102)
Deferred income tax (150) (169)
Net decrease in premiums and notes receivable,
prepaid reinsurance premiums and unearned premiums 2,634 1,423
Net increase in unpaid losses and loss adjustment expenses
and reinsurance recoverable 6,047 2,670
(Increase) decrease in:
Accrued investment income (230) (325)
Deferred policy acquisition costs (1,079) (561)
Income tax recoverable (55) 61
Other assets 28 (390)
Increase (decrease) in:
Accounts payable and accrued expenses (503) (1,101)
Other liabilities (149) 6
---------- ----------
Net cash provided by operating activities 10,366 4,665
---------- ----------
Cash flows from investing activities:
Purchases of equity securities (874) (3,049)
Purchases of fixed maturities available for sale (15,988) (12,049)
Purchases of fixed maturities held to maturity (3,027) (16,071)
Proceeds from sales of equity securities 943 2,684
Proceeds from sales and maturities of fixed maturities available for sale 3,000 11,181
Proceeds from maturities and calls of fixed maturities held to maturity 3,214 3,008
Change in short-term investments 3,352 7,000
---------- ----------
Net cash used by investing activities (9,380) (7,296)
---------- ----------
Cash flows from financing activities:
Issuance of common stock 990 214
Principal payments on capital lease obligations (55) (48)
Dividends paid (539) (355)
Principal payment on note payable, affiliate -- (100)
---------- ----------
Net cash provided (used) by financing activities 396 (289)
---------- ----------
Increase (decrease) in cash 1,382 (2,920)
Cash, beginning of period 2,979 5,204
---------- ----------
Cash, end of period $ 4,361 $ 2,284
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income tax $ 1,825 $ 1,560
Interest 404 412
Supplemental non-cash disclosure:
Cost of securities transferred from available for sale to held to maturity $ 8,002 --
</TABLE>
See accompanying notes to unaudited financial statements.
PAGE 6
<PAGE> 7
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Organization and Basis of Presentation
Penn-America Group, Inc. ("PAGI") is an insurance holding company whose
principal asset is the common stock of Penn-America Insurance Company
("Penn-America"). The "Company" refers to PAGI and Penn-America, as well as to
Penn-America's wholly-owned subsidiary, Penn-Star Insurance Company. Penn
Independent Corporation ("Penn Independent") currently owns approximately
60.1% of the outstanding common stock of PAGI.
The accompanying unaudited consolidated financial statements should be
read in conjunction with the financial statements and notes for the year ended
December 31, 1996. In the opinion of management, the financial information
reflects all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair presentation of the Company's financial
position, results of operations, and cash flows for the interim periods. The
Company's results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year.
On March 7, 1997, PAGI effected a three-for-two split of its common
stock. All share amounts and per share information disclosed herein have been
adjusted to reflect this split.
NOTE 2 -- Reinsurance
Premiums earned are net of amounts ceded to reinsurers of $1.9 million
for the three months ended June 30, 1997 and $1.7 million for the three months
ended June 30, 1996. Losses and loss adjustment expenses are net of amounts
ceded to reinsurers of $1.9 million for the three months ended June 30, 1997 and
$2.2 million for the three months ended June 30, 1996.
Premiums earned are net of amounts ceded to reinsurers of $3.7 million
for the six months ended June 30, 1997 and $3.3 million for the six months
ended June 30, 1996. Losses and loss adjustment expenses are net of amounts
ceded to reinsurers of $3.7 million for the six months ended June 30, 1997 and
$4.7 million for the six months ended June 30, 1996.
NOTE 3 -- Registration of Securities
On June 11, 1997, PAGI filed a registration statement for the sale of
3,500,000 shares of common stock, of which 2,500,000 shares are being sold by
PAGI and 1,000,000 shares are being sold by Penn Independent.
Page 7
<PAGE> 8
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Gross written premiums increased 43.8% to $27.5 million for the three
months ended June 30, 1997 from $19.2 million for the three months ended June
30, 1996. The increase resulted from 77.0% growth in personal automobile lines
gross written premiums to $9.0 million and 31.8% growth in commercial lines
gross written premiums to $18.5 million. These increases in gross written
premiums were primarily attributable to increased volume.
Net written premiums increased 45.5% to $25.4 million for the three months
ended June 30, 1997 from $17.5 million for the three months ended June 30,
1996. During the same periods, net premiums earned increased 39.7% to $23.0
million from $16.5 million. Net premiums earned increased due to the increase
in gross written premiums, partially offset by an increase in premiums ceded to
reinsurers.
