<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1996
PROFESSIONAL BENEFITS INSURANCE COMPANY
(Exact Name of Small Business as Specified in its Charter)
TEXAS 74-2072635
(State or Other (IRS Employer
Jurisdiction Incorporation Identification Number)
or Organization)
COMMISSION FILE NUMBER: 0-22344
10835 ROCKLEY ROAD
HOUSTON, TEXAS 77099
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(Address or principal executive office) (Zip Code)
(713) 561-9919
(Registrant's telephone number)
Check mark whether the Issuer (1) filed all reports required 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
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The number of shares of Class A common stock the Registrant, par value
$1.22 per share, issued and outstanding at March 31, 1996 was 587,129.
The number of shares of Class B common stock the Registrant, par value
$1.22 per share, issued and outstanding at March 31, 1996 was 73,524.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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PROFESSIONAL BENEFITS INSURANCE COMPANY
INDEX TO FORM 10-Q
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ITEM 1. Financial Statements.
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995... 3
Consolidated Income Statements - Three Months Ended
March 31, 1996 and 1995........................................... 5
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1996 and 1995........................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 7
</TABLE>
2
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Item 1. Financial Statements.
PROFESSIONAL BENEFITS INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1996
(Unaudited) DECEMBER 31, 1995*
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<S> <C> <C>
INVESTMENTS
Fixed maturity securities held for investment,
at market value (amortized cost: March 31, 1996 -
$1,097,371; and December 31, 1995 - $1,230,621) $1,074,934 $1,220,642
Common stock mutual funds, at market 1,001,509 856,389
Short-term investments, at cost 1,415,784 1,420,523
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Total Investments 3,492,227 3,497,554
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CASH 14,758 37,252
DUE FROM REINSURERS 882,468 1,006,756
ACCRUED INVESTMENT INCOME 25,099 47,643
PREMIUMS DUE AND UNCOLLECTED 109,600 28,551
ACCOUNTS RECEIVABLE 36,584 36,584
LAND AND BUILDING, At Cost
(Net of accumulated depreciation of
$386,348 - 1996 and $376,794 - 1995) 566,440 575,994
FURNITURE AND EQUIPMENT, At Cost
(net of accumulated depreciation -
$324,225 - 1996 and $529,326 - 1995) 244,572 217,139
GUARANTY FUND ASSESSMENTS 8,919 10,361
FEDERAL INCOME TAX RECEIVABLE 188,000 188,000
OTHER ASSETS, At Cost 50,097 37,630
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Total Assets $5,618,764 $5,683,464
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</TABLE>
*The amounts for December 31, 1995 were derived from amounts included in the
audited financial statements filed as part of the Company's 1995 Form 10K.
3
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Item 1. Financial Statements. (continued)
PROFESSIONAL BENEFITS INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (cont'd.)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, 1996
(Unaudited) DECEMBER 31, 1995*
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<S> <C> <C>
LIABILITIES
Future policy benefits $ 949,187 $1,052,509
Policy claims 1,447,000 1,623,000
Premiums received in advance 150,016 100,488
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2,546,203 2,775,997
Reinsurance payable 45,584 31,820
Federal income taxes payable 38,466 0
Deferred Tax Liability 16,100 5,000
Other liabilities 310,168 300,951
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Total Liabilities 2,956,521 3,113,768
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STOCKHOLDERS' EQUITY
Common stock
Class A voting, $1.22 par value; 1,022,668
authorized shares; 587,329 and issued and
outstanding in 1996 and 1995 716,594 716,594
Class B nonvoting, $1.22 par value; 136,720
authorized shares; 73,524 issued and
outstanding in 1996 and 1995 89,699 89,699
Additional paid-in capital 536,214 536,464
Unrealized gain(loss) on investments
(net of deferred income tax benefits (liabilities)
of $(32,300) - 1996 and $(21,200) - 1995) 62,822 41,959
Retained earnings 1,256,914 1,184,980
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Total Stockholders' Equity 2,662,243 2,569,696
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Total Liabilities and Stockholders' Equity $5,618,764 $5,683,464
========== ==========
</TABLE>
*The amounts for December 31, 1995 were derived from amounts included in the
audited financial statements filed as part of the Company's 1995 Form 10K.
