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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark
One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from _______ to ________
Commission file number 33-94226-A
WMA INTERNATIONAL CORPORATION
(Name of small business issuer in its charter)
Delaware 58-2179041
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5555 Triangle Parkway, N.W., Second Floor, Norcross, Georgia 30092
(Address of principal executive offices)
Issuer's telephone number: (770) 453-9300
Check whether the issuer (1) filed all reports required to be filed by Sect
ion 13 or 15(d) of the Exchange Act during the past 12 months (or for such short
er 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date:
As of September 30, 1997, there were 2,411,742 shares of common stock
(.001 par value) outstanding, and 88,258 warrants had been issued, each
warrant representing the right to purchase a share of common stock for $10.
Transitional Small Business Disclosure Format (Check one): Yes___ No X
Table of Contents
PART I
Page No.
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 16
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<PAGE>
WMA INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1997
(Unaudited)
September 30,
September 30,
1997
1996
Assets
Cash and cash equivalents
$3,303,958
$17,496,640
Funds withheld
-
555,926
Fixed maturity securities - available for sale
15,003,703
-
Equity securities - available for sale
613,457
-
Investment income due and accrued
250,525
-
Reinsurance receivable
47,780
-
Prepaid expenses
58,999
-
Deferred offering costs
-
516,527
Deferred acquisition costs
3,382,278
407,273
Deferred organization costs, net
133,850
170,370
Other receivables
784
55,085
Total assets
$22,795,334
$19,201,821
Liabilities and Stockholders' Equity
Liabilities:
Stock subscription deposits
-
283,729
Future policy benefits
974,874
388,359
Reinsurance balances payable
278,129
-
Accounts payable
110,485
111,436
Accrued expenses
207,969
50,457
Due to stockholders
13,817
-
Deferred tax liability
655,231
75,000
Total liabilities
2,240,505
908,981
Stockholders' equity:
Common stock, par value $ .001,
10,000,000 authorized; 2,411,742 and 2,256,103
shares issued in 1997 and 1996, respectively
2,412
2,256
Additional paid-in capital
19,346,481
18,295,524
Unrealized loss on securities available for
sale, net of taxes
42,438
-
Accumulated equity (deficit)
1,183,499
(4,940)
Total stockholders' equity before treasury stock
20,574,829
18,292,840
Less cost of 2,000 and 0 shares reacquired and held in
treasury at September 30, 1997 and 1996, respectively
(20,000)
0
20,554,829
18,292,840
Total liabilities and stockholders' equity
$22,795,334
$19,201,821
See accompanying notes to consolidated financial statements.
WMA INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
Nine Months Ended
September 30,
September 30,
1997
1996
Revenues:
Premiums
$3,652,644
$1,054,800
Gross deposits and other considerations
20,495,836
-
Modified coinsurance reserve
adjustment
(20,395,080)
-
Net investment income
836,617
438,933
Total revenue
4,590,017
1,493,733
Benefits and expenses:
Benefits, claims and settlement
1,655,724
516,392
Reinsurance premium allowances, net
1,052,112
273,191
Professional fees
166,015
83,567
Management fees
97,611
103,532
Interest expense
9,427
42,583
Other expense
31,505
35,079
Amortization of organization costs
27,328
11,815
Amortization of deferred acquisition costs
18,872
2,893
Total benefits and expenses
3,058,594
1,069,052
Income before income taxes
1,531,423
424,681
Income tax
(537,658)
(75,000)
Net income
$993,765
$349,681
Net income per share
$0.42
$0.30
Common shares used in computing
income
per share
2,369,265
1,172,133
See accompanying notes to consolidated financial statements.
