<PAGE>
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 Quarterly Period Ended March 31, 1996 Commission File Number 1-12266
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
THE PAUL REVERE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3176707
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification no.)
18 CHESTNUT STREET, WORCESTER, MASSACHUSETTS 01608-1528
- - -------------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (508) 799-4441
--------------
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
--- ---
The numbers of shares of common stock outstanding as of May 1, 1996, was
45,000,000.
<PAGE>
THE PAUL REVERE CORPORATION
INDEX TO FORM 10-Q
PAGE
------
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995 3
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7 - 11
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PAUL REVERE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
---------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues:
Premiums, policy and contract charges and fees $ 281,278 $ 253,906
Net investment income 98,111 98,317
Net realized investment gains 4,250 6,143
---------- ----------
Total revenues 383,639 358,366
---------- ----------
Benefits, claims and expenses:
Benefits to policyholders 255,909 243,025
Commissions and other expenses 77,669 69,628
Amortization of deferred costs:
Deferred policy acquisition costs 14,223 14,052
Value assigned purchased insurance in force 1,743 1,619
Goodwill amortization 2,070 2,070
---------- ----------
Total benefits, claims and expenses 351,614 330,394
---------- ----------
Income before income taxes 32,025 27,972
Income taxes 12,172 10,725
---------- ----------
Net income $ 19,853 $ 17,247
========== ==========
Net income per common share $ 0.44 $ 0.38
========== ==========
Weighted average number of common shares
outstanding 45,000,000 45,000,000
========== ==========
Dividends paid per common share $ 0.06 $ 0.06
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
THE PAUL REVERE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Available for sale:
Fixed maturities - at fair value (cost: $4,465,333 in 1996 and
$4,218,437 in 1995) $ 4,563,950 $ 4,619,841
Equity securities - at market (cost: $34,556 in 1996 and
$28,370 in 1995) 40,446 32,744
Investment in Textron common stock - at market (cost: $19,811
in 1996 and 1995) 67,276 57,257
Short-term investments 92,596 71,326
Mortgage loans 308,236 309,046
Real estate 9,721 9,291
Policy loans 73,019 73,933
Other invested assets 32,108 31,604
------------ ------------
Total investments 5,187,352 5,205,042
Cash - 14,970
Accrued investment income 75,758 80,993
Premiums due 21,068 21,396
Deferred policy acquisition costs 921,917 775,651
Value assigned purchased insurance in force 64,235 66,894
Reinsurance recoverable 494,491 494,313
Goodwill, net of accumulated amortization of $93,062 in
1996 and $90,992 in 1995 113,738 115,808
Property and equipment, net of accumulated depreciation of
$67,745 in 1996 and $66,612 in 1995 34,564 35,386
Other assets 99,157 190,031
Assets held in separate accounts 23,974 43,201
------------ ------------
Total assets $ 7,036,254 $ 7,043,685
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 1,369,311 $ 1,371,297
Unpaid claims and claim expenses 1,935,766 1,852,298
Other policyholder funds 1,884,351 1,876,324
Notes payable 42,034 38,020
Income taxes 314,919 366,094
Other liabilities 161,203 103,072
Liabilities related to separate accounts 23,974 43,201
------------ ------------
Total liabilities 5,731,558 5,650,306
Shareholders' equity:
Common stock, par value $1.00 per share, 100,000,000
shares authorized; 45,000,000 shares issued and outstanding 45,000 45,000
Additional paid-in capital 560,134 560,134
Securities valuation adjustment 91,174 197,090
Foreign currency translation adjustment (11,607) (11,687)
Retained earnings 619,995 602,842
------------ ------------
Total shareholders' equity 1,304,696 1,393,379
------------ ------------
Total liabilities and shareholders' equity $ 7,036,254 $ 7,043,685
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
THE PAUL REVERE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 19,853 $ 17,247
Adjustments to reconcile net income to net cash provided
by operating activities:
Increase in future policy benefits, unpaid claims and
