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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period ______ to ______ Commission File Number 001-12746
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SECURITY-CONNECTICUT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1383088
(State of incorporation) (I.R.S. Employer Identification Number)
20 Security Drive, Avon, Connecticut 06001
(Address of principal executive offices)
(860) 677-8621
Registrant's telephone number
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 [ ]
There were 8,582,471 shares outstanding of the Registrant's Common Stock, $.01
par value, as of May 2, 1997.
The exhibit index to this report is located on page 11.
Page 1 of 14
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<PAGE>
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
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Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996.............................. 3
Consolidated Statements of Income -
Three Months Ended March 31, 1997 and 1996........................ 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996........................ 5
Notes to Consolidated Financial Statements......................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 9
PART II - OTHER INFORMATION
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Item 6 Exhibits and Reports on Form 8-K................................... 11
Signatures......................................................... 12
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<PAGE>
<TABLE>
SECURITY-CONNECTICUT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<CAPTION>
(Unaudited)
March 31, December 31,
--------------- -------------
ASSETS 1997 1996
--------------- -------------
<S> <C> <C>
Investments:
Securities available-for-sale at fair value:
Fixed maturities (cost:1997-$1,586,809; 1996-$1,555,884) $ 1,584,062 $ 1,587,309
Equities (cost: 1997-$3,154; 1996-$1,913) 3,197 1,930
Mortgage loans on real estate 124,984 128,530
Policy loans 73,402 74,393
Other invested assets 7,607 6,914
--------------- -------------
Total investments 1,793,252 1,799,076
Cash and invested cash 12,883 29,027
Deferred policy acquisition costs 406,096 388,668
Premiums and fees receivable 8,708 7,860
Accrued investment income 28,150 28,798
Goodwill 20,426 20,653
Property and equipment 8,220 8,516
Acquired insurance in-force 8,148 8,284
Amounts recoverable from reinsurers 39,491 39,616
Other assets 7,131 7,772
--------------- -------------
Total assets $ 2,332,505 $ 2,338,270
=============== =============
LIABILITIES
Future policy benefits and claims $ 1,746,721 $ 1,735,277
Contractholder funds 65,206 61,407
Long-term debt 75,000 75,000
Federal income taxes payable 10,298 20,909
Dividends payable 1,201 1,027
Accrued expenses and other liabilities 82,657 88,185
Deferred gain on sale/leasebacks 1,208 1,233
--------------- -------------
Total liabilities 1,982,291 1,983,038
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01 per share;
Authorized - 10,000,000 shares;
issued and outstanding - none
Common stock, par value $0.01 per share; Authorized-
50,000,000 shares; issued and outstanding-
1997 - 8,583,025 shares; 1996 - 8,564,626 shares;
less 4,782 treasury shares 86 86
Paid-in capital 83,147 82,558
Net unrealized gains (losses) on securities available-for-sale (2,154) 10,873
Retained earnings 269,135 261,715
--------------- -------------
Total shareholders' equity 350,214 355,232
--------------- -------------
Total liabilities and shareholders' equity $ 2,332,505 $ 2,338,270
=============== =============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
SECURITY-CONNECTICUT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<CAPTION>
(Unaudited)
Three Months Ended March 31,
------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
REVENUE
Premiums $ 13,019 $ 14,042
Insurance fees 34,831 33,900
Net investment income 33,905 33,533
Realized gains on investments 169 4,135
Other 36 159
--------------- -------------
Total revenues 81,960 85,769
BENEFITS AND EXPENSES
Benefits and reserve increases 44,656 49,425
Insurance and other expenses 24,093 22,316
--------------- -------------
Total benefits and expenses 68,749 71,741
--------------- -------------
Income before federal income taxes 13,211 14,028
Federal income taxes 4,590 4,815
--------------- -------------
NET INCOME $ 8,621 $ 9,213
=============== =============
EARNINGS PER COMMON SHARE $ 0.99 $ 1.07
=============== =============
DIVIDENDS DECLARED PER COMMON SHARE $ 0.14 $ 0.12
=============== =============
Common stock and equivalents 8,729,375 8,598,410
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
SECURITY-CONNECTICUT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
(Unaudited)
Three Months Ended March 31,
------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,621 $ 9,213