<PAGE>
WMA INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months
Nine Months
Ended
Ended
September 30,
September 30,
1997
1996
Cash flows from operating activities:
Net income
$993,765
$349,681
Adjustments to reconcile net income to cash
provided by (used in) operations
Amortization
27,328
11,815
Change in:
Investment income due and accrued
(69,260)
-
Funds withheld
-
(555,926)
Reinsurance receivables
(17,385)
-
Deferred acquisition costs
(2,649,949)
(407,273)
Prepaid expenses
(32,922)
-
Deferred tax liability
775,228
75,000
Other assets
-
(55,085)
Future policy benefits
360,397
388,359
Reinsurance balances payable
278,129
-
Accrued expenses
154,390
50,457
Accounts payable
(128,193)
(26,435)
Net cash provided by (used in) operating activities
(308,472)
(169,407)
Cash flows from investing activities:
Purchase of available-for-sale securities
(2,364,412)
(6,991,474)
Proceeds from available-for-sale sales of securities
2,904,743
-
Net cash provided by activities
540,331
(6,991,474)
Cash flows from financing activities:
Issuance of common stock and warrants
1,059,920
18,047,780
Purchase of treasury stock
(20,000)
-
Repayments of borrowings under note payable
-
(748,679)
Offering and organization costs
-
(223,817)
Stock subscription deposits
51,977
283,729
Net cash provided by financing activities
1,091,897
17,359,013
Net increase in cash and cash equivalents
1,323,756
10,198,132
Cash and cash equivalents at beginning of period
1,980,201
307,034
Cash and cash equivalents at end of period
$3,303,957
$10,505,166
Supplemental disclosure of cash flow information
- interest paid
$9,427
$42,583
See accompanying notes to consolidated financial statements.
<PAGE>
WMA INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1997
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-QSB of
Regulation S-B. 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
of normal recurring accruals) considered necessary for a fair presentation have
been included.
(2) Stock Subscriptions
As of September 30, 1997 the Company has received $19,617,420 for
purchases of common stock and warrants pursuant to an offering for which the
registration statement became effective December 22, 1995. The Company has
accepted $19,117,420 for purchases of common stock representing 1,911,742
shares of common stock issued pursuant to the offering and $500,000 for
purchases of 500,000 warrants, each representing the right to purchase a share
of common stock for $10.
(3) Deferred Tax
Deferred income tax liabilities and related expenses are determined in
accordance with Statement of Financial Accounting Standard No. 109 (SFAS No.
109) using an effective federal tax rate of 34%. SFAS No. 109 specifically
excludes recognition of the "small life insurance company deduction" available
under Section 806 of the Internal Revenue Code for qualifying life insurance
companies. This special deduction, for which management believes the
Company will qualify for a number of years, can reduce the effective federal
income tax rate from 34% to less than 20% depending upon the amount of
taxable income. Consequently, the effective tax rate on the Company's earnings
may ultimately prove to be less than the deferred income tax liabilities and
related expenses determined under SFAS No. 109, at September 30, 1997.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
WMA International Corporation (the "Company") was formed March 9, 1995 as a for-
profit corporation organized under Delaware law. The Company is a holding
company, owning 100% of the outstanding stock of WMA Life Holding, Ltd., a
Bermuda for-profit corporation formed August 2, 1995 ("Holding") and of WMA Life
Insurance Company Limited, a fully licensed for-profit Bermuda life insurance
corporation formed August 2, 1995 ("WMA Life"). WMA Life, a life reinsurance
company, is presently engaged in providing reinsurance to certain insurance
companies with respect to insurance policies sold by World Marketing Alliance,
Inc. ("WMA Agency"), a Georgia corporation controlled by S. Hubert Humphrey,
Jr., the largest shareholder of the Company. Holding presently has no active
business operations. The Company, Holding and WMA Life are sometimes referred
herein collectively as the "Companies."
During 1997, the Company has been engaged primarily in providing reinsurance,
through WMA Life, and in negotiating the terms of additional reinsurance
agreements into which the Company expects WMA Life to enter during 1997 and
1998. The Company has also entertained the exploration of non-reinsurance
opportunities that may be synergistic with the leveraging strengths created
by WMA Agency. Given the resources presently available to the Company, it
intends to expand its presence in the reinsurance field and to explore
possible diversification into other enterprises in the financial services
industry.
As of September 30, 1997, WMA Life had in effect three reinsurance indemnity
agreements for variable universal life insurance products and a flexible premium
deferred variable annuity product. The reinsurance of the variable universal
life insurance products includes business previously and currently being sold by
WMA Agency and issued or anticipated to be issued by Western Reserve Life
Assurance Co. of Ohio ("WRL") and Kemper Investors Life Insurance Company
("KILICO"). The WRL and KILICO reinsurance agreements provide for the
reinsurance of a portion of all individual Variable Universal Life policies sold
by WMA Agency on a monthly renewable term basis (a variation of Yearly Renewable
Term).
WMA Life executed a reinsurance agreement with American Skandia Life Assurance
Corporation ("ASLAC") during July, 1997, providing for the reinsurance of a
portion of all "Imperium" Variable Annuity policies sold by WMA Agency
commencing as of January 1, 1997. The Imperium policies are proprietary
products exclusively distributed and sold by WMA Agency. The reinsurance
under this agreement is conducted on a modified coinsurance basis. Aside from
the initial reinsurance settlement representing business issued from the
first of the year, monthly cash outflows are expected to range from $250,000 to
$300,000 for the balance of 1997 in support of this agreement.