other policyholder funds 110,151 148,435
Amortization and depreciation 8,578 9,287
Additions to deferred policy acquisition costs (38,873) (43,733)
Increase in income tax liability 7,630 12,167
Increase (decrease) in other assets/liabilities 57,361 (26,364)
Net realized investment gains (4,250) (6,143)
Decrease in accrued investment income 5,224 5,620
Other, net 756 4,498
------------ ------------
Net cash provided by operating activities 166,430 121,014
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed maturities held to maturity:
Proceeds from sales - -
Proceeds from maturities and calls - 10,058
Purchases - (76,055)
Fixed maturities and marketable equity securities and short-term
investments available for sale:
Proceeds of sales 251,483 65,023
Proceeds from maturities and calls 62,501 24,896
Purchases (502,772) (218,353)
(Increase) decrease in other, net (216) 13,428
(Increase) decrease in policy loans, net 914 (1,079)
Capital expenditures (799) (523)
------------ ------------
Net cash used in investing activities (188,889) (182,605)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in cash overdraft 31,443 23,415
Dividends to shareholders (2,700) (2,700)
Increase (decrease) in notes payable 4,000 (1,130)
Receipts from interest-sensitive products 45,420 87,764
Return of account balances on interest-sensitive products (62,129) (44,832)
------------ ------------
Net cash provided by financing activities 16,034 62,517
Effect of foreign exchange rate changes on cash (8,545) (926)
------------ ------------
Net change in cash (14,970) -
Cash at beginning of period 14,970 -
------------ ------------
Cash at end of period $ - $ -
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
THE PAUL REVERE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of The Paul
Revere Corporation ("the Company") have been prepared in accordance with
generally accepted accounting principles applicable to stock life insurance
companies for interim financial information and with the requirements of Form
10-Q. Accordingly, they do not include all of the information and footnotes
required for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the Company's consolidated financial
position at March 31, 1996 and December 31, 1995 and its consolidated
statements of income and consolidated cash flows for each of the respective
three month periods ended March 31, 1996 and March 31, 1995, have been
included. Certain 1995 amounts have been reclassified to conform to the
current year's presentation. Interim results for the three month period
ended March 31, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. The financial statements
should be read in conjunction with the financial statements included in the
Company's Annual Report on Form 10-K, for the year ended December 31, 1995.
NOTE 2. LITIGATION AND CONTINGENCIES
In the normal course of its business operations, the Company is involved
in litigation from time to time with claimants, beneficiaries and others, and
a number of lawsuits were pending at March 31, 1996. In the opinion of
management, the ultimate liability, if any, arising from this litigation is
not expected to have a material adverse effect on the consolidated net income
or financial condition of the Company.
The laws of many states in which the Company's insurance subsidiaries
are admitted to do business require as a condition of admission that all
insurance companies so admitted collectively guarantee to policyholders the
benefits payable under policies issued by other insurance companies admitted
in the particular state up to statutory levels. While the amount of any
assessments which may be made in the future cannot be predicted, the Company
does not believe the total assessments, if any, will be material to its
operating results or financial position.
NOTE 3. SUBSEQUENT EVENTS
On April 10, 1996, in connection with a previously approved commitment,
Textron Inc. ("Textron") purchased 424,125 shares of its common stock from
the Company. This purchase, which represented the third of four such annual
installments, was made at $78.623 per share, resulting in realized investment
gains to the Company of $23.3 million, before income taxes. The Company
valued these shares at the purchase price in the accompanying balance sheet
at March 31, 1996.
On April 29, 1996, the Company and Provident Companies, Inc.
