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Previous: BOSTON FINANCIAL TAX CREDIT FUND VIII LP, 10QSB, EX-27, 2000-11-14 |
Next: VESTA INSURANCE GROUP INC, 10-Q, EX-27, 2000-11-14 |
UNITED STATES 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 September 30, 2000
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 1-12338
VESTA INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1097283
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3760 River Run Drive 35243
Birmingham, Alabama (Zip Code)
(Address of principal executive offices)
(205) 970-7000
(Registrant's telephone number, including area code)
Not Applicable
(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. |X|Yes |_| No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
The number of shares outstanding of the registrant's common stock,
$.01 par value, as of November 13, 2000
18,825,832
PART I FINANCIAL INFORMATION Page
------- --------------------- ----
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999................................................................................... 1
Consolidated Statements of Income and Comprehensive Income for the
Three Months and Nine months ended September 30, 2000 and 1999...................................... 2
Consolidated Statements of Cash Flows for the
Nine months ended September 30, 2000 and 1999....................................................... 3
Notes to Consolidated Financial Statements.......................................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................................... 10
PART II OTHER INFORMATION
-------- -----------------
Item 1. Legal Proceedings................................................................................... 15
Item 2. Changes in Securities............................................................................... 17
Item 3. Defaults Upon Senior Securities..................................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders................................................. 18
Item 5. Other Information................................................................................... 18
Item 6. Exhibits and Reports on Form 8-K.................................................................... 19
September 30, December 31,
2000 1999
(Unaudited)
Assets:
Investments
Fixed maturities available for sale-at fair value (cost: 2000-$810,850 ;
1999-$348,760)....................................................... $ 812,857 $ 339,429
Equity securities-at fair value: (cost: 2000-$8,158; 199-$2,092) 10,694 1,865
Mortgage and collateral loans........................................ 55,979 --
Policy loans......................................................... 61,813 --
Short-term investments............................................... 41,491 125,026
Other invested assets................................................ 15,644 --
Total investments.................................................... 998,478 466,320
Cash....................................................................... 7,093 17,677
Accrued investment income.................................................. 13,464 5,460
Premiums in course of collection........................................... 29,068 41,206
Reinsurance balances receivable............................................ 342,347 193,345
Reinsurance recoverable on paid losses..................................... 65,841 77,925
Value of business acquired................................................. 33,380 --
Deferred policy acquisition costs.......................................... 32,320 40,357
Deferred income taxes...................................................... 13,758 13,489
Other assets............................................................... 79,145 60,030
------ ------
Total assets......................................................... $1,614,894 $915,809
========== ========
Liabilities:
Future policy benefits..................................................... 671,315 --
Losses and loss adjustment expenses........................................ 272,942 354,709
Unearned premiums.......................................................... 114,638 133,029
Federal home loan bank notes............................................... 148,732 --
Other liabilities.......................................................... 27,207 39,905
Short term debt............................................................ 5,000 5,000
Long term debt............................................................. 86,007 141,876
Minority interest.......................................................... 34,690 --
------ --
Total liabilities.................................................... 1,360,531 674,519
Commitments and contingencies: See Note C
Deferrable Capital Securities.................................................. 41,225 41,225
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, issued: 2,950,000........ 30 30
Series B Junior participating preferred stock $.01 par value, 300,000 shares authorized,
issued: none.........................................................
Common stock, $.01 par value, 100,000,000 shares authorized, issued: 2000 -18,964,322;
1999-18,964,322................................................ 190 190
Additional paid-in capital.................................................. 170,368 172,272
Accumulated other comprehensive income, net of applicable tax benefit of $1,014 and
$3,346 in 2000 and 1999, respectively................................ (1,884) (6,213)
Retained earnings.......................................................... 52,510 41,862
Treasury stock (138,490 shares at cost at September 30, 2000 and December 31, 1999)... (6,274) (6,274)
Receivable from issuance of restricted stock................................ (1,802) (1,802)
------- -------
Total stockholders' equity 213,138 200,065
======= =======
Total liabilities and stockholders' equity $1,614,894 $ 915,809
========== =========
September 30, September 30,
-------------- -------------
2000 1999 2000 1999
----- ----- ----- ----
(unaudited) (unaudited)
Revenues:
Net premiums written.............................................. $60,222 $72,425 $178,110 $197,077
Decrease in unearned premiums..................................... 2,062 15,357 13,570 80,054
----- ------ ------ ------
Net premiums earned............................................... 62,284 87,782 191,680 277,131
Net investment income............................................. 16,917 6,338 29,302 19,061
Policy fees....................................................... 1,174 -- 1,174 --
Other, including realized gains and losses........................ (826) 8,033 825 32,239
---- ----- --- ------
Total revenues............................................... 79,549 102,153 222,981 328,431
Expenses:
Policyholder benefits........................................ 4,302 4,302
Loss and loss adjustment expenses incurred..................... 35,015 52,887 115,724 172,027
Policy acquisition expenses.................................... 14,860 23,713 41,970 74,949
Operating expenses............................................. 12,639 9,151 32,095 32,490
Interest on debt............................................... 4,188 2,164 10,354 9,267
Goodwill and other intangible amortization..................... 351 270 1,105 810
Total expenses............................................... 71,355 88,185 205,550 289,543
Income from continuing operations before income taxes, minority
interest and deferrable capital securities...................... 8,194 13,968 17,431 38,888
Income tax expense................................................... 2,671 4,589 5,729 12,286
Deferrable capital securities interest, net of income tax............ 571 1,402 1,713 4,126
Minority interests insubsidiary, net of income taxes................. 858 -- 858 --
Income from continuing operations.................................... 4,094 7,977 9,131 22,476