WMA Life has become a material reinsurer of WRL. As of September 30, 1997,
premiums from reinsurance of WRL life insurance policies represented the
majority share of WMA Life's business revenues, and this reliance on WRL is anti
cipated to continue for the foreseeable future, particularly in light of the sub
stantial volume of WRL policies that are sold by WMA Agency. The Company
also anticipates WMA Life will become a material reinsurer of KILICO and ASLAC.
As of September 30, 1997, WMA Life's business inforce with respect to
reinsurance agreements on life insurance policies constituted 138,759
policies with $3,883,486,595 of reinsured death benefits. WMA Life's
business inforce with respect to an reinsurance agreement on annuity policies
constituted 1,278 policies with $22,234,824 of reinsured annuity contract
benefits. Associated with these agreements , the income and balance sheet
statements as of September 30, 1997, reflect premiums and deposits, benefits,
claims, settlement expenses, reserves and deferred acquisition costs.
Such entries are normal within the context of an insurance enterprise.
The deferred acquisition costs reflect expenses and reinsurance premium
allowances that are directly associated with the acquisition of the reinsured
business. These expenses include actuarial, legal and accounting fees,
salaries and expenses, as well as reinsurance allowances in excess of
ultimate renewal allowances. These expenses have been deferred to the extent
that such costs are deemed recoverable from future revenues. Benefits, Claims
and Settlement Expenses in the Income Statement reflect life insurance claims
settled, increases in claims in the course of settlement and an increase in the
liability for future benefits reinsured under the monthly renewable term
agreements. The outstanding claims as of September 30, 1997, were $712,500.
The total liability for future benefits and claims as of September 30, 1997,
is $974,874. (Note: The corresponding U.S. statutory reserve credit taken by
the ceding insurance companies is $1,262,490. The U.S. statutory reserve is
determined using interest and mortality assumptions typically much more
conservative than experience otherwise expected by the industry.)
The accounting treatment for the modified coinsurance agreement follows
principles consistent with generally accepted accounting principles ("GAAP").
However, it differs from the accounting treatment given the monthly renewable
term agreement. The principal difference lies in the manner in which revenues
are reported. (See Part II, Item 5, Other Information, for further explanation
of the accounting treatment.) Accordingly, the
statement of operations reflect premiums as Deposits and Other Considerations.
The Modified Coinsurance Reserve Adjustment reflects the increase in the assets
deposited with the ceding company plus incurred policy benefits and claims,
less investment gains and losses. As a result, the netting of Deposits and
Other Considerations and the Modified Coinsurance Reserve Adjustment is equal to
revenues of $100,756. Assets and liabilities relating to reinsurance agreements
written on a modified coinsurance basis have been netted and included in
other reinsurance balances on the balance sheet since a right of offset exists.
The Company expects to cause WMA Life to enter into additional reinsurance
agreements in 1997 and 1998 with companies including The Midland Life Insurance
Company, WRL and ASLAC with respect to policies sold by WMA Agency. The
Company anticipates that WMA Life will reinsure different types of life
insurance products of these companies, including variable annuities, term
life, universal life and other insurance products. There are no established
criteria, parameters or limitations with respect to the nature and amount of
additional reinsurance to be written by WMA Life. The Company has, and will
continue to have, complete discretion in determining the nature and amount of
additional reinsurance to be written by WMA Life.
These reinsurance agreements also may provide that an amount remain on deposit
with the ceding insurance company until such time as WMA Life provides security
such as a Letter of Credit (LOC) for the benefit of the ceding company. WMA
Life has previously secured a LOC in favor of WRL and, during the fourth
quarter, 1997, will increase the LOC from $1,000,000 to $2,000,000. WMA Life
previously secured a LOC of $30,000 in favor of KILICO resulting in the
release of funds previously withheld by KILICO. If determined to be
necessary, WMA Life will develop facilities for future LOC's and trust
arrangements in support of additional reinsurance agreements.
Nine Month Period Ending September 30, 1997 Compared to Nine Month Period Ending
September 30, 1996
Results of Operations
The Companies revenues through third quarter, 1997, were $4,590,017 compared to
$1,493,733 for the same period in 1996, representing an increase of $3,096,284,
or 207%. This increase is primarily attributable to premiums associated with a
reinsurance agreement WMA Life entered into with WRL during the second quarter,
1996. To a lesser extent, revenue increases are also attributable to
reinsurance agreements WMA Life entered into with ASLAC and KILICO.