("Provident") announced they had signed a definitive merger agreement. The
transaction, valued at approximately $1.2 billion, has been approved by
boards of directors of both companies. Under the agreement, the Company's
shareholders may elect to receive a) $26.00 per share in cash; or b) a
combination of $20.00 in cash and a number of shares of Provident common
stock equal to the product of $6.00 and the exchange ratio; or c) a number of
shares of Provident common stock equal to the product of $26.00 and the
exchange ratio. The exchange ratio is based on the Provident common stock
price during a defined period prior to closing and is subject to certain
maximum and minimum share amounts. Textron, which owns approximately 83% of
the Company's outstanding common shares, has agreed to support the merger,
which, subject to shareholder and regulatory approval, is expected to close
during the third quarter of 1996.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE PAUL REVERE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1996 was $19.9 million or
$0.44 per share as compared to $17.2 million or $0.38 per share for the
comparable quarter of 1995, an increase of 15.1%. Revenues for the quarter
ended March 31, 1996 increased 7.1% to $383.6 million as compared to $358.4
million for the comparable period in 1995.
INCOME BEFORE INCOME TAXES
Income before income taxes for the first quarter increased $4.1 million,
or 14.5%, to $32.0 million from $28.0 million during the first quarter of
1995. Income before income taxes for the business segments of the Company for
the three months ended March 31, 1996 and 1995, respectively, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------------------------
$ %
1996 1995 CHANGE CHANGE
-------- -------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Individual Disability Insurance $ 12,644 $ 11,797 $ 847 7.2%
Group Insurance 4,132 4,779 (647) (13.5)
Individual Life Insurance 6,204 2,787 3,417 122.6
Financial Products 8,847 8,431 416 4.9
Corporate 198 178 20 11.2
-------- -------- -------- ------
$ 32,025 $ 27,972 $ 4,053 14.5%
======== ======== ======== ======
</TABLE>
PREMIUMS, POLICY AND CONTRACT CHARGES AND FEES
Premiums, policy and contract charges and fees for the first quarter
increased $25.8 million, or 10.2%, to $279.7 million from $253.9 million
during the first quarter of 1995. Premiums, policy and contract charges and
fees for the business segments of the Company for the three months ended
March 31, 1996 and 1995, respectively, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------------------------
$ %
1996 1995 CHANGE CHANGE
-------- -------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Individual Disability Insurance $196,318 $178,304 $ 18,014 10.1%
Group Insurance 73,341 64,094 9,247 14.4
Individual Life Insurance 8,452 8,970 (518) (5.8)
Financial Products 1,606 2,538 (932) (36.7)
Corporate - - - -
-------- -------- -------- ------
$279,717 $253,906 $ 25,811 10.2%
======== ======== ======== ======
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
INDIVIDUAL DISABILITY INSURANCE SEGMENT
The Individual Disability Insurance segment reported increased income
before income taxes for the three months ended March 31, 1996 as compared to
the same period in 1995, primarily attributable to increased premiums and
fees partially offset by reduced net investment income, including net
realized investment gains, and increased benefit and commission costs.
United States morbidity was adversely impacted by lower claim termination
rates on policies in the previously identified problem areas, specifically
those issued to physicians, during 1985-1989, and in Florida and California.
The Company continued its efforts to improve operating results in this
segment through new products, pricing and underwriting adjustments as well as
a continued emphasis on claims management. The segment's benefit ratio was
84.0% in the first quarter of 1996, compared to 89.4% during the same period
in the prior year and 81.5% in the fourth quarter of 1995. Management
continues to be optimistic that the segment will experience overall
improvement in the benefit ratio this year. Commissions and other expenses
increased to $50.5 million in the first quarter, an increase of 14.6% as
compared to $44.1 million in the comparable period in the prior year. The
increased commissions are primarily attributable to a 13% increase in renewal
premiums in this segment resulting from improved persistency. Persistency was
95.2% for the quarter ended March 31, 1996 as compared to 93.3% during the
similar period in the prior year.