Loss from discontinued operations, net of tax........................ (98) (2,947) (642) (4,150)
Gain on debt extinguishments, net of tax............................. -- -- 5,250 --
Net income........................................................... 3,996 5,030 13,739 18,326
Preferred stock dividends............................................ 1,272 -- 2,398 --
Income available to common shareholders.............................. $2,724 $5,030 $ 11,341 $18,326
====== ====== ======== =======
Basic income from continuing operations per common share............. $ .23 $ .43 $ .50 $ 1.20
====== ====== ====== ======
Basic income available to common shareholders per common share....... $ .15 $ .27 $ .62 $ .98
====== ====== ====== ======
Diluted income from continuing operations per common share........... $ .17 $ .43 $ .37 $ 1.20
====== ====== ====== ======
Diluted income available to common shareholders per common share..... $ .14 $ .27 $ .53 $ .98
====== ====== ====== ======
Dividends declared per common share.................................. $.0125 $ -- $.0375 $ --
====== ====== ====== ======
STATEMENTS OF COMPREHENSIVE INCOME
Net income ....................................................... $ 3,996 $5, 030 $ 13,739 $ 18,326
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on available-for-sale
securities, net of applicable tax expense (benefit) of $1,280,$(161),
$2,331 and $(3,135), respectively................................. 2,400 (299) 4,671 (6,384)
Less realized losses (gains) on available-for-sale securities,
net of applicable tax (benefit) expense of $(12), $618, $(184)
and $2,890,respectively..................................................... (22) 1,148 (342) 5,330
2,378 (1,447) 4,329 (11,714)
Comprehensive income ............................................. $6,374 $ 3,583 $ 18,068 $ 6,612
====== ======= ======== ========
See accompanying Notes to Consolidated Financial Statements
Nine months ended
September 30,
-------------
2000 1999
----- ----
(Unaudited)
Operating Activities:
Net income .......................................................................................... $13,739 $ 18,326
Adjustments to reconcile net income to cash from operating activities:
Change in:
Loss and LAE reserves........................................................................... (82,382) (118,464)
Unearned premium reserve........................................................................ (18,392) (140,660)
Premiums in course of collection................................................................ 12,138 77,425
Reinsurance balances receivable................................................................. 27,242 39,171
Reinsurance recoverable on paid losses.......................................................... 12,084 48,869
Other assets and liabilities.................................................................... (36,808) (13,762)
Policy acquisition costs deferred.................................................................. (19,073) (48,063)
Policy acquisition costs amortized................................................................. 27,110 85,691
Amortization and depreciation...................................................................... 4,496 4,811
Investment (gains) losses.......................................................................... 2,321 (12,470)
Extraordinary gain................................................................................. (5,250) --
Net cash used in operating activities.............................................................. (62,775) (59,126)
Investing Activities:
Investments sold or matured:
Fixed maturities available for sale-matured, called or sold...................................... 117,802 190,064
Equity securities................................................................................ 491 21,351
Investments acquired:
Fixed maturities available for sale............................................................. (91,037) (118,385)
Equity securities.............................................................................. (2,797) (1,072)
Net cash paid for acquisition....................................................................... (13,561)
Net change in other long term investments........................................................... 5,028
Net (increase) decrease in short-term investments.................................................. 92,462 (52,395)
Disposition of Vesta County Mutual.................................................................. -- 11,200
Additions to property, plant and equipment.......................................................... (3,698) (2,059)
Dispositions of property, plant and equipment....................................................... -- 673
Net cash provided from investing activities....................................................... 104,690 49,377
Financing Activities:
Repayment of long and short term debt............................................................... (43,911) (49,965)
Issuance of preferred stock........................................................................ 25,075
Net deposits and withdrawals from insurance liabilities (4,970)
Dividends paid....................................................................................... (1,256) (698)
Purchase of treasury stock.......................................................................... (33,285)
Issuance of treasury stock.......................................................................... 30,923
Capital contributions from exercising options........................................................ -- (559)
Net cash used in financing activities.............................................................. (52,499) (26,147)
Decrease in cash........................................................................................ (10,584) (35,896)
Cash at beginning of year............................................................................... 17,677 47,311
Cash at end of period................................................................................... $ 7,093 $ 11, 415
======== ---------
Basis of Presentation: The accompanying unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles and, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of results for such periods. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and related notes which have been issued by the Company and filed with the Securities and Exchange Commission.
Certain amounts in the financial statements presented have been reclassified from amounts previously reported in order to be comparable between years. These reclassifications have no effect on previously reported stockholders’ equity or net income during the period involved.
New Accounting Standards. In September 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be recorded on the balance sheet at fair value. In September 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133. This statement defers the effective date of SFAS No. 133. As a result, SFAS No. 133 will not be effective for the Company, until the year 2001. The impact of the reporting requirements of SFAS No. 133 on the Company will depend on the nature and amount of derivative instruments the Company might have at date of implementation. The Company does not currently believe the impact will be material.
In December 1999, the staff of the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements.” SAB No. 101 summarizes the SEC staff”s views in applying generally accepted accounting principles to the recognition of revenues. The Company has evaluated the impact of the reporting requirements of SAB No. 101 and has determined that there will be no material impact on its consolidated results of operations, financial position or cash flows.
Income per share. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts which could be exercised or converted into common shares except when the additional shares would produce anti-dilutive results.
