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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _______ TO ________
COMMISSION FILE NUMBER 0-23637
THE WMA CORPORATION
(Name of small business issuer in its charter)
DELAWARE 58-2179041
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11315 JOHNS CREEK PARKWAY, DULUTH, GEORGIA 30097
(Address of principal executive offices)
Issuer's telephone number: (770) 248-3311
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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 March 31, 1998, there were 2,495,710 shares of common stock
(.001 par value) outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No X
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TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
ITEM 1 Financial Statements 3
ITEM 2 Management's Discussion and Analysis or Plan of Operation 7
PART II
ITEM 1 Legal Proceedings 16
ITEM 2 Changes in Securities 16
ITEM 3 Defaults Upon Senior Securities 16
ITEM 4 Submission of Matters to a Vote of Security Holders 16
ITEM 5 Other Information 16
ITEM 6 Exhibits and Reports on Form 8-K 18
</TABLE>
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THE WMA CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
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<S> <C> <C>
ASSETS
Fixed maturity securities - available for sale
(amortized cost of $16,995,247 and $17,686,390
for 1998 and 1997, respectively) $17,121,692 $17,782,055
Equity securities - available for sale (cost of
$487,733 for 1998 and 1997) 714,597 630,929
----------- -----------
Total investments 17,836,289 18,412,984
Cash and cash equivalents 1,991,275 1,469,663
Investment income due and accrued 259,414 257,629
Reinsurance balances receivable -- 183,524
Prepaid expenses 387,766 113,243
Deferred acquisition costs 6,558,706 4,503,338
Deferred organization costs (net of accumulated
amortization of $71,238 and $62,128 for 1998
and 1997, respectively) 115,632 124,741
Other assets 9,600 783
----------- -----------
Total assets $27,158,682 $25,065,905
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 1,498,899 $ 1,293,917
Reinsurance balances payable 1,396,536 434,443
Accrued expenses 30,000 53,735
Accounts payable 400,920 105,108
Due to WMA Management Services, Inc. 120,000 120,000
Due to World Marketing Alliance, Inc. 78,501 1,916
Deferred tax liability 1,184,242 980,411
----------- -----------
Total liabilities 4,709,098 2,989,530
Stockholders' equity:
Common stock, par value $.001, 10,000,000 authorized:
2,500,000 shares issued in 1998 and 1997 2,500 2,500
Additional paid-in capital 20,228,973 20,228,973
Accumulated other comprehensive income 238,212 157,670
Retained earnings 2,022,799 1,709,232
Treasury stock, at cost (4,290 shares and 2,200 for
1998 and 1997, respectively) (42,900) (22,000)
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Total stockholders' equity 22,449,584 22,076,375
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Total liabilities and stockholders'equity $27,158,682 $25,065,905
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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THE WMA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
<S> <C> <C>
Revenues:
Premiums $ 1,728,837 $ 1,067,902
Reinsured policy revenues 158,957 --
Net investment income 246,402 256,069
Net realized gains on investments 3,799 645
----------- -----------
Total revenue 2,137,995 1,324,616
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Benefits and expenses:
Benefits, claims and settlement expenses 875,417 393,588
Reinsurance premium allowances, net 472,505 303,442
Amortization of deferred acquisition costs 124,573 (1,657)
Professional fees and other expenses 120,330 71,259
Management fees to WMA Management Services, Inc. -- 30,000
Consulting fees to World Marketing Alliance, Inc. 69,265 --
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Total benefits and expenses 1,662,090 796,632
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Income before income taxes 475,905 527,984
Income tax expense (162,339) (205,152)
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Net income after income taxes $ 313,566 $ 322,832
=========== ===========
Basic and diluted income per share $ 0.13 $ 0.14
=========== ===========
Weighted-average common shares outstanding 2,497,452 2,385,558
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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THE WMA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 313,566 $ 322,832
Adjustments to reconcile net income
to cash provided by (used in) operations
Amortization 133,682 7,452
Deferred tax expense 162,339 205,152
Change in:
Investment income due and accrued (1,786) (63,691)
Reinsurance receivables 183,524 30,396
Deferred acquisition costs (2,179,941) (299,953)
Prepaid expenses (274,523) (17,523)
Other assets (8,816) (35,306)
Future policy benefits 204,982 (68,966)
Reinsurance balances payable 962,093 80,307
Accrued expenses (23,735) (16,054)
Accounts payable 295,812 13,224
Due to WMA Management Services, Inc. -- 12,436
Due to World Marketing Alliance, Inc. 76,586 (775)
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Net cash provided by (used in)
operating activities (156,217) 169,242
----------- -----------
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities 698,729 974,858
Purchase of available-for-sale securities -- (2,050,266)
----------- -----------
Net cash provided by (used in)
investing activities 698,729 (1,075,408)
----------- -----------
Cash flows from financing activities:
Issuance of common stock -- 1,061,920
Purchase of treasury stock (20,900) --
Increase in due to stockholders -- 38,160
----------- -----------
Net cash provided by (used in) financing activities (20,900) 1,100,080
Net increase in cash and cash equivalents 521,612 193,914
Cash and cash equivalents at beginning of period 1,469,663 1,980,201
----------- -----------
Cash and cash equivalents at end of period $ 1,991,275 $ 2,174,115
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ --
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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THE WMA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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 March 31, 1998, there were 2,495,710 shares of common stock
outstanding. The aggregate market value of the common stock held by
non-affiliates computed on the basis of the price at which the stock was sold
was $19,957,100. All warrants previously issued in 1995 have been exercised.