GROUP INSURANCE SEGMENT
For the three months ended March 31, 1996, the Group Insurance segment
reported decreased income before income taxes as compared to the
corresponding period of the prior year. However, the prior year results
included a positive impact of $1.6 million as a result of the Company's
decision to terminate an excess reinsurance agreement and reassume the
obligations which were previously ceded under the contract. Excluding this
impact, income before income taxes in this segment increased 30.0%, to $4.1
million, primarily attributable to increased premium volume, including a
14.7% increase in disability premiums reflecting management's continued
emphasis on this product, increased net investment income and improved
expense ratios partially offset by slightly elevated benefit ratios. Net
investment income increased $1.7 million to $9.1 million for the quarter
ended March 31, 1996, an increase of 22.4%, as the growth in invested assets
more than offset a decline in portfolio yields. The expense ratio for this
segment was 29.5% for the first quarter ended March 31, 1996, compared to
30.4% during the comparable period of the prior year, due to the impact of
various expense initiatives.
INDIVIDUAL LIFE INSURANCE SEGMENT
Income before income taxes in the Individual Life Insurance segment for
the three months ended March 31, 1996 increased 122.6% to $6.2 million as
compared to $2.8 million for the quarter ended March 31, 1995, primarily
attributable to a combination of improved benefit and expense ratios.
Additionally, during the quarter ended March 31, 1996, the Company recorded a
gain of $1.6 million in U.S. dollars, before income taxes, in connection with
an agreement with Imperial Life Assurance of Canada ("Imperial"), whereby
Imperial acquired the Company's Canadian individual life insurance portfolio.
This transaction enables the Company to continue to focus its resources on
its Canadian disability insurance line of business.
FINANCIAL PRODUCTS SEGMENT
The increase in income before income taxes in the Financial Products
segment for the three months ended March 31, 1996, as compared to the same
period in the prior year is primarily attributable to improved gross margins,
partially offset by reduced net realized investment gains.
The gross margin on financial products is calculated to be the spread
between investment income, including earnings on assets representing surplus,
and interest credited to policyholders. In the first quarter of 1996, the
financial products' segment gross margin increased relative to the first
quarter of 1995. The spread for the first quarter of 1996 was approximately
210 basis points which compares to a spread of 178 basis points for the first
quarter of 1995 and an annual spread of 184 basis points for 1995.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
NET INVESTMENT INCOME
Net investment income remained relatively flat during the three months
ended March 31, 1996 as compared to the same period last year, decreasing
$0.2 million (0.2%). Net investment income for the first quarter of the
prior year included the receipt of $3.5 million representing the interest
portion of a federal income tax refund related to prior years. Excluding
this item, net investment income would have increased $3.3 million or 3.5% as
the growth in invested assets more than offset a decline in portfolio yields.
The average yield on the Company's portfolio of invested assets was 7.9% and
8.0% for the quarters ended March 31, 1996 and 1995, respectively.
NET REALIZED INVESTMENT GAINS
Net realized investment gains totaled $4.3 million for the three months
ended March 31, 1996, a decrease of $1.9 million, as compared to the
comparable period in the prior year. This decrease was attributable to
significant investment gains generated from the Company's convertible bond
portfolio and to two sales of equity securities in the prior year.
INCOME TAXES
Income taxes increased for the three months ended March 31, 1996, as
compared with the same period last year due to the increase in pretax income.
INVESTMENTS
The Company's investment portfolio is segmented by product line, with
specific investment policies tailored to each product line and developed
within the overall corporate investment policy. Within each investment
segment, the Company attempts to select investments with expected cash flows
that will match as closely as possible the expected cash flow requirements of
the related insurance or annuity products. The Company's investment strategy
is to maintain a predominantly investment grade, fixed maturity portfolio of
diversified investments, to provide liquidity for insurance obligations and
to maximize total return through prudent investment management.