Reconciliation of income available to common shareholders and average shares outstanding for the nine months ending September 30, 2000 and 1999 and the three months ending September 30, 2000 and 1999 are as follows:
Nine months ended September 30
2000 1999
---- ----
Income available to common shareholders $11,341 $ 18,326
Preferred stock dividends on convertible preferred stock 1,689 --
Adjusted income available to common shareholders $13,030 $ 18,326
======= ========
Average shares outstanding-basic 18,231 18,682
Stock options and restricted stock 233 22
Convertible preferred stock 5,900 --
Average shares outstanding-diluted 24,364 18,704
Three months ended September 30
2000 1999
---- ----
Income available to common shareholders $2,724 $5,030
Preferred stock dividends on convertible preferred stock 563 --
Adjusted income available to common shareholders $3,287 $5,030
====== ======
Average shares outstanding-basic 17,918 18,675
Stock options and restricted stock 232 65
Convertible preferred stock 5,900 --
Average shares outstanding-diluted 24,050 18,740
====== ======
Earnings per share for discontinued operations and extraordinary gains for the three and nine-month periods ended September 30,
2000 and 1999 are as follows:
2000 1999
3 month 9 month 3 month 9 month
Basic Earnings per share:
Discontinued Operations $ (.01) $ (.04) $ (.16) $ (.22)
Extraordinary Gain -- $ .29 -- --
Diluted Earnings per share:
Discontinued Operations -- $ (.03) $ (.16) $ (.22)
Extraordinary Gain -- $ .22 -- --
Change in estimate-During the nine month period ended September 30, 2000, the Company began a new program to enhance the timeliness and amount of collections of salvage and subrogation. An evaluation of amounts available for collection, when considered with other factors, resulted in a reduction to calculated reserves of approximately $9.5 million pre-tax. This was recorded in the quarter ending June 30, 2000.
The Company recorded extraordinary gains, net of tax and related debt issue costs, of $5.3 million for the nine-month period ended September 30, 2000, as a result of the early redemption of long term debt. For the nine months ended September 30, 2000, the Company has redeemed $44.1 million of its 12.5% Senior Notes and approximately $13.1 million of its 8.75% Senior Debentures. The redemptions were funded with internally generated cash. The warrants attached to the 12.5% Senior Notes have been cancelled.
Subsequent to the filing of its quarterly report on Form 10-Q for the period ended March 31, 1998 with the Securities and Exchange Commission, the Company became aware of certain accounting irregularities consisting of inappropriate reductions of reserves and overstatements of premium income in the Company's reinsurance business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. The Company promptly commenced an internal investigation to determine the exact scope and amount of such reductions and overstatements. This investigation concluded that inappropriate amounts had, in fact, been recorded and the Company determined it should restate its previously issued 1997 financial statements and first quarter 1998 Form 10-Q. Additionally, during its internal investigation the Company re-evaluated the accounting methodology being utilized to recognize earned premium income in its reinsurance business. The Company had historically reported certain assumed reinsurance premiums as earned in the year in which the related reinsurance contracts were entered even though the terms of those contracts frequently bridged two years. The Company determined that reinsurance premiums should be recognized as earned over the contract period and corrected the error in its accounting methodology by restating previously issued financial statements. The Company issued press releases, which were filed with the Securities and Exchange Commission, on September 1, 1998 and September 29, 1998 announcing its intention to restate its historical financial statements.
The Company restated its previously issued financial statements for 1995, 1996 and 1997 and its first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders' equity of $75.2 million through March 31, 1998.
Commencing in September 1998, Vesta and several of its current and former officers and directors were named in several purported class action lawsuits in the United States District Court for the Northern District of Alabama and in one purported class action lawsuit in the Circuit Court of Jefferson County, Alabama. Several of Vesta's officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant.
The class action lawsuit filed in the Circuit Court of Jefferson County,Alabama has been dismissed and the derivative case has been placed on the administrative docket. The class actions filed in the United States District Court for the Northern District of Alabama have been consolidated into a single action in that district. The class representatives in that action have filed (a) a consolidated amended complaint alleging that the defendants violated the federal securities laws and (b) a motion for class certification, which was granted in 1999. The consolidated amended complaint also added as defendants Torchmark Corporation and the Company's former auditors, KPMG Peat Marwick, LLP. The consolidated amended complaint alleges various violations of the federal securities law and seeks unspecified but potentially significant damages.
The Company has notified its directors and officers liability insurance companies of these lawsuits and the consolidated amended complaint. The litigation is still in the preliminary stages and there has been no discovery conducted in the securities case. The Company intends to vigorously defend this litigation and intends to explore all available rights and remedies it may have under the circumstances. In related litigation, in September, 1998, Cincinnati Insurance Company ("Cincinnati"), one of the Company's directors and officers liability insurance carriers, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to avoid coverage under its directors and officers liability and other policies. The Company filed a motion to dismiss Cincinnati's complaint on jurisdictional grounds in federal court (which was granted), and filed a lawsuit against Cincinnati in the Circuit Court of Jefferson County, Alabama seeking damages arising out of Cincinnati's actions. Cincinnati has filed an answer and counterclaim in that case again seeking to avoid coverage.
Indemnification Agreements and Liability Insurance
Pursuant to Delaware law and by-laws, the Company is obligated to indemnify its current and former officers and directors for certain liabilities arising from their employment with or service to the Company. The Company believes that these indemnification obligations extend to its current and former officers' and directors' costs of defense and other liabilities which may arise out of the securities litigation described above.
The Company has purchased directors' and officers' liability insurance ("D and O insurance") for the purposes of covering among other things the costs incurred in connection with these indemnification obligations. For the period in which most of the claims against the Company and certain of its directors and officers were asserted, the Company had in place a primary D and O insurance policy providing $25 million in coverage and an excess D and O insurance policy covering for an additional $25 million in coverage. The issuer of the primary D and O insurance policy, Cincinnati, has attempted to avoid coverage as discussed above, and the Company is vigorously resisting its efforts to do so.
Subsequent to the initiation of the class actions described above, the Company secured additional excess D and O insurance providing coverage for losses in excess of $50 million up to $110 million, or additional excess coverage of $60 million for the class actions. The Company paid for this additional excess policy in full in 1998.
These matters are in their early stages and their ultimate outcome cannot be determined. Accordingly, the Company has not currently recorded any reserves relating to any of the above-referenced actions.
The Company, through its subsidiaries, is routinely a party to pending or threatened legal proceedings and arbitration relating to the regular conduct of its insurance business. These proceedings involve alleged breaches of contract, torts, including bad faith and fraud claims and miscellaneous other specified relief. Based upon information presently available, and in light of legal and other defenses available to the Company and its subsidiaries, management does not consider liability from any threatened or pending litigation regarding routine matters to be material.