Adjustments to reconcile net income to net cash used:
Deferred policy acquisition costs:
Amortization 10,723 11,111
Deferral (12,222) (17,624)
Decrease in accrued investment income 648 477
Decrease in policy liabilities and contractholder funds (20,502) (16,272)
Increase (decrease) in federal income taxes (3,584) 4,472
Net amortization of acquired insurance in-force and goodwill 363 396
Decrease (increase) in amounts recoverable from reinsurers 125 (3,625)
Increase in premiums and fees receivable (848) (1,986)
Realized gain on investments (169) (4,135)
Other (5,733) 5,875
--------------- -------------
Net cash used in operating activities (22,578) (12,098)
INVESTING ACTIVITIES
Fixed maturity securities available-for-sale:
Purchases (100,645) (161,045)
Sales 46,496 85,844
Maturities 23,526 31,834
Equity Securities
Purchases (1,240) (494)
Sales 5,135
Purchases of other investments (693) (302)
Sale or maturity of other investments 4,537 891
Other 1,119 (6,607)
--------------- --------------
Net cash used in investing activities (26,900) (44,744)
FINANCING ACTIVITIES
Universal life and investment contract deposits 63,907 64,180
Universal life and investment contract withdrawals (30,135) (26,277)
Issuance of long-term debt 75,000
Repayment of long-term debt (65,000)
Dividends to shareholders (1,027) (1,028)
Issuance of common stock 589 102
Acquisition of treasury stock (129)
Other 340
--------------- -------------
Net cash provided by financing activities 33,334 47,188
--------------- -------------
Net decrease in cash and invested cash (16,144) (9,654)
Cash and invested cash at beginning of period 29,027 29,753
--------------- -------------
Cash and invested cash at end of period $ 12,883 $ 20,099
=============== =============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
-5-
<PAGE>
SECURITY-CONNECTICUT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Accounting Policies and Principles
Basis of Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring accruals considered necessary for a fair presentation,
have been included. Operating results for the three month period ended March 31,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1996. The
accompanying financial information relates to the consolidated financial
statements of Security-Connecticut Corporation (the "Company" or
"Security-Connecticut") and its wholly owned subsidiaries, Arrowhead Ltd. (a
Bermuda insurance corporation) and Security-Connecticut Life Insurance Company
("SCL") and SCL's wholly owned subsidiary, Lincoln Security Life Insurance
Company ("LSL"). Significant intercompany transactions and balances have been
eliminated.
Earnings Per Common Share
Fully diluted earnings per common share are not presented as they are not
materially different from primary earnings per common share.
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997
presentation. These reclassifications had no impact on the previously reported
net income.
2. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("FAS") No. 128, "Earnings per Share" which is
required to be adopted on December 31, 1997. At that time the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements, primary earnings per
share will be replaced by basic earnings per share which excludes the dilutive
effect of stock options. FAS 128 also requires that diluted earnings per share,
which replaces and is not significantly different from the calculation of fully
diluted earnings per share, also be presented. The comparative pro-forma
disclosure of the effect of adopting this FAS as of March 31, 1997 is as follows
(in thousands, except for earnings per share information):
-6-
<PAGE>
<TABLE>
<CAPTION>
For the Quarter For the Quarter
Ended 3/31/97 Ended 3/31/96
--------------------------- -------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share as reported $8,621 8,729 $ 0.99 $9,213 8,598 $ 1.07
Basic earnings per share 8,621 8,566 1.01 9,213 8,556 1.08
Diluted earnings per share 8,621 8,729* 0.99 9,213 8,598* 1.07
<FN>
* Consists of shares outstanding plus incremental shares assumed issued for
outstanding stock options.
</FN>
</TABLE>
3. Litigation
The Company is involved in lawsuits concerning policy terms and benefits
and the actions of independent agents, which seek both punitive and compensatory
damages. Because of the considerable uncertainties that exist, the Company
cannot predict the outcome of pending or future litigation with certainty. It is
possible that results in a particular period could be materially affected by
certain legal proceedings. Based on consultation with the Company's internal and
external legal advisors, management believes that valid defenses exist, and that
the results of such litigation will not have a material adverse effect on the
results of operations or financial position of the Company.