4
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Item 1. Financial Statements. (continued)
PROFESSIONAL BENEFITS INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENTS
QUARTERS ENDING MARCH 31, 1996 AND MARCH 31, 1995
<TABLE>
<CAPTION>
1996 1995
3 MONTHS 3 MONTHS
ENDED 3/31/96 ENDED 3/31/95
(Unaudited) (Unaudited)
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<S> <C> <C>
REVENUES
Premiums earned $2,353,680 $2,245,862
Less reinsurance ceded 101,536 131,767
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Net premiums earned 2,252,144 2,114,095
Net investment income 52,201 48,265
Other income 30,688 27,503
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Total Revenues 2,335,033 2,189,863
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BENEFITS, CLAIMS AND EXPENSES
Benefits and claims 1,781,041 1,905,782
Less reinsurance recoverable 132,316 100,149
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Net benefits and claims 1,648,725 1,805,633
Commissions 92,253 62,075
Underwriting, acquisition, insurance, and
administrative expenses 457,232 514,588
Taxes, licenses, and fees 23,689 0
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Total Benefits, Claims and Expenses 2,221,899 2,382,296
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INCOME BEFORE INCOME TAXES 113,134 (192,433)
INCOME TAX PROVISION 38,466 0
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NET INCOME $74,668 ($192,433)
========== ==========
NET INCOME PER SHARE
(Based on Weighted Average Shares of
Common Stock Outstanding during the
year of 660,653 - 1996; 660,853 - 1995) $0.11 ($0.29)
</TABLE>
5
<PAGE> 6
Item 1. Financial Statements. (continued)
PROFESSIONAL BENEFITS INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTERS ENDING MARCH 31, 1996 AND MARCH 31, 1995
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS
ENDED 3/31/96 ENDED 3/31/95
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Premiums $2,291,974 $2,114,095
Net investment income 16,224 48,265
Other income 33,011 27,503
Benefits and claims (1,757,076) (1,781,277)
Commissions (107,237) (62,075)
Underwriting, acquisition, insurance, and
administrative expenses (552,126) (514,588)
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Net cash provided by (used in) operating activities (75,230) (168,077)
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CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale or maturing of investments 100,000 (4,065)
Purchase of investments 0 (75,000)
Purchase of furniture and equipment (42,365) (68,627)
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Net cash provided by (used in) investing activities 57,635 (147,692)
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CASH FLOW FROM FINANCING ACTIVITIES
Principal payments on capital lease payable (4,899) 0
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Net cash provided by (used in) investing activities (4,899) 0
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INCREASE (DECREASE) IN CASH (22,494) (315,769)
CASH, BEGINNING OF YEAR 37,252 396,944
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CASH, END OF YEAR $14,758 $81,175
========== ==========
</TABLE>
6
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Part I, Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Change in PBIC revenues for the 1st Quarter, 1996 and 1st Quarter, 1995 are
shown below:
<TABLE>
<CAPTION>
3 Mths Ended 3 Mths Ended
3/31/96 3/31/95
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<S> <C> <C>
Total Revenues $2,335,033 $2,189,863
Increase/(Decrease) in Revenues Compared to Preceding Period $ 145,170 $ (73,751)
Percentage of Change Compared to Preceding Period 6.6% (3.3%)
</TABLE>
The primary components of PBIC's revenue are premiums, management fees and net
investment income.
Changes in premium revenue for the 1st Quarter, 1996 and 1st Quarter, 1995 are
shown below:
<TABLE>
<CAPTION>
3 Mths Ended 3 Mths Ended
3/31/96 3/31/95
------------ ------------
<S> <C> <C>
Total Earned Premiums $2,252,144 $2,114,095
Increase/(Decrease) in Premiums Compared to Preceding Period $ 138,049 $ (93,118)
Percentage of Change Compared to Preceding Period 6.5% (4.2%)
</TABLE>
In the 1st Quarter, 1996 premiums increased by $138,049 from the 1st Quarter,
1995. The increase in premium is due to increasing sales of dental insurance
and the addition of three associations with which the Company has contracted to
provide major medical insurance as of March 1, 1996.
Components of the changes in net investment income for the 1st Quarter, 1996
and 1995 are shown below:
<TABLE>
<CAPTION>
3 Mths Ended 3 Mths Ended
3/31/96 3/31/95
------------ ------------
<S> <C> <C>
Total Net Investment Income $52,201 $48,265
Increase/(Decrease) in Net Investment Income Compared to Preceding Period $ 3,936 $16,014
Percent Change in Net Investment Income 8.2% 49.7%
</TABLE>
In the three months ending March 31, 1996 investments experienced a 8.2%
increase in total net investment income due to the increased market value of
equities currently being held by PBIC.