As discussed above, the Company corrected its accounting for assumed reinsurance business through restatement of its previously issued financial statements. Similar corrections were made on a statutory accounting basis through recording cumulative adjustments in Vesta Fire's 1997 statutory financial statements. The impact of this correction has been reflected in amounts ceded under the Company's 20 percent whole account quota share treaty which was terminated on September 30, 1998 on a run-off basis. The Company believes such treatment is appropriate under the terms of this treaty and has calculated the quarterly reinsurance billings presented to the three treaty participants accordingly. The aggregate amount included herein as recoverable from such reinsurers totaled $54.4 million at September 30, 2000 exclusive of approximately $48.5 million that the company collected from such reinsurers via the conversion of collateral on hand.
NRMA, one of the participants in the 20 percent whole account quota share treaty, filed a lawsuit in the United States District Court for the Northern District of Alabama contesting the Company's claim and the validity of the treaty, and seeking return of $34.5 million collected by the conversion of collateral on hand. The Company filed a demand for arbitration as provided for by the treaty and filed a motion to compel arbitration which was granted in the United States District Court action. The Company has filed for arbitration against the other two participants on the treaty and those arbitrations are in their early stages. While management believes its interpretation of the treaty's terms and computations based thereon are correct, these matters are in their early stages and their ultimate outcome cannot be determined at this time.
A dispute has arisen with F and G Re (on behalf of USF and G) under two aggregate stop loss reinsurance treaties whereby F and G assumed certain risk from the Company. During 1999, F and G filed for arbitration under those two treaties.
A dispute has also arisen with CIGNA Property and Casualty Insurance Company (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby the Company assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement.
While management believes its interpretation of the treaties' terms and computations based thereon are correct, this arbitration is in its early stages and its ultimate outcome cannot be determined at this time.
On September 23, 1999, Torchmark Corporation, formerly the Company's largest common stockholder, filed a lawsuit in the Circuit Court of Jefferson County, Alabama against the Company asserting breach of contract, conversion and breach of duty in connection with the Company's preparation and filing of a registration statement covering its shares in accordance with certain registration rights claimed by Torchmark. This claim seeks an injunction requiring a registration statement to be filed, as well as compensatory and punitive damages. This litigation is in its early stages, and management is unable to assess the damages that may be awarded, if any. However, management does not believe that such damages, if any, would materially and adversely affect the Company's financial position or results of operations.
On June 23, 1999, a subsidiary of Torchmark filed suit in the Circuit Court of Jefferson County, Alabama against two subsidiaries of the Company. The lawsuit claims that the Company's subsidiaries have failed to pay certain sums due under a marketing and administrative services agreement between the parties. The suit also seeks payment of certain commissions and administrative expenses. This litigation is in its discovery stages, and management is unable to assess the damages that may be awarded, if any. However, management does not believe that such damages, if any, would materially and adversely affect the Company's financial position or results of operations.
On June 13, 2000 Vesta purchased 3.75 million shares of its common stock held by Torchmark for $6.30 per share. On June 29, 2000, Vesta sold the 3.75 million shares in three separate transactions to unrelated third parties. Simultaneously with these transactions, Vesta entered into contracts that allow it to repurchase those securities or otherwise arrange for the sale of those securities to third parties by December 29, 2000 such that the unrelated third parties will receive $6.30 per share.
In the period ending September 30, 2000, the Company changed its segment reporting to reflect a change in our reportable segments due to the acquisition of American Founders Financial Corporation and the start up of a specialty lines segment. A brief description of each segment is as follows:
The standard property-casualty segment is primarily engaged in the marketing and distribution of personal lines products including Homeowners and Personal Auto coverages. Our products are distributed primarily through 2,500 independent agents in 42 states.
Our life insurance segment markets term insurance products, annuities and universal life through independent agents networks.
Our specialty lines segment enters into arrangements whereby we write property-casualty insurance and reinsure substantially all of the risks to reinsurers in exchange for fees.
Corporate and other primarily consists of net investment income on capital, interest on all debt and certain expenses not directly associated with a particular segment.
The Company uses the same accounting policies and procedures to measure operating segment income and assets as it uses to measure its consolidated net income and assets.
Segment information for the nine months ending September 30, 2000 and 1999 are as follows (in thousands):
Total Revenue Interest Expense Pretax Income Total Assests
2000 1999 2000 1999 2000 1999 2000 1999
Standard Property-Casualty $197,776 $290,320 -- -- $18,860 $18,544 $396,281 $561,229
Life Insurance 13,881 $2,497 -- 2,967 -- 906,457 --
Specialty Lines 141 -- -- -- 210 -- 1,862 --
Corporate Other 11,183 38,111 7,857 $9,267 (4,606) 20,344 213,138 189,203
$222,981 $328,431 $10,354 $9,267 $17,431 $38,888 $1,517,738 $750,432
======== ======== ======= ======= ======= ========== ========
The Commercial segment, which is not included herein because it has been discontinued reported revenue of $5.8 million and $51.6 million for the nine months ended September 30, 2000 and 1999 respectively. Pre tax income (loss) was $(1.0) million and $(7.6) million and total assets were $97 million and $256.8 million for nine months ended September 30, 2000 and 1999 respectively.
On June 30, 2000 the Company completed the acquisition of a 71% controlling interest in American Founders Financial Corporation for $25 million. American Founders is a life insurance holding company with approximately $1 billion (face value) of life products in force and approximately $185 million of annuity deposits as of December 31, 1999, American Founders is currently rated B+ by A.M. Best and operates in 40 states and the District of Columbia. The transaction has been accounted for as a purchase. Summarized below is an allocation of assets and liabilities acquired and the consolidated results of operations for the nine-months ended September 30, 2000 and 1999 on an unaudited pro forma basis as if the acquisition had occurred as of January 1, 1999. The pro forma information is based on the Company's consolidated results of operations for the nine-months ended September 30, 2000 and 1999 and on data provided by the acquired company, after giving effect to certain pro forma adjustments. The pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transactions occurred on the basis assumed above nor are they indicative of results of the future operations of the combined enterprises.