Investment income resulting from a change in the composition of invested
assets, described below, also led to an increase in revenues. Premiums
through third quarter 1997 were $3,652,644 compared to $1,054,800 for the
same period in 1996, representing an increase of $2,597,844 or 246%. This
increase is primarily attributable to the reinsurance agreement with WRL,
and to a much lesser extent to a reinsurance agreement executed during the
fourth quarter of 1996 with KILICO. Considering the reinsurance under these
agreements are conducted on a monthly renewable term basis, not only are
premium revenues expected to increase with the growth of business sold by
WMA Agency, but revenues are also expected to increase as the duration of
policies progress under these agreements.
Revenues attributed to the modified coinsurance agreement reflect mortality and
expense (M&E) charges, policy charges and deferred sales charges deducted from
the reinsured policy account balances. Revenues with regard to this agreement
total $100,756 through the third quarter, 1997. (These are the result of
netting the Deposits and Other Considerations with the Modified Coinsurance
Reserve Adjustment.) There are not prior period revenue comparisons
considering this agreement was executed during the third quarter, 1997.
Net investment income through third quarter, 1997, was $836,617 compared to
$438,933 for the same period in 1996, representing an increase of $397,684 or
91%. The primary cause for the increase in net investment income is the result
of the majority of the Companies' assets being invested into fixed income
securities that were previously in cash or cash equivalents. Fixed income
securities generally offer greater investment yields than cash or cash
equivalent securities. During the third quarter of 1996, the Companies engaged
an outside investment manager which then proceeded to invest the assets, in
accordance with the Companies' investment policies, into fixed income, equity
and cash equivalent securities. Benefits, claims and settlement expenses are
$1,655,724 as compared to $516,392 for the same period in 1996, representing an
increase of $1,139,332 or 221%. An increase in the inforce business and the
duration of exposure of reinsurance activities during each respective
reporting period are the primary causes for the increase in benefits, claims
and settlement expenses. The business in force at the close of the third
quarter, 1997, was $3,883,486,595 as compared to $2,300,062,161 at the same
time in 1996. This represents a $1,583,424,434 increase in the inforce
business, or 69%. The increase in the inforce business is the principle
cause for the increase in benefits and claims. A second component of the
increase is primarily a result of the exposure period of business reinsured. As
of September 30, 1996, WMA Life's death benefit exposure on business reinsured
commenced with each individual policy's monthiversary occurring during the
month of June, for all policies in force on June 30, 1996. Consequently,
during 1996, WMA Life's exposure to the death benefit risk was for approxima
tely three and one-half months as compared to nine months during 1997. This
difference in exposure period, as well as the growth of in force business,
resulted in greater claims reported during the first three quarters of 1997.
Net reinsurance premium allowances increased to $1,052,112 as of September
30, 1997, from $273,191 as of September 30, 1996. This reflects an increase of
$788,921, or 285%. Reinsurance premium allowances represent a percentage of
each reinsurance premium which is paid or allowed by WMA Life to the ceding
company for each life reinsured. A certain portion of the reinsurance
allowances are primarily related to the production of new business. These
amounts have been deferred to the extent that such costs are recoverable in
accordance with the principles of GAAP. The balance of those amounts not
deferred are reflected as net reinsurance premium allowances and are often a
level percentage of individual policy revenues. Similar to the considerations
associated with the increase in benefits, claims and settlement expenses, the
increase in net premium allowances, attributable to the WRL and KILICO
monthly renewable term reinsurance agreements, are primarily associated with
(a) the increase in period of exposure, (b) the increase of business in force
and (c) the progression of the duration of policies reinsured.
Professional fees, management fees and other expenses were $295,131as of
September 30, 1997, as compared to $222,178 as of September 30, 1996,
representing an increase of $72,953, or 33%. The primary causes for the
increase in these expenses are primarily associated with the administration
of the Company, the establishment of WMA Life's operating activities and the
duration of those activities as compared to the same reporting period for
1996. The Company continues to expect its operating expenses over the next
twelve months to consist primarily of the payment of fees relating to
management, accounting and consulting services rendered; payment of expenses
related to compliance with corporate and tax matters, investment management
fees, custodial account fees and other incidental administrative expenses.