Net investment income increased 20.3% to $2.0 million for the three months
ended June 30, 1997 from $1.7 million for the three months ended June 30, 1996.
This increase resulted principally from growth in invested assets funded
primarily by cash flows from operating activities. The average investment yield
of the fixed maturity portfolio for the three months ended June 30, 1997 was
6.86%, compared to 6.85% for the three months ended June 30, 1996. Net realized
investment gains were $108,000 for the three months ended June 30, 1997, as
compared to $79,000 for the three months ended June 30, 1996.
Losses and loss adjustment expenses increased 40.4% to $14.4 million for
the three months ended June 30, 1997 from $10.3 million for the three months
ended June 30, 1996, primarily due to an increase in net premiums earned.
Amortization of deferred policy acquisition costs increased 48.6% to $6.3
million for the three months ended June 30, 1997 from $4.2 million for the
three months ended June 30, 1996. The increase was attributable to an increase
in net premiums earned and to the higher percentage of net premiums earned in
personal automobile lines relative to commercial lines for the three months
ended June 30, 1997 as compared to the same period ended June 30, 1996.
Commission rates for personal automobile lines are generally higher than
commission rates for commercial lines.
Other underwriting expenses increased 23.7% to $1.5 million for the three
months ended June 30, 1997 from $1.2 million for the three months ended June
30, 1996, primarily due to the increase in gross written premiums.
PAGE 8
<PAGE> 9
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The loss and loss adjustment expense ratio (loss ratio) increased slightly
to 62.5% for the three months ended June 30, 1997 from 62.2% for the three
months ended June 30, 1996. The statutory expense ratio was 31.9% for both of
the three month periods ended June 30, 1997 and 1996. The statutory combined
ratio increased slightly to 94.4% for the three months ended June 30, 1997 from
94.1% for the three months ended June 30, 1996.
As a result of the factors described above, the Company's net income for
the three months ended June 30, 1997 increased 28.4% to $2.0 million or $0.30
per share, from $1.6 million or $0.24 per share for the three months ended June
30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Gross written premiums increased 38.4% to $51.5 million for the six months
ended June 30, 1997 from $37.2 million for the six months ended June 30, 1996.
The increase resulted from 89.9% growth in personal automobile lines gross
written premiums to $18.7 million and 19.9% growth in commercial lines gross
written premiums to $32.8 million. These increases in gross written premiums
were primarily attributable to increased volume.
Net written premiums increased 40.6% to $47.6 million for the six months
ended June 30, 1997 from $33.8 million for the six months ended June 30, 1996.
During the same periods, net premiums earned increased 36.8% to $43.9 million
from $32.1 million. Net premiums earned increased due to the increase in gross
written premiums, partially offset by an increase in premiums ceded to
reinsurers.
Net investment income increased 20.8% to $3.9 million for the six months
ended June 30, 1997 from $3.2 million for the six months ended June 30, 1996.
This increase resulted principally from growth in invested assets funded
primarily by cash flows from operating activities. The average investment yield
of the fixed maturity portfolio for the six months ended June 30, 1997 was
6.82%, compared to 6.85% for the six months ended June 30, 1996. Net realized
investment gains were $109,000 for the six months ended June 30, 1997, as
compared to $102,000 for the six months ended June 30, 1996.
Losses and loss adjustment expenses increased 37.3% to $27.6 million for
the six months ended June 30, 1997 from $20.1 million for the six months ended
June 30, 1996, primarily due to an increase in net premiums earned.
PAGE 9
<PAGE> 10
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Amortization of deferred policy acquisition costs increased 45.8% to
$12.0 million for the six months ended June 30, 1997 from $8.2 million for the
six months ended June 30, 1996. The increase was attributable to an increase in
net premiums earned and to the higher percentage of net premiums earned in
personal automobile lines relative to commercial lines for the six months ended
June 30, 1997 as compared to the same period ended June 30, 1996. Commission
rates for personal automobile lines are generally higher than commission rates
for commercial lines.
Other underwriting expenses increased 16.2% to $2.6 million for the six
months ended June 30, 1997 from $2.3 million for the six months ended June 30,
1996, primarily due to the increase in gross written premiums.
The loss ratio increased slightly to 62.8% for the six months ended
June 30, 1997 from 62.6% for the six months ended June 30, 1996. The statutory
expense ratio increased to 32.2% for the six months ended June 30, 1997 from
31.5% for the six months ended June 30, 1996. The increase in the statutory
expense ratio was primarily due to the increase in the percentage of net
premiums written in personal automobile lines relative to commercial lines.