Assets and liabilities acquired (in thousands except per share amounts, unaudited):
Assets acquired
Invested assets $863,094
Value of business acquired 33,380
Other assets 15,632
----------
Total assets $912,106
Liabilities acquired:
Future policy benefits $690,701
FHLB notes payable 143,123
Other liabilities 53,282
----------
Total liabilities $887,106
Pro forma consolidated results of operations are as follows (in thousands except per share amount, unaudited):
Nine months ended
September 30
2000 1999
Total revenues $ 249,359 $ 368,810
Income available to common shareholders $ 12,813 $ 19,119
Income available to common shareholders per share-basic $ .70 $ 1.02
Income available to common shareholders per share-diluted $ .53 $ 1.02
The Company writes primary property-casualty insurance on selected Personal lines risks, balanced between risks of property damage (which is susceptible to faster determination of ultimate loss but is highly unpredictable) and casualty exposure (which is more predictable but takes longer to determine the ultimate loss), annuity and life insurance products and we write property-casualty insurance for reinsurers in exchange for a fee. In the past, we also wrote primary insurance on a variety of Commercial Lines risks. In each of these segments, we focused principally on property coverages, for which ultimate losses generally can be more promptly determined than on casualty risks. In the fourth quarter of 1999, we received final regulatory approval to discontinue our commercial insurance operations. Accordingly, our commercial lines segment is discussed herein as a discontinued operation.
Our revenues from operations are derived primarily from net premiums earned on risks written by our insurance subsidiaries, policy fees, investment income and investment gains or losses. Our expenses consist primarily of payments for claims and underwriting expenses, including agents’ commissions and operating expenses.
Significant factors influencing results of operations include the supply and demand for property and casualty insurance as well as the number and magnitude of catastrophic losses such as hurricanes, windstorms, fires and severely cold weather.
The Company seeks to manage its risk exposure by adjusting the mix and volume of business written in response to changes in price and maintaining extensive reinsurance.
The Company has historically followed a practice of reinsuring a portion of its primary business to spread the risk of loss to reinsurers. The Company’s loss reserve levels historically have remained relatively stable from year to year despite changes in premium volume. The Company is continuing to cede portions of insurance risks while using its capital base to gradually increase, on a selective basis, its retention of certain property risks.
Because catastrophe loss events are by their nature unpredictable, historical results of operations may not be indicative of expected results of future operations. The Company markets its primary personal insurance products throughout the United States. While the Company seeks to reduce its exposure to catastrophic events through the purchase of reinsurance, the occurrence of one or more major catastrophes in any given period could have a material adverse impact on the Company’s results of operations and financial condition and could result in substantial outflows of cash as losses are paid.
Other certain known trends and uncertainties which may affect our future results are discussed more fully below.
Competition: The insurance industry is highly competitive on the basis of both price and service. In recent years there has been a trend in the industry toward consolidation which could result in even more competitive pricing. We also face competition from foreign insurance companies, captive insurance companies and risk retention groups. In the future, the industry, including us, may face increasing insurance underwriting competition from banks and other financial institutions.
Litigation: See "Part II Item 1-Legal Proceedings" and Note C to the Consolidated Financial Statements for discussion of the current status of litigation.Reliance on Performance of Reinsurers: We evaluate the credit quality of the reinsurers to which it cedes business. No assurance can be given regarding the future ability of any of our reinsurers to meet their obligations.
Inflation: We do not believe our results over the last three fiscal years have been materially affected by inflation due in part to the predominantly short-tail nature of our business. The potential adverse impacts of inflation include: (i) a decline in the market value of our fixed maturity investment portfolio, (ii) an increase in the ultimate cost of settling claims which remain unsettled for a significant period of time, and (iii) an increase in our operating expenses. Historically, the effect of inflation on our reserves has not been material.
Comparison of Third Quarter 2000 to Third Quarter 1999Income available to common shareholders decreased by $2.3 million, or 46% to $2.7 million for the quarter ended September 30, 2000, from $5.0 million for the quarter ended September 30, 1999. On a diluted per share basis, income available to common shareholders for the Third Quarter of 2000 was $.14 per share versus net income of $.27 per share for the Third Quarter of 1999. The decrease in income available to common shareholder is primarily attributable to $3.1 million of after tax investment gains recognized during the Third Quarter of 1999 and the recognition of a $1.1 million after tax loss from the proposed sale of a building in Shelby, Ohio in the Third Quarter of 2000.
Standard Property-CasualtyNet premiums written for standard property-casualty lines decreased by $14.1 million, or 19.5%, to $58.3 million for the quarter ended September 30, 2000, from $72.4 million for the quarter ended September 30, 1999. Net premiums earned for standard property-casualty lines decreased $27.1 million, or 31.0% to $60.6 million for the quarter ended September 30, 2000, from $87.7 million for the quarter ended September 30, 1999. The decrease in net premiums written and net premiums earned are primarily attributable to the decrease in new policy application that occurred when we were temporarily downgraded by A.M. Best to a B (good).
Loss and loss adjustment expenses (“LAE”) for standard property-casualty lines decreased by $17.9 million, or 33.8%, to $35.0 million for the quarter ended September 30, 2000, from $52.9 million for the quarter ended September 30, 1999. The loss and LAE ratio for property-casualty lines for the quarter ended September 30, 2000 was 57.7% as compared to 60.2% at September 30, 1999. The decrease in loss and LAE incurred is primarily attributable to the decline in earned premium. The decrease in the loss and LAE ratio is primarily attributable to a decrease in catastrophe losses in the current period versus the prior year.
Policy acquisition expenses decreased by $9.8 million, or 41.4% to $13.9 million for the quarter ended September 30, 2000, from $23.7 million for the quarter ended September 30, 1999 primarily due to the decrease in earned premium.