Holding's operating expenses are expected to be nominal and consist
principally of accounting and administrative costs of reporting to regulatory
authorities, and fees for business qualification. WMA Life's expenses during
the next twelve months are expected to consist of costs associated with its
operations as a reinsurance company, which costs include expense allowances
payable to ceding insurance companies, payment of fees relating to accounting,
actuarial and legal services, investment management fees, management service
fees, custodial account fees, and fees and expenses for regulatory compliance
in Bermuda. In addition to the above, management is also considering the
addition of one or more employees during 1998 as a result of the
Companies' expanding operations. None of the Companies expect to purchase or
sell any significant equipment.
Interest expenses were $9,427 through September 30, 1997, as compared to
$42,583 as of September 30, 1996. The 1996 expense did not reoccur during 1997
because a $750,000 loan from Money Services, Inc. was repaid during the third
quarter, 1996. The interest expense reported through September, 1997, is a
non-recurring expense directly attributed to the initial settlement in
accordance with the terms of the ASLAC agreement.
Amortization of organization costs increased to $27,328 as of September 30,
1997, from $11,815 as of September 30, 1996. The net increase of $15,513, or
131%, reflects the five year amortization of costs associated with the organiza
tion of the Company that were previously capitalized.
Amortization of deferred acquisition costs increased $15,979, or 552%, to
$18,872 as of September 30, 1997, from $2,893 as of September 30, 1996.
Deferred acquisition costs related to traditional life insurance (e.g., the
monthly renewable term reinsurance) are amortized over the premium paying
period of the related policies in proportion to the ratio of premium revenues
to total anticipated premium revenues . Deferred costs related to interest-
sensitive policies (e.g., the modified coinsurance agreement) are amortized
over the lives of the underlying policies, with regard to the terms of the
reinsurance agreement, in relation to the present value of estimated gross
profits from mortality, investment and expense margins. As a result of the
pattern of anticipated premium revenues, the amortization was negative for
the monthly renewable term business during this reporting period, but
positive for the modified coinsurance business. These amortization patterns
are considered normal under the principles of reporting under GAAP.
Income before taxes through September 30, 1997, was $1,531,424 compared to
$424,681 as of September 30, 1996, an increase of $1,106,743, or 261%.
Income taxes through September 30, 1997, are $537,658 as compared to $75,000
for the same reporting period during 1996 representing an increase of
$462,658.
As a result of the foregoing, net income through September 30, 1997, was
$993,766 compared to $349,681 through September 30, 1996, an increase of
$644,085, or 184%.
Liquidity and Capital Resources
The Companies primary source of liquidity as of September 30, 1997, was
$3,303,957 in cash and cash equivalents compared to $17,496,640 at September
30, 1996, a decrease of $14,192,682. The decrease in cash and cash
equivalents was due primarily to placement of assets into fixed income and
equity securities in accordance with the Companies' investment policies. The
liquid assets available as of September 30, 1996, were primarily the result
of proceeds from a stock offering in progress at that time.
The Company believes that the Companies' present capital position will be
adequate for WMA Life to sustain operations during the next twelve months. In
anticipation of the ASLAC agreement, WMA Life repositioned its investment
portfolio to meet the liquidity requirements of this agreement. The
effective duration of the Companies' fixed income portfolio's are less than
four years with over 90% of the fixed income assets having a maturity of less
than 10 years. The fixed income portfolios, including short term assets,
represent over 95% of total invested assets and have average quality ratings
of AA2 and AA3 for WMA Life and the Company, respectively.
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PART II
Item 1. Legal Proceedings.
At September 30, 1997, neither the Company, Holding nor WMA Life was
involved in any legal proceedings.
Item 2. Changes in Securities.
There have been no changes or modifications to the rights of the holders of
any class of registered securities.
Item 3. Defaults Upon Senior Securities.
There have been no defaults in the payment of principal or interest of any
indebtedness of the issuer.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of stockholders was held in Atlanta, Georgia
on August 11, 1997. The purpose of the meeting was to elect four directors;
to ratify or reject the selection of KPMG Peat Marwick, LLP to audit the
Company's financial statements for the fiscal year ending December 31, 1997;
to ratify the amendment to the Company's By-laws to change the date of the
annual meeting to the second Monday in August; and to consider any other
business that may come before the meeting.
Set forth below are the results of the election of Directors of the Company.
Name of Nominee
Votes Cast For
Votes Cast Against or Withheld
S. Hubert Humphrey, Jr.
1,510,905
13,957
Thomas W. Montgomery
1,511,914,
12,948
C. Simon Scupham
1,510,914
13,948
Edward F. McKernan
1,511,914
12,948
The ratification of the selection of KPMG Peat Marwick, LLP as the
Company's auditors for 1997 was approved by 1,497,126 votes FOR, 499 AGAINST,
and 27,237 ABSTAINING.