There is no established market for the shares of common stock.
(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 March 31, 1998.
(4) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of
general-purpose financial statements. The Company adopted Statement 130
effective January 1, 1998. The primary component of the differences between net
income and comprehensive income for the Company is unrealized gains on
securities. Total comprehensive income for the three months ended March 31, 1998
was $394,108 compared to $52,700 for the three months ended March 31, 1997. In
June 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (Statement
131). Statement 131 is effective for financial statements for years ending after
December 15, 1997. The Company does not have any separate segments that are
considered material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The WMA Corporation ("the Company") is a holding company that owns all
of the outstanding capital stock of WMA Life, a Bermuda life insurance
corporation. WMA Life began reinsurance operations at the end of the second
quarter of 1996. WMA Life presently provides reinsurance to certain life
insurance companies ("Ceding Life Companies") with respect to variable universal
life ("VUL") and variable annuity policies sold through World Marketing
Alliance, Inc., a Georgia corporation which operates a multi-product independent
insurance agency. World Marketing Alliance, Inc., and certain entities and
persons, with which it is associated primarily for licensing purposes, are
referred to herein as "WMA Agency", unless the context indicates otherwise.
Where securities licenses are required for the sale of variable annuity and VUL
products, such licenses are obtained through WMA Securities, Inc., under a dual
licensing arrangement with WMA Agency. S. Hubert Humphrey, Jr. owns
substantially all of WMA Agency and all of WMA Securities, Inc. Mr. Humphrey
also beneficially owns approximately 36.1% of the Company's Common Stock.
All of the Company's reinsurance business is generated by the
marketing efforts of WMA Agency which places business with the Ceding Life
Companies. The Company does not use reinsurance intermediaries or engage in any
direct marketing activities. As a consequence, the Company is dependent upon and
benefits from WMA Agency marketing those products, which the Company reinsures.
World Marketing Alliance, Inc. is an independent entity separate and apart from
the Company.
The following tables show, by Ceding Life Company, the percentage of
WMA Agency business reinsured by the Company.
<TABLE>
<CAPTION>
Life Insurance Applications (1)
Ceding Life Company 3/31/98 1997 1996
------------------- ------- ---- ----
<S> <C> <C> <C>
Western Reserve Life Assurance Company of Ohio ("Western 81% 85% 85%
Reserve")
American Skandia Life Assurance Corporation ("American 0 0 0
Skandia")
Kemper Investors Life Insurance Company ("Kemper") 3 2 0
--- --- ---
Total 84% 87% 85%
Annuity Applications (1)
Ceding Life Company 3/31/98 1997 1996
------------------- ------- ---- ----
Western Reserve 40% 0% 0%
American Skandia 13 13 0
Kemper 0 0 0
--- --- ---
Total 53% 13% 0%
</TABLE>
(1) As reported to WMA Agency by life insurance companies, of
applications for life insurance and annuity policies submitted by
WMA Agency, and that WMA Agency monitors on a regular basis.
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WMA Life's revenues do not and are not expected to, bear any
relationship to the distribution of business placed by the companies with whom
WMA Agency does business as illustrated by the above tables. The reasons WMA
Life's revenue will diverge from the relationships noted above include, but are
not limited to, the nature, mix and pricing of the products reinsured; the terms
of the various reinsurance agreements; and the prescribed generally accepted
accounting for such products and reinsurance structures.
Under a reinsurance agreement, the economic consequences of certain
insurance risks are transferred from the ceding company to the reinsurer.
Depending upon the type of reinsurance agreement, these risks may include:
mortality, persistency, expense, and investment. Key considerations in
evaluating the risks include: industry experience, the ceding company's pricing
and assumptions, the type of product, the ceding company's underwriting
practices and procedures, the type of distribution system, the ceding company's
recent experience, and the market for the product.
The Ceding Life Companies retain responsibility for the payment of all
claims, surrender values, commissions and expenses involved in issuing and
maintaining the policies. In addition, the ceding companies administer the
reinsurance contracts and, on a monthly basis, provide WMA Life with information
regarding premiums, reserves, benefits, claims and settlement expenses for
policies reinsured. Financial activity between the Ceding Life Companies and WMA
Life is settled on either a monthly or quarterly basis in accordance with the
terms of the reinsurance agreements.
At March 31, 1998, WMA Life's reinsurance inforce on life insurance
policies constituted 167,204 policies with an aggregate reinsured amount of
$4.66 billion. This is an increase of 18,264 life insurance policies and $500
million of inforce face amounts from December 31, 1997. As of March 31, 1998,
WMA Life had