Life InsurancePremiums and policy fees were $2.9 million for the quarter ended September 30, 2000 compared to zero for the comparable prior period due to the acquisition of American Founders on June 30, 2000. American Founders has approximately $1.2 billion face amount of life insurance and annuities in force at September 30, 2000.
Specialty LinesNet premiums written for specialty lines were $.4 million for the quarter ended September 30, 2000. Net premiums earned for specialty lines were $.1 million for the quarter ended September 30, 2000. For the quarter ended September 30, 2000, the Company earned approximately $114 thousand of fees.
Net Investment Income from Continuing OperationsNet investment income increased by $10.6 million, or 168%, to $16.9 million for the quarter ended September 30, 2000, from $6.3 million for the quarter ended September 30, 1999. The weighted average yield on invested assets (excluding realized and unrealized gains) was 7.0% for the quarter ended September 30, 2000, compared with 5.4% for the quarter ended September 30, 1999. The increase in investment income is primarily attributable to an increase in average invested assets from the American Founders acquisition and an increased investment yield resulting from a lower percentage of tax exempt securities in the current portfolio.
Federal Income TaxesFederal income taxes decreased by $1.9 million, or 41.3%, to $2.7 million for the quarter ended September 30, 2000. The effective rate on pre-tax income increased to 32.6% for the quarter ended September 30, 2000 versus 32.9% for the quarter ended September 30, 1999 due to lower tax exempt investment income.
Comparison of Nine months ended September 30, 2000 with Nine months ended September 30, 1999Income available to common shareholders decreased by $7.0 million, or 38.25%, to $11.3 million for the period ended September 30, 2000, from $18.3 million for the period ended September 30, 1999. On a diluted per share basis, income available to common shareholders for the period ended September 30, 2000 was $.53 per share versus income available to common shareholders of $.98 per share for the period ended September 30, 1999. The decrease in income available to common shareholders is primarily attributable to a $9.8 million after tax gain from the sale of certain reinsurance renewal rights and a $3.1 million after tax investment gain from the sale of Vesta's interest in Vesta County Mutual in the period ended September 30, 1999, and a $1.1 million after tax loss on the proposed sale of a building in Shelby, Ohio, partially offset by a $5.3 million extraordinary gain from extinguishments of debt in the nine months ended September 30, 2000.
Standard Property-Casualty LinesNet premiums written for standard property-casualty lines decreased by $20.9 million, or 10.6%, to $176.2 million for the period ended September 30, 2000, from $197.1 million for the period ended September 30, 1999. Net premiums earned for standard property-casualty lines decreased $87.2 million, or 31.5% to $190 million for the period ended September 30, 2000, from $277.2 million for the period ended September 30, 1999. The decrease in net premiums written and net premiums earned are primarily attributable a reduction in new policy applications in late 1999 and 2000 that occurred when we were temporarily downgraded by A.M. Best to a B (good).
Loss and loss adjustment expenses (“LAE”) for standard property-casualty lines decreased by $56.3 million, or 32.7%, to $115.7 million for the period ended September 30, 2000, from $172.0 million for the period ended September 30, 1999. The loss and LAE ratio for personal lines for the period ended September 30, 2000 was 60.9% as compared to 62.1% at September 30, 1999. The decrease in loss and LAE incurred is primarily attributable to the decline in earned premium. The decrease in the loss and LAE ratio is primarily attributable to increased salvage and subrogation recoverable from prior years partially offset by increased claim severity and higher losses from multiple storms occurring during the nine months ended September 30, 2000.
Policy acquisition expenses decreased by $33.9 million, or 45.2% to $41.0 million for the period ended September 30, 2000, from $74.9 million for the period ended September 30, 1999 primarily due to the decrease in earned premium.
Life InsurancePremiums and policy fees were $2.9 million for the period ended September 30, 2000 compared to zero for the comparable prior year period, due to the acquisition of American Founders on June 30, 2000. American Founders has approximately $1.2 billion face amount of life insurance and annuities in force at September 30, 2000.
Specialty LinesNet premiums written for specialty lines were $.4 million for the period ended September 30, 2000. Net premiums earned for specialty lines were $.1 million for the period ended September 30, 2000. For the period ended September 30, 2000, the Company earned approximately $114 thousand of fees for these arrangements.
Net Investment Income from Continuing OperationsNet investment income increased by $10.2 million, or 53.4%, to $29.3 million for the period ended September 30, 2000, from $19.1 million for the period ended September 30, 1999. The weighted average yield on invested assets (excluding realized and unrealized gains) was 6.4% for the period ended September 30, 2000, compared with 5.7% for the period ended September 30, 1999. The increase in investment income is primarily attributable to an increase in average invested assets from the acquisition of American Founders and increased investment yield resulting from a lower percentage of tax exempt securities in the current portfolio.
Federal Income TaxesFederal income taxes decreased by $6.6 million, or 53.6%, to $5.7 million for the period ended September 30, 2000. The effective tax on pre-tax income increased to 32.9% for the period ended September 30, 2000 versus 31.6% for the period ended September 30, 1999 primarily due to decreased tax exempt investment income.
Liquidity and Capital ResourcesVesta is a holding company whose principal asset is its investment in the capital stock of the companies constituting the Vesta Group, a group of wholly owned property and casualty insurance companies including Vesta Fire and a 71% interest in American Founders Financial Corporation, a life insurance holding company. The insurance subsidiaries comprising the Vesta Group are individually supervised by various state insurance regulators. The principal uses of funds at the holding company level are to pay operating expenses, principal and interest on outstanding indebtedness and deferrable capital securities and dividends to shareholders if declared by the Board of Directors.
Dividends
The principal internal source of liquidity is dividends from our insurance subsidiaries. During the last three years, our insurance subsidiaries have produced operating results and paid dividends sufficient to fund our needs. Except for the regulatory restrictions described below, we are not aware of any demands or commitments of the insurance subsidiaries that would prevent them from paying dividends sufficient to meet our anticipated needs (including debt service) for at least the next twelve months.