The Company is involved in three class action lawsuits as follows:
Zipf vs. Security-Connecticut Life Insurance Company, et al., Court of
Common Pleas of Allegheny County, Pennsylvania.
The complaint, seeking actual and punitive damages, alleges that SCL has a
practice of misleading and/or misinforming policyholders on the basis of a
policy rate class designation. Specifically, the plaintiff alleges that the
"special non-smoker" designation leads policyholders to believe that they are
being charged premiums based on a "superior" rate when the actual premiums are
based on an "inferior, substandard or rated class."
In June 1995, the Pennsylvania court ordered the case certified as a class
action. The court later limited the class to Pennsylvania residents "who
purchased life insurance policies from Security-Connecticut Life Insurance
Company designated as 'Premium Rate Class Special Non-Smoker' on or after
November 17, 1986." SCL has filed a motion for revocation of class
certification.
Jacobson, et al. vs. Security-Connecticut Life Insurance Company, et al.,
Superior Court, Judicial District of Hartford/New Britain at Hartford,
Connecticut.
Plaintiffs originally filed a class action complaint in November 1995,
alleging breach of contract, fraud and violation of Connecticut's Unfair Trade
Practices Act. Plaintiffs claimed that SCL improperly charged additional
premiums to pay for the tax on deferred policy acquisition costs ("DAC")
incurred by defendants Lincoln National Life Insurance Company ("LNL") and the
Company.
-7-
<PAGE>
In November 1996, the plaintiffs filed a Request for Leave to Amend
Complaint, alleging in the proposed Complaint that SCL misled purchasers about
the cost of insurance and insurance rates and improperly increased premiums for
factors other than changes in mortality. Plaintiffs now seek to assert a class
action claim against SCL and SCC on behalf of "all persons . . . who purchased a
life insurance policy from defendant Security-Connecticut Life Insurance Company
and thereafter had their premiums increased," as well as on behalf of a
sub-class of Connecticut policyholders under an Unfair Trade Practices count.
The proposed amended complaint alleges breach of contract, fraud, fraud in
the sale of insurance contracts, and violation of Connecticut's Unfair Trade
Practices Act. It does not allege, as before, that SCL charged additional
premiums to pay for tax on DAC. SCL has filed an objection to the plaintiffs'
request to amend the Complaint. The plaintiffs have moved to withdraw their
claims against LNL, stating that the claims in the proposed amended complaint do
not directly implicate LNL.
Plaintiffs seek contractual damages, punitive damages, attorneys' fees and
the imposition of a constructive trust as to any excess amounts allegedly paid
by the plaintiffs. The parties are presently pursuing settlement discussions;
however, management does not believe that any resulting settlement would be
material to the Company's financial statements.
Semler vs. First Colony Life Insurance Company, et al., Superior Court, San
Francisco, California.
The plaintiff filed a class action complaint in February 1997 against SCL
and twenty-nine other insurance companies, alleging that those companies have
improperly collected "unearned premiums" for a period of time when they do not
actually provide insurance coverage. The plaintiff, who purchased a life
insurance policy from First Colony Life Insurance Company, claims that all the
defendant companies provide in their contracts that no insurance shall take
effect until the policy is delivered and the first premium paid during the
continued good health of the proposed insured. The companies bill premiums,
however, from either an issue date or policy date, which allegedly might precede
the effective date of coverage. The plaintiff claims that this industry practice
violates certain provisions of California's Business and Professions Code. The
plaintiff amended the complaint in March 1997 to add another defendant, to
insert allegations as to "delayed coverage," and to challenge premiums and
coverage where a conditional receipt is issued.
The plaintiff seeks restitution, injunctive relief, attorneys' fees and
expenses.
4. Merger
On February 23, 1997, ReliaStar Financial Corp. ("ReliaStar") and
Security-Connecticut signed a definitive agreement to combine the two companies
through the statutory merger of Security-Connecticut with and into ReliaStar.