The statutory combined ratio increased to 95.0% for the six months ended June
30, 1997 from 94.1% for the six months ended June 30, 1996.
As a result of the factors described above, the Company's net income
for the six months ended June 30, 1997 increased 25.6% to $3.8 million or $0.56
per share, from $3.0 million or $0.45 per share for the six months ended June
30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
PAGI is a holding company, the principal asset of which is the common
stock of Penn-America. PAGI's cash flows depend primarily on dividends and
other payments from Penn-America. PAGI uses these funds to pay (i) interest and
principal under the Company's term loan with PNC Bank (the "Term Loan"), (ii)
operating expenses, (iii) taxes and other payments and (iv) dividends to PAGI
stockholders. Penn-America's sources of funds consist primarily of premiums,
investment income and proceeds from sales and redemptions of investments. Funds
are used by Penn-America principally to pay claims and operating expenses, to
purchase investments and to make dividend and other payments to PAGI.
Net cash provided by operating activities increased 122.2% to $10.4
million for the six months ended June 30, 1997 from $4.7 million for the six
months ended June 30, 1996. The increase in net cash provided by operations
resulted principally from the increase in net written premiums during the
period.
PAGE 10
<PAGE> 11
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Net cash used by investing activities increased 28.6% to $9.4 million
for the six months ended June 30, 1997 from $7.3 million for the six months
ended June 30, 1996. This increase was primarily due to the higher amount of
net cash provided by operating activities for the six months ended June 30,
1997.
Net cash provided by financing activities was $396,000 for the six
months ended June 30, 1997, as compared to $289,000 used for financing
activities for the same period in 1996. The cash provided by financing
activities in 1997 resulted primarily from $990,000 in contributions to
stockholders' equity as a result of the exercise of stock options, partially
offset by $539,000 of cash dividends paid to stockholders.
The Company believes that it has sufficient liquidity to meet its
anticipated insurance obligations and operating and capital expenditure needs.
The Company's investment strategy emphasizes quality, liquidity and
diversification, as well as total return. With respect to liquidity, the
Company considers liability durations, specifically related to loss reserves,
when determining desired investment maturities. In addition, maturities have
been staggered to produce cash flows for loss payments and reinvestment
opportunities. The average duration of the fixed maturity portfolio as of June
30, 1997 was approximately 2.9 years.
The Company's fixed maturity portfolio represented $105.9 million or
86.6% of the total investment portfolio as of June 30, 1997. Approximately
99.0% of these securities were rated "A-" or better by Standard & Poor's or
Moody's. Short-term investments represented $3.6 million or 3.0% of total
investments as of June 30, 1997. Equities, the majority of which consist of
preferred stocks, represented $12.7 million or 10.4% of total investments as of
June 30, 1997.
As of June 30, 1997, the investment portfolio contained $8.1 million or
6.7% of collateralized mortgage obligations. All of these securities are
"AAA"-rated securities issued by government or government-related agencies, are
publicly traded, and have market values obtained from an independent pricing
service. Changes in estimated cash flows due to changes in prepayment
assumptions from the original purchase assumptions are revised based on current
interest rates and the economic environment. The Company had no other
derivative financial instruments, real estate or mortgages in the investment
portfolio as of June 30, 1997.
On December 20, 1995, the Company entered into the Term Loan, under
which it had an outstanding balance of $9.0 million as of June 30, 1997. Unless
prepaid, the Term Loan is scheduled to mature as follows: $1.0 million in 1997,
$2.0 million in 1998, $3.0 million in 1999 and $3.0 million in 2000. The
interest rate on the Term Loan is equal to LIBOR plus a factor which can vary
between 100 and 225 basis points. The Term Loan is secured by the common stock
of Penn-America and contains various covenants, including the maintenance of
certain net
PAGE 11
<PAGE> 12
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
worth requirements and leverage and liquidity ratios. In April 1997, the
Company signed a commitment letter to increase the Term Loan to $15.0 million.
The structure of the new credit facility will provide that the current $9.0
million outstanding under the Term Loan be repaid in equal installments over a
five-year period and a new $6.0 million credit line would be repaid over a
three-year period beginning after the second anniversary of the new facility.
The terms of the new agreement, including the interest rate, security and
covenants, are expected to be substantially similar to the terms of the
existing Term Loan.