As a holding company with no other business operations, we rely primarily upon dividend payments from Vesta Fire to meet our cash requirements (including its debt service) and to pay dividends to our stockholders. Transactions between Vesta and its insurance subsidiaries, including the payment of dividends to Vesta by such subsidiaries, are subject to certain limitations under the insurance laws of those subsidiaries’ domiciliary states. The insurance laws of the state of Illinois, where Vesta Fire is domiciled, permit the payment of dividends in any year which, together with other dividends or distributions made within the preceding 12 months, do not exceed the greater of 10% of statutory surplus as of the end of the preceding year or the net income for the preceding year, with larger dividends payable only after receipt of prior regulatory approval.
Credit FacilitiesOn March 3, 2000, we established a revolving credit facility with First Commercial Bank, Birmingham, Alabama (“First Commercial”) which consists of the following lines of credit:
o a $7.5 million unsecured line which bears interest at First Commercial's prime rate + 1/4%; o an additional $7.5 million line which bears interest at First Commercial's prime rate, secured by a pledge of the management contract between our wholly owned management company, J. Gordon Gaines, Inc., and our operating insurance subsidiaries.Each of these newly established credit facilities mature on December 31, 2002. In addition, the credit agreements related to these facilities contain typical financial covenants which require us to maintain certain financial standards.
Long Term Debt and Preferred Stock
In the nine months ended September 30, 2000, Vesta has extinguished $13.1 million of its 8.75% Senior Debentures for approximately $9.8 million plus accrued interest and all $44.1 million of our 12.5% Senior Notes for approximately $38.2 million, plus accrued interest.
Annual distribution obligations for the Company’s long term debt and preferred stock outstanding at September 30, 2000 are as follows:
Security Principal Annual Interest Obligation
-------- --------- --------------------------
8.75% Senior Debentures due 2025... $86.8 million $7.6 million
8.525% Deferrable Capital Securities
due 2027.................... $41.2 million $3.5 million
Series A convertible Preferred Stock.. $25 million $2.25 million
The principal sources of funds for our insurance subsidiaries are premiums, policy fees, investment income and proceeds from the sale or maturity of invested assets. Such funds are used principally for the payment of claims, operating expenses, commissions and the purchase of investments. On a consolidated basis, net cash used in operations for the period ended September 30, 2000 and 1999, was $62.8 million and $59.1 million, respectively. The net cash used in operations is primarily attributable to the declines in loss reserves and unearned premium reserves as a result of the Company’s exit from the reinsurance assumed and commercial lines business.
As of September 30, 2000, the Company’s investment portfolio consisted of short-term investments (4.8%), U.S. Government securities (6.9%), mortgage-backed securities (46.2%), corporate bonds (30.2%), municipal bonds (3.6%) equity securities (1.8%) and mortgage and collateral loans (6.5%). The Company expects current cash flow to be sufficient to meet operating needs, although invested assets have been categorized as available for sale in the event short-term cash needs exceed available resources. The Company adjusts its holdings of cash, short-term investments and invested assets available for sale according to its seasonal cash flow needs.
Vesta’s principal assets are financial instruments, which are subject to the market risk of potential losses from adverse changes in market rates and prices. The Company’s primary risk exposures are interest rate risk on fixed maturity investments and equity price risk for domestic stocks. Vesta manages its exposure to market risk by selecting investment assets with characteristics such as duration, yield and liquidity to reflect the underlying characteristics of the related insurance.
Any statement contained in this report which is not a historical fact, or which might otherwise be considered an opinion or projection concerning the Company or its business, whether express or implied, is meant as and should be considered a forward-looking statement as that term is defined in the Private Securities Litigation Reform Act of 1996. Forward-looking statements are based on assumptions and opinions concerning a variety of known and unknown risks, including but not necessarily limited to changes in market conditions, natural disasters and other catastrophic events, increased competition, changes in availability and cost of reinsurance, changes in governmental regulations, and general economic conditions, as well as other risks more completely described in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. If any of these assumptions or opinions prove incorrect, any forward-looking statements made on the basis of such assumptions or opinions may also prove materially incorrect in one or more respects.
Subsequent to the filing of its quarterly report on Form 10-Q for the period ended March 31, 1998 with the Securities and Exchange Commission, the Company became aware of certain accounting irregularities consisting of inappropriate reductions of reserves and overstatements of premium income in the Company's reinsurance business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. The Company promptly commenced an internal investigation to determine the exact scope and amount of such reductions and overstatements. This investigation concluded that inappropriate amounts had, in fact, been recorded and the Company determined it should restate its previously issued 1997 financial statements and first quarter 1998 Form 10-Q. Additionally, during its internal investigation the Company re-evaluated the accounting methodology being utilized to recognize earned premium income in its reinsurance business. The Company had historically reported certain assumed reinsurance premiums as earned in the year in which the related reinsurance contracts were entered even though the terms of those contracts frequently bridged two years. The Company determined that reinsurance premiums should be recognized as earned over the contract period and corrected the error in its accounting methodology by restating previously issued financial statements. The Company issued press releases, which were filed with the Securities and Exchange Commission, on September 1, 1998 and September 29, 1998 announcing its intention to restate its historical financial statements.
The Company restated its previously issued financial statements for 1995, 1996 and 1997 and its first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders' equity of $75.2 million through March 31, 1998.
Commencing in September 1998, Vesta and several of its current and former officers and directors were named in several purported class action lawsuits in the United States District Court for the Northern District of Alabama and in one purported class action lawsuit in the Circuit Court of Jefferson County, Alabama. Several of Vesta's officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant.
The class action lawsuit filed in the Circuit Court of Jefferson County,Alabama has been dismissed and the derivative case has been placed on the administrative docket. The class actions filed in the United States District Court for the Northern District of Alabama have been consolidated into a single action in that district. The class representatives in that action have filed (a) a consolidated amended complaint alleging that the defendants violated the federal securities laws and (b) a motion for class certification, which was granted in 1999. The consolidated amended complaint also added as defendants Torchmark Corporation and the Company's former auditors, KPMG Peat Marwick, LLP. The consolidated amended complaint alleges various violations of the federal securities law and seeks unspecified but potentially significant damages.