The Board of Directors of Security-Connecticut has unanimously approved the
merger. Completion of the merger is subject to normal closing conditions,
including approval by the Company's shareholders and various regulatory
approvals. Provided there has been no material breach by ReliaStar of the
representations, warranties, covenants and agreements of ReliaStar under the
merger agreement, Security-Connecticut has agreed to pay ReliaStar $8 million if
the merger agreement is terminated either as a result of (a) the modification or
withdrawal, in any way detrimental to ReliaStar, of the recommendation of the
Security-Connecticut Board with respect to the merger, or (b) the execution by
Security-Connecticut of a definitive agreement with a party other than ReliaStar
with respect to a publicly announced offer or intent to make an offer to acquire
all or substantially all of Security-Connecticut or its subsidiaries.
-8-
<PAGE>
Separately and not additionally, if the merger agreement is terminated by
ReliaStar on the basis that the Security-Connecticut shareholders did not
approve the merger, then Security-Connecticut would be required to pay ReliaStar
$2.5 million to reimburse ReliaStar's expenses incurred in connection with the
merger agreement. In addition to the foregoing $2.5 million payment, if an
acquisition proposal is outstanding on the date of such termination, or at any
time within 90 days thereafter, and an acquisition proposal is consummated
within twelve months of the termination of the merger agreement, the Company has
agreed to pay ReliaStar an additional $5.5 million. The foregoing discussion is
qualified in its entirety by reference to the merger agreement filed as an
exhibit to the Company's Annual Report on Form 10-K, for the year ended December
31, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1997 compared to the Three Months Ended March 31,
1996.
Premiums - Premiums decreased $1.0 million, or 7.3%, from $14.0 million in
1996 to $13.0 million in 1997 due principally to an increase in ceded premiums
under various reinsurance agreements partially offset by an increase in term
premiums.
On a statutory-basis the Company's first year annualized life premiums on
new life insurance sales for individual life insurance decreased 30.2%, from
$13.4 million in 1996 to $9.4 million in 1997 primarily as a result of a
decrease in sales of universal life and term products. Management believes the
decline is primarily due to the highly competitive insurance environment and may
also reflect the effect of the downgrade of the Company's claims-paying ability
by A.M. Best in the fourth quarter of 1996. Although life sales may continue to
decline in the second quarter of 1997, management expects with the offering of
additional new products, sales should improve for the latter part of 1997.
Annualized annuity sales decreased $2.2 million or 16.8% from $13.0 million in
1996 to $10.8 million in 1997. The Company continues to maintain profit margins
on annuity products rather than sacrifice profitability to increase sales.
Insurance Fees - Insurance fees, primarily mortality and expense
assessments on universal life products and surrender charges increased $0.9
million, or 2.7%, from $33.9 million in 1996 to $34.8 million in 1997. The
increase resulted primarily from the growth of insurance in-force and aging of
the in-force block of business resulting in higher average mortality charges.
Net Investment Income - Net investment income increased $0.4 million, or
1.1%, from $33.5 million in 1996 to $33.9 million in 1997. This reflects the
increase in the cost basis of invested assets, offset slightly by a lower
effective yield on such assets. The effective yield on invested assets was 7.5%
for 1997 compared with 7.7% for 1996.
Realized Gains on Investments - Net realized gains on investments were $0.2
million in 1997 compared with realized gains of $4.1 million in 1996. The 1997
gains were the result of net realized capital gains of $0.3 million from the
sale of investments, offset by DAC associated with realized gains of $0.1
million. The 1996 gains were the result of net realized gains from the sale of
investments of $4.8 million offset by increases in the allowance for losses and
permanent impairment writedowns of $0.2 million and DAC associated with realized
gains of $0.5 million.
-9-
<PAGE>
Benefits and Reserves - Benefits and reserve increases decreased $4.7
million, or 9.6%, from $49.4 million in 1996 to $44.7 million in 1997. The
Company's life claim experience for 1997 was favorable compared to plan by $6.6
million, or approximately $0.49 per share, after-tax, and was approximately $2.9
million below 1996. Interest credited to policyholders decreased $0.8 million,
or 3.6% from $21.6 million in 1996 to $20.8 million in 1997 due primarily to a
slight decrease in crediting rates as a result of rate resets on contract
anniversary dates. Increases in policy reserves and other fund deposits
increased $1.8 million from $1.4 million in 1996 to $3.2 million in 1997 due
primarily to an increase in the acquisition load liability, a smaller release of
single premium immediate annuity reserves and fewer whole life policy lapses in
1997 compared to 1996. Surrenders increased $0.3 million, or 15.2%, from $2.2
million in 1996 to $2.5 million in 1997.