The principal source of cash to use for the payment of dividends to
PAGI's stockholders is dividends from Penn-America. Penn-America is required by
law to maintain a certain minimum surplus on a statutory basis and is subject
to risk-based capital requirements and regulations under which payment of
dividends from statutory surplus may require prior approval of the Pennsylvania
regulatory authorities. The maximum dividend that may be paid in 1997 by
Penn-America to PAGI without prior approval of regulatory authorities is
$6,262,000. Penn-America's statutory surplus increased 5.3% to $43.9 million as
of June 30, 1997 from $41.7 million as of December 31, 1996.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Comprehensive Income", which establishes standards for the reporting and
disclosure of comprehensive income and its components (revenues, expenses,
gains and losses). The statement requires that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. The statement is effective for
fiscal years beginning after December 15, 1997. The Company will adopt the
statement in 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information",
which establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The statement is effective for fiscal
years beginning after December 15, 1997. The Company is in the process of
determining the effect of this statement upon its financial reporting
requirements.
PAGE 12
<PAGE> 13
PENN-AMERICA GROUP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote by Security Holders - See Attached
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
PAGE 13
<PAGE> 14
PART II, ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Shareholders of Penn-America Group, Inc. was
held on May 14, 1997 (the "Annual Meeting" or "Meeting"), with the following
results:
The total number of shares represented at the Annual Meeting in person
or by proxy was 6,345,527 of the 6,710,638 shares of common stock outstanding
and entitled to vote at the meeting.
On the proposal to elect Irvin Saltzman, Jon S. Saltzman, James E.
Heerin, Jr., Robert A. Lear, Jami Saltzman-Levy, M. Moshe Porat, Paul Simon,
Thomas Spiro and Charles Ellman as Directors to serve until the 1998 Annual
Meeting and until their successors are duly elected and qualified, the nominees
for Director received the number of votes set forth opposite their respective
names.
NUMBER OF VOTES
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Irvin Saltzman 6,260,027 85,550
Jon S. Saltzman 6,260,027 85,550
James E. Heerin, Jr. 6,260,327 85,250
Robert A. Lear 6,260,327 85,250
Jami Saltzman-Levy 6,260,027 85,550
M. Moshe Porat 6,260,327 85,250
Paul Simon 6,260,027 85,550
Thomas M. Spiro 6,260,327 85,250
Charles Ellman 6,260,327 85,250
</TABLE>
There were no broker non-votes recorded. On the basis of the above
vote, Irvin Saltzman, Jon S. Saltzman, James E. Heerin, Jr., Robert A. Lear,
Jami Saltzman-Levy, M. Moshe Porat, Paul Simon, Thomas Spiro and Charles Ellman
were elected as Directors to serve until the 1998 Annual Meeting and until
their respective successors are duly elected and qualified.
On the proposal to amend the Corporation's Certificate of Incorporation
to increase authorized Common Stock from 10,000,000 shares to 20,000,000 shares:
<TABLE>
<CAPTION>
FOR WITHHELD ABSTAIN
--- -------- -------
<S> <C> <C>
6,172,147 168,178 5,252
</TABLE>
On the basis of the above vote, the amendment to increase the
authorized Common Stock from 10,000,000 to 20,000,000 shares was approved.
PAGE 14
<PAGE> 15
SIGNATURE
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.
PENN-AMERICA GROUP, INC.
Date: July 8, 1997 By: /s/ Jon S. Saltzman
------------------------------- ------------------------------
Jon S. Saltzman
President and
Chief Executive Officer
By: /s/ Rosemary R. Ferrero
------------------------------
Rosemary R. Ferrero
Principal Finance and
Accounting Officer
Page 15
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS AT JUNE 30, 1997
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 53,554
<DEBT-CARRYING-VALUE> 52,362
<DEBT-MARKET-VALUE> 0
<EQUITIES> 12,704
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 122,268
<CASH> 4,361
<RECOVER-REINSURE> 16,920
<DEFERRED-ACQUISITION> 8,310
<TOTAL-ASSETS> 173,415
<POLICY-LOSSES> 77,976
<UNEARNED-PREMIUMS> 34,733
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 9,000
0
0
<COMMON> 68
<OTHER-SE> 46,670
<TOTAL-LIABILITY-AND-EQUITY> 173,415
43,933
<INVESTMENT-INCOME> 3,925
<INVESTMENT-GAINS> 109
<OTHER-INCOME> 0
<BENEFITS> 27,607
<UNDERWRITING-AMORTIZATION> 11,971
<UNDERWRITING-OTHER> 2,615
<INCOME-PRETAX> 5,389
<INCOME-TAX> 1,620
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,769
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