7
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Part I, Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
General and Administrative expenses for the 1st Quarter, 1996 and 1995 are show
below:
<TABLE>
<CAPTION>
3 Mths Ended 3 Mths Ended
3/31/96 3/31/95
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<S> <C> <C>
General & Admin. Expenses $457,232 $514,588
Increase/(Decrease) in General & Admin. Expenses Compared to Preceding Period
Percentage of Change Compared to Preceding Period (11.1%) (1.8%)
</TABLE>
The decrease in general and administrative expense for the three months ending
March 31, 1996 from the three months ending March 31, 1995 is due to
management's efforts to control costs and properly accrue expenses. These
expenses include audit, actuarial, and legal expenses which were not accrued
for in prior periods.
Commission expenses for 1st Quarter of 1996 and 1995 are show below:
<TABLE>
<CAPTION>
3 Mths Ended 3 Mths Ended
3/31/96 3/31/95
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<S> <C> <C>
Total Commission Expenses $92,253 $ 62,075
Increase/(Decrease) in Commission Expenses Compared to Preceding Period
Percentage of Change Compared to Preceding Period 48.6% (26.8%)
</TABLE>
The increase in commission expense is due to an increase in gross written
premiums for the 1st quarter of 1996. This increase is due to increased sales
of dental and major medical insurance. First year commissions are higher than
renewal commissions for major medical insurance and dental insurance has a
higher commission structure than other lines of business which the Company
markets.
LIQUIDITY
All funds in excess of immediate cash needs are invested in short-term money
market funds, government bonds, and stock mutual funds. The current allocation
of funds is government bonds 37.6%, cash 7.7%, common stock mutual funds 30.3%,
short-term money market funds 24.4%.
The three months ending March 31, 1996 cash flow decreased by $(22,494). This
decrease is primarily due to premium taxes of $23,689, which were paid in the
first quarter of 1996. The prior year premium tax liability increased due to a
decrease of the credit available from the Texas Guaranty Fund. The amount of
these credits can vary from year to year. Increased commissions and
acquisition expenses resulting from increased sales of insurance also
contributed to this decrease in cash flow.
8
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Part I, Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
The Company does not expect to declare any dividends on its stock in the
foreseeable future. No dividends have been declared or paid in the prior three
years.
CAPITAL RESOURCES
PBIC currently does not have any outstanding debts. PBIC does not anticipate
the need for any substantial new capital or debt in the foreseeable future.
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PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
consolidated financial position as of March 31, 1996 and December 31, 1995, the
consolidated results of operations and its cash flow for the periods ended
March 31, 1996 and March 31, 1995, and are of a normal recurring nature.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On January 15, 1996 Professional Benefits Insurance Company
(PBIC) entered into a marketing agreement with Don M. Canada
d.b.a. Professional Benefits Managers. As part of this
agreement Mr. Canada moved the insurance of three associations
to PBIC as of March 1, 1996. This agreement had a positive
impact on PBIC's revenues. Based on the level of premium
revenue as of December 31, 1995, the addition of the three
associations will increase premium revenue by approximately
13.6%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
11
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on it's behalf by the undersigned
thereunto duly authorized.
PROFESSIONAL BENEFITS INSURANCE COMPANY
Date 5-10-96 /s/ JERRY O. RAY
_________________ __________________________________
Signature
Jerry O. Ray - President
Date 5-10-96 /s/ STEVEN TAYLOR
_________________ __________________________________
Signature
Steven Taylor - Controller
12
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EXHIBIT INDEX
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 1,074,934
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,001,509
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,492,227
<CASH> 14,758
<RECOVER-REINSURE> 882,468
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 5,618,764
<POLICY-LOSSES> 2,396,187
<UNEARNED-PREMIUMS> 150,016
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 806,293
0
0
<OTHER-SE> 1,319,736
<TOTAL-LIABILITY-AND-EQUITY> 5,618,764
2,252,144
<INVESTMENT-INCOME> 52,201
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 30,688
<BENEFITS> 1,648,725
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 573,174
<INCOME-PRETAX> 113,134
<INCOME-TAX> 38,466
<INCOME-CONTINUING> 74,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,668
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<RESERVE-OPEN> 2,382,805
<PROVISION-CURRENT> 1,045,134
<PROVISION-PRIOR> 1,279,334
<PAYMENTS-CURRENT> 542,228
<PAYMENTS-PRIOR> 1,205,544
<RESERVE-CLOSE> 2,324,468
<CUMULATIVE-DEFICIENCY> (102,074)
</TABLE>