Insurance and Other Expenses - Insurance and other expenses increased $1.8
million, or 8.0%, from $22.3 million in 1996 to $24.1 million in 1997.
Commissions, net of DAC, increased $0.4 million, or 4.3%, from $8.5 million in
1996 to $8.9 million in 1997. General administrative and other operating costs,
net of DAC, increased $1.4 million, or 10.2%, from $13.8 million in 1996 to
$15.2 million in 1997 primarily due to increases in legal, data processing, and
interest costs and taxes, licenses an fees.
Federal Income Taxes - Federal income taxes decreased $0.2 million from
$4.8 million in 1996 to $4.6 million in 1997. This was primarily due to lower
pre-tax operating income. The effective tax rates were 34.7% and 34.3% in 1997
and 1996, respectively, compared to a statutory rate of 35%.
Liquidity and Capital Resources
Security-Connecticut Corporation is a holding company whose principal
assets are Arrowhead Ltd. and SCL and its wholly owned insurance subsidiary. The
Company is dependent on receiving dividends from SCL and Arrowhead Ltd. to pay
operating expenses, meet debt service payments and make dividend payments to its
shareholders. The dividends from SCL and Arrowhead Ltd. are subject to
restrictions set forth by the laws of Connecticut and the Bermuda Registrar of
Companies, respectively.
Cash flow from SCL's insurance operations consists primarily of its
contractual obligations to policyholders and annuitants and its payment of
dividends to the Company. The primary source of meeting these contractual
requirements is investment income from its total investment portfolio, scheduled
maturities from its available-for-sale fixed maturity security portfolio, and
principal repayments from its mortgage loan portfolio, as well as a portion of
premium income.
To provide for additional liquidity to meet normal variations in contract
obligations, the Company maintains cash and short-term investments, and a
significant portion (75.6% at March 31, 1997) of its fixed maturity portfolio in
investment grade public debt securities. The Company believes that its liquidity
needs are adequately met with the aforementioned investment policies, combined
with the contractual terms of its life insurance and annuity products.
The Company has entered into several interest rate cap agreements as a
hedge against rising interest rates in its SPDA investment portfolio. As of
March 31, 1997, these agreements established cap rates ranging from 7.07% to
12.5% on notional principal of $510 million with termination dates through 2001.
The aggregate cost of $3.6 million is being amortized to net investment income
over the effective life of the caps. These investments are reported as fixed
maturity securities and classified as available-for-sale and are carried at fair
value ($2.1 million at March 31, 1997) with unrealized gains and losses reported
in shareholders' equity. The Company is exposed to credit loss in the event of
non-performance by counterparties on the caps. Due to the high quality rating of
the counterparties, the Company does not anticipate non-performance by any of
the counterparties. The amount of such exposure is approximately the unrealized
gain in such contracts as interest rates rise.
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<PAGE>
The Company does not believe that inflation has had a material effect on
its consolidated results of operations. The Company manages its investment
portfolio in part to reduce its exposure to interest rate fluctuations. In
general, the market value of the Company's fixed maturity portfolio increases or
decreases in inverse relationship with fluctuations in interest rates, and the
Company's net investment income increases or decreases in direct relationship
with interest rate changes. For example, if interest rates decline (as was the
case in 1995), the Company's fixed maturity investments generally will increase
in market value, while net investment income may decrease as fixed maturity
investments mature or are sold and proceeds are reinvested at the declining
rates. If interest rates increase (as was the case in 1996), the Company's fixed
maturity investments generally will decrease in market value, while net
investment income may increase as fixed maturity investments mature or are sold
and proceeds are reinvested at the increased rates.
Interest rate changes may have temporary effects on the sale and
profitability of the universal life and annuity products offered by the Company.