The amendment to the Company's By-laws changing the date of the annual
stockholders meeting was approved by a vote of 1,506,934 FOR, 54 AGAINST, and
17,874 ABSTAINING.
No other business came before the meeting which required a vote of the
stockholders.
Item 5. Other Information.
The accounting treatment for the monthly renewable term agreements follow
principles consistent with those prescribed by Statement of Financial
Accounting Standard No. 60 ("SFAS No. 60"). Under SFAS No. 60, deferred costs
are amortized over the premium paying period of the related reinsurance
agreements in proportion to the ratio of premium revenues to total
anticipated premium revenues. Such anticipated premium
revenues are estimated using the same assumptions used for computing
liabilities for future benefits.
The accounting treatment for the modified coinsurance agreement follows
principles consistent with those prescribed by Statement of Financial
Accounting Standard No. 97 ("SFAS No. 97"). Pursuant to the accounting
methods prescribed by SFAS No. 97, deferred costs are amortized over
the lives of the underlying policies, with regard to the terms of the
reinsurance agreement, in relation to the present value of estimated gross
profits from mortality, investment and expense margins.
Under SFAS No. 97, the accounting treatment also differs from SFAS No. 60 in
that premiums and deposits paid by policyholders are credited to the policy
account balance, a liability, rather than income. Revenues consist primarily of
policy mortality & expense (M&E) charges, policy administration charges and
surrender charges that have been assessed against policy account balances
during the reporting period. Such charges are recognized in revenue as
earned rather than recognizing premiums as under SFAS No. 60. Premiums and
deposits were $20,495,836 through third quarter, 1997, as compared to
revenues of $100,756.
SFAS No. 97 liabilities are equal to policy account balances without
recognition of applicable surrender charges. Assets equal to these
liabilities are held by the ceding company and, of these, assets equal to the
statutory reserves are legally owned by the ceding company. Investment gains
and losses accrue to these assets reflecting the performance of the ceding
company's separate account investment experience. Further, policy benefits
and claims, not to exceed the policy account balance, are charged against the
policy account balance. Benefits and claims in excess of the policy account
balance, if any, are charged to expense. Policy account balances were
$22,234,824 as of September 30, 1997. (Note: The corresponding U.S.
statutory reserve is $20,901,472.)
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Item 6. Exhibits and Reports on Form 8-K.
No reports were required to be filed on Form 8-K.
Exhibit
Number Description of Exhibit
3.1 Articles of Incorporation (1)
3.2 By-laws (1)
3.2.1 Amendment to By-laws of the Company
4.1 Shareholders' Agreement (3)
4.2 Specimen Stock Certificate (2)
4.3 Subscription Agreement (3)
4.4 Revised Specimen Warrant (4)
4.5 Loan Agreement between WMA Agency and Offering Subscribers (3)
10.1 Form of Escrow Agreement between Registrant and Fidelity National
Bank as Escrow Agent.(2)
10.2 Form of Promotional Share Escrow Agreement (3)
10.3 Loan Agreement with Money Services, Inc. (3)
10.4 Loan Agreement between Money Services, Inc. and WMA Agency (3)
10.5 Management Agreement with WMA Management (3)
16.1 Letter on change in Certifying Accountant (5)
23.2 Consent of KPMG Peat Marwick, LLP (6)
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FOOTNOTES TO PRECEDING PAGE:
(1) Filed on June 28, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23
(2) Filed on September 22, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(3) Filed on November 17, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(4) Filed on December 20, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(5) Filed on December 21, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(6) Filed on March 31, 1997 as part of the Company's 1996 10-KSB.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
(Registrant) WMA International Corporation
By (Signature/Title) /s/ Thomas W. Montgomery (SEAL) Date: November 14, 1997.
Thomas W. Montgomery, Executive Vice
President, Chief Financial Officer,
Secretary/Treasurer, and Director
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EXHIBIT 3.2.1
WMA INTERNATIONAL CORPORATION
* * * * *
FIRST AMENDMENT TO
B Y - L A W S
* * * * *
Article II, Section 2 of the By-Laws is hereby deleted in its entirety and
in lieu thereof the following shall be substituted:
"Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on the Second Monday in August, if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 10:00
A.M., or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting."
Date of Amendment: June 3, 1997
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