The composition of the Company's $5,187.4 million of investments was as
follows:
INVESTMENT COMPOSITION
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Available for sale:
Fixed maturities $4,563,950 88.0%
Equity securities 107,722 2.1
Short-term investments 92,596 1.8
Mortgage loans 308,236 5.9
Real estate 9,721 0.2
Policy loans 73,019 1.4
Other invested assets 32,108 0.6
---------- ------
$5,187,352 100.0%
========== ======
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
AVAILABLE FOR SALE. The fair value of fixed maturities available for
sale was $4,564.0 million at March 31, 1996, or $98.6 million above the
aggregate amortized cost of these securities. This compares to securities
with a fair value of $4,619.8 million at December 31, 1995, which were $401.4
million above their aggregate amortized cost. At March 31, 1996, $116.6
million of fixed maturities available for sale were below investment grade.
These securities represented 2.2% of the Company's total investments. This
compares to $114.2 million of securities at December 31, 1995, or 2.2% of the
Company's total investments.
The fair value of equity securities was $107.7 million and $90.0 million,
respectively, at March 31, 1996 and December 31, 1995. Fair values of those
securities exceeded their cost by $53.4 million and $41.8 million at March 31,
1996 and December 31, 1995, respectively.
The Company's largest single equity investment, 848,250 shares of the
common stock of Textron, represented $47.5 million and $37.4 million of the
excess over cost at March 31, 1996 and December 31, 1995, respectively. The
Company has an agreement with Textron whereby these shares are redeemable at
any time, at the Company's option, at the quoted market price of Textron's
registered common stock at the redemption date. The Company and Textron
entered into a stock purchase agreement pursuant to which Textron is
purchasing all of the shares of Textron common stock owned by the Company in
four annual installments of 424,125 shares each, beginning on April 10, 1994,
at a share price to be equal to the average closing price of Textron's stock
over the quarter preceding each such purchase. The third of these purchases
occurred as scheduled in April 1996 at $78.623 per share, resulting in
realized investment gains to the Company of $23.3 million, before income
taxes.
MORTGAGE LOANS AND REAL ESTATE. The book value of the Company's
mortgage loans was $308.2 million and $309.0 million, respectively, at March
31, 1996 and December 31, 1995. The book value of the Company's real estate
was $9.7 million and $9.3 million, respectively, at March 31, 1996 and
December 31, 1995. In light of the size of the Company's mortgage and direct
real estate portfolios, adequate diversification and low level of historical
losses, the Company believes its allowance for other than temporary declines
in value of mortgages and real estate of $7.3 million at March 31, 1996,
makes adequate provision for potential losses.
LIQUIDITY AND CAPITAL RESOURCES
HOLDING COMPANY STRUCTURE. The Paul Revere Corporation is a holding
company the principal asset of which is the common stock of The Paul Revere
Life Insurance Company, which in turn owns all the common stock of The Paul
Revere Protective Life Insurance Company and The Paul Revere Variable Annuity
Insurance Company.
As a holding company, the Company's principal source of cash needed to
meet its obligations and to pay dividends is the receipt of dividends from
The Paul Revere Life Insurance Company (a Massachusetts-domiciled insurance
company). The maximum annual dividend which The Paul Revere Life Insurance
Company is permitted to pay without the prior approval of the Massachusetts
Insurance Commissioner is the greater of (a) 10% of The Paul Revere Life
Insurance Company's surplus to policyholders as of the thirty-first day of
December next preceding or (b) The Paul Revere Life Insurance Company's
statutory net gain from operations for the twelve-month period ending the
thirty-first day of December next preceding. Legislation enacted in
Massachusetts during 1993 further provides that any dividend not paid out of
earned surplus be made only with prior approval of the Massachusetts
Insurance Commissioner. Up to $37.6 million is available for the payment of
dividends by The Paul Revere Life Insurance Company without regulatory
approval in 1996. The Company paid a regular quarterly cash dividend of
$0.06 per share on March 29, 1996 to shareholders of record on March 8, 1996.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
OTHER SOURCES AND USES OF FUNDS. The Company's principal uses of funds
are to pay benefits to policyholders (including benefits paid and
surrenders), returns of account balances on interest-sensitive products
(including withdrawals of policyholder account balances on interest-sensitive
life and financial products), operating expenses, debt obligations and
dividends to its shareholders. In September 1994, the Company restructured
its existing $75 million bankers acceptance credit facility into a $100
million multi-bank revolving credit facility, consisting of a bankers
acceptance portion as well as revolving loans at either a prime or Eurodollar
rate of interest. In September 1995, the limit of the facility was extended
through September 30, 1998, with a single one-year option remaining. The
facility limit is permanently reducible at the Company's option. The
proceeds of borrowings under the agreement have generally been contributed to
the Company's operating subsidiaries as statutory capital to support the
subsidiaries' business growth.