For example, if interest rates rise, competing investments (such as annuities or
life insurance offered by the Company's competitors, certificates of deposit,
mutual funds, and similar instruments) may become more attractive to potential
purchasers of the Company's products until the Company increases the rate
credited to holders of its universal life and annuity products. The Company
monitors interest rates with respect to a spectrum of durations and sells
policies and annuities that permit flexible responses to interest rate changes
as part of the Company's management of interest spreads.
Part II - Other Information
ITEMS 1, 2, 3, 4, and 5 are either inapplicable or are answered in the negative
and are omitted pursuant to the instructions to Part II.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibit 12.01 - Calculation of ratio of earnings to fixed charges,
page 13.
b.) A report on Form 8-K dated February 25, 1997 relating to the Agreement
and Plan of Merger of Security-Connecticut Corporation with and into
ReliaStar Financial Corp. dated February 23, 1997.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SECURITY-CONNECTICUT CORPORATION
(Registrant)
Date: May 15, 1997 /s/Ronald D. Jarvis
----------------- ---------------------------------------
Ronald D. Jarvis, Chairman, President
and Chief Executive Officer
(Principal Executive Officer); Director
Date: May 15, 1997 /s/Robert J. Voight
----------------- ---------------------------------------
Robert J. Voight, Executive Vice President,
(Principal Financial Officer)
Date: May 15, 1997 /s/Richard D. Mocarski
----------------- ---------------------------------------
Richard D. Mocarski, Vice President,
Controller and Treasurer
(Principal Accounting Officer)
-12-
<TABLE>
<CAPTION>
Exhibit 12.01
SECURITY-CONNECTICUT CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months
Ended
March 31, Year Ended December 31,
--------- ----------------------------------------------------
1997 1996 1995 1994 1993(1) 1992(1)
-------- -------- -------- -------- -------- --------
(thousands of dollars, except ratio data)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before federal
income tax and
cumulative effects
of accounting change $ 13,211 $ 53,571 $ 36,396 $ 37,967 $ 40,513 $ 32,815
Fixed charges, excluding
interest on annuities
and financial products 1,846 7,305 6,355 5,027 4,434 4,760
-------- -------- -------- -------- -------- --------
Earnings, excluding interest
on annuities and
financial products 15,057 60,876 42,751 42,994 44,947 37,575
Interest on annuities and
financial products 20,849 84,939 87,034 75,747 70,785 67,708
-------- -------- -------- -------- -------- --------
Earnings $ 35,906 $145,815 $129,785 $118,741 $115,732 $105,283
======== ======== ======== ======== ======== ========
Fixed Charges:
Interest expense on debt $ 1,366 $ 5,409 $ 4,495 $ 3,208 $ 2,641 $ 2,990
Interest component of
rent expense 480 1,896 1,860 1,819 1,793 1,770
-------- -------- -------- -------- -------- --------
Fixed charges, excluding
interest on annuities and
financial products 1,846 7,305 6,355 5,027 4,434 4,760
Interest on annuities and
financial products 20,849 84,939 87,034 75,747 70,785 67,708
-------- -------- -------- -------- -------- --------
Fixed charges $ 22,695 $ 92,244 $ 93,389 $ 80,774 $ 75,219 $ 72,468
======== ======== ======== ======== ======== ========
Ratios of Earnings to Fixed Charges:
Excluding interest on annuities
and financial products (2) 8.16 8.33 6.73 8.55 10.14 7.89
Including interest on annuities
and financial products (3) 1.58 1.58 1.39 1.47 1.54 1.45
<FN>
(1) The amounts reported are pro-forma and assume the $65 million Term Note was
outstanding in years 1993 and 1992, at LIBOR plus .75%, as more fully
described in the Company's financial statements included in its Annual
Report on Form 10-K, for the year ended December 31, 1996.
(2) This ratio is comprised of the relationship of "earnings excluding interest
on annuities and financial products" to "fixed charges excluding interest
on annuities and financial products" as disclosed above.
(3) This ratio is comprised of the relationship of "earnings" to "fixed
charges" as disclosed above.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the three month period ended March 31, 1997 as filed on
Form 10-Q and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000913601
<NAME> Security-Connecticut Corporation
<S> <C>
<PERIOD-TYPE> 3-MOS
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