The Company has notified its directors and officers liability insurance companies of these lawsuits and the consolidated amended complaint. The litigation is still in the preliminary stages and there has been no discovery conducted in the securities case. The Company intends to vigorously defend this litigation and intends to explore all available rights and remedies it may have under the circumstances. In related litigation, in September, 1998, Cincinnati Insurance Company ("Cincinnati"), one of the Company's directors and officers liability insurance carriers, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to avoid coverage under its directors and officers liability and other policies. The Company filed a motion to dismiss Cincinnati's complaint on jurisdictional grounds in federal court (which was granted), and filed a lawsuit against Cincinnati in the Circuit Court of Jefferson County, Alabama seeking damages arising out of Cincinnati's actions. Cincinnati has filed an answer and counterclaim in that case again seeking to avoid coverage.
Indemnification Agreements and Liability Insurance
Pursuant to Delaware law and by-laws, the Company is obligated to indemnify its current and former officers and directors for certain liabilities arising from their employment with or service to the Company. The Company believes that these indemnification obligations extend to its current and former officers' and directors' costs of defense and other liabilities which may arise out of the securities litigation described above.
The Company has purchased directors' and officers' liability insurance ("D and O insurance") for the purposes of covering among other things the costs incurred in connection with these indemnification obligations. For the period in which most of the claims against the Company and certain of its directors and officers were asserted, the Company had in place a primary D and O insurance policy providing $25 million in coverage and an excess D and O insurance policy covering for an additional $25 million in coverage. The issuer of the primary D and O insurance policy, Cincinnati, has attempted to avoid coverage as discussed above, and the Company is vigorously resisting its efforts to do so.
Subsequent to the initiation of the class actions described above, the Company secured additional excess D and O insurance providing coverage for losses in excess of $50 million up to $110 million, or additional excess coverage of $60 million for the class actions. The Company paid for this additional excess policy in full in 1998.
These matters are in their early stages and their ultimate outcome cannot be determined. Accordingly, the Company has not currently recorded any reserves relating to any of the above-referenced actions.
The Company, through its subsidiaries, is routinely a party to pending or threatened legal proceedings and arbitration relating to the regular conduct of its insurance business. These proceedings involve alleged breaches of contract, torts, including bad faith and fraud claims and miscellaneous other specified relief. Based upon information presently available, and in light of legal and other defenses available to the Company and its subsidiaries, management does not consider liability from any threatened or pending litigation regarding routine matters to be material.
As discussed above, the Company corrected its accounting for assumed reinsurance business through restatement of its previously issued financial statements. Similar corrections were made on a statutory accounting basis through recording cumulative adjustments in Vesta Fire's 1997 statutory financial statements. The impact of this correction has been reflected in amounts ceded under the Company's 20 percent whole account quota share treaty which was terminated on September 30, 1998 on a run-off basis. The Company believes such treatment is appropriate under the terms of this treaty and has calculated the quarterly reinsurance billings presented to the three treaty participants accordingly. The aggregate amount included herein as recoverable from such reinsurers totaled $54.4 million at September 30, 2000 exclusive of approximately $48.5 million that the company collected from such reinsurers via the conversion of collateral on hand.
NRMA, one of the participants in the 20 percent whole account quota share treaty, filed a lawsuit in the United States District Court for the Northern District of Alabama contesting the Company's claim and the validity of the treaty, and seeking return of $34.5 million collected by the conversion of collateral on hand. The Company filed a demand for arbitration as provided for by the treaty and filed a motion to compel arbitration which was granted in the United States District Court action. The Company has filed for arbitration against the other two participants on the treaty and those arbitrations are in their early stages. While management believes its interpretation of the treaty's terms and computations based thereon are correct, these matters are in their early stages and their ultimate outcome cannot be determined at this time.
A dispute has arisen with F and G Re (on behalf of USF and G) under two aggregate stop loss reinsurance treaties whereby Fand G assumed certain risk from the Company. During 1999, F and G Re filed for arbitration under those two treaties.
A dispute has also arisen with CIGNA Property and Casualty Insurance Company (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby the Company assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement.
While management believes its interpretation of the treaties' terms and computations based thereon are correct, this arbitration is in its early stages and its ultimate outcome cannot be determined at this time.
On September 23, 1999, Torchmark Corporation, formerly the Company's largest common stockholder, filed a lawsuit in the Circuit Court of Jefferson County, Alabama against the Company asserting breach of contract, conversion and breach of duty in connection with the Company's preparation and filing of a registration statement covering its shares in accordance with certain registration rights claimed by Torchmark. This claim seeks an injunction requiring a registration statement to be filed, as well as compensatory and punitive damages. This litigation is in its early stages, and management is unable to assess the damages that may be awarded, if any. However, management does not believe that such damages, if any, would materially and adversely affect the Company's financial position or results of operations.
On June 23, 1999, a subsidiary of Torchmark filed suit in the Circuit Court of Jefferson County, Alabama against two subsidiaries of the Company. The lawsuit claims that the Company's subsidiaries have failed to pay certain sums due under a marketing and administrative services agreement between the parties. The suit also seeks payment of certain commissions and administrative expenses. This litigation is in its discovery stages, and management is unable to assess the damages that may be awarded, if any. However, management does not believe that such damages, if any, would materially and adversely affect the Company's financial position or results of operations.
__________
| A current report was filed on Form 8-K/A dated September 12, 2000 reporting the required financial statements in connection with the acquisition of American Founders Financial Corporation. |
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned “hereunto duly authorized.
VESTA INSURANCE GROUP, INC.
Date: November 14, 2000
/s/ W. Perry Cronin
W. Perry Cronin
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 2000
/s/ Hopson B. Nance
Hopson B. Nance
Vice President,
Controller
(Principal Accounting Officer)
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