Under the terms of the bankers acceptance portion, the operating
subsidiaries may invest in bankers acceptances of the bank group and may, at
their sole discretion, hold such investments to maturity. As long as the
Company and its subsidiaries elect to make and hold such investments, the
Company is permitted to offset obligations to and from the bank group, and
there is no net increase in the Company's consolidated liquidity or its
consolidated debt. While individual borrowings by the Company have interim
maturities of $70.4 million in 1996, the credit facility guarantees the
Company the right to renew these borrowings up to the limit of the facility.
In addition, under the terms of the revolving loan portion of this agreement,
at March 31, 1996, the Company had outstanding borrowings of $20.0 million,
including accrued interest. These borrowings are unsecured and bear the
prime rate of interest.
In addition to its multi-bank revolving credit facility, in November
1995, the Company established a $25.0 million revolving credit agreement with
a single bank. Borrowings of $22.0 million including accrued interest were
outstanding at March 31, 1996. These borrowings, which were repaid in April
1996, are unsecured and bear the prime rate of interest.
The Company maintains additional lines of credit totaling $35.0 million
for short-term funding of investment purchases, and other short-term cash
requirements against which no borrowings were outstanding at March 31, 1996.
Principal sources of funds at the insurance companies are premiums and
policy charges and deposits on interest-sensitive insurance policies and
annuities, net investment income and proceeds from investments sold, called
or matured. Given The Paul Revere Life Insurance Company's historically
adequate cash flow and current financial results, management of the Company
believes that the cash flow from operating activities will continue to
provide sufficient liquidity for the operations of both the insurance
companies and the holding company, so that the Company will be able to meet
its obligations and pay dividends to its shareholders. The ability of the
Company to pay its operating expenses, meet debt service obligations and pay
dividends in future years will depend upon the availability to the Company of
sufficient funds from its subsidiary insurance companies.
RATINGS
In March 1996, the A. M. Best Company rating service reaffirmed the A
(Excellent) rating for the Company's primary insurance subsidiary, The Paul
Revere Life Insurance Company and other insurance subsidiaries, The Paul
Revere Variable Annuity Insurance Company and The Paul Revere Protective Life
Insurance Company. In December 1995, the Standard and Poor's rating service
reaffirmed the AA- (Excellent) claims-paying ability rating to the Company's
primary insurance subsidiary, The Paul Revere Life Insurance Company and
other insurance subsidiaries, The Paul Revere Variable Annuity Insurance
Company and The Paul Revere Protective Life Insurance Company. Also in
December 1995, Moody's Investors Service Inc. assigned the A2 insurance
financial strength rating to The Paul Revere Life Insurance Company, The Paul
Revere Variable Annuity Insurance Company and The Paul Revere Protective Life
Insurance Company.
11
<PAGE>
THE PAUL REVERE CORPORATION
MARCH 31, 1996
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
No exhibits are filed with this report.
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K with the Securities
and Exchange Commission during the quarter ended March 31, 1996.
12
<PAGE>
THE PAUL REVERE CORPORATION
MARCH 31, 1996
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.
THE PAUL REVERE CORPORATION
--------------------------------------------
(Registrant)
Date MAY 13, 1996 /s/ James A. Hilbert
------------ --------------------------------------------
James A. Hilbert
Senior Vice President,
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
13
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<NAME> THE PAUL REVERE CORPORATION
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0
0
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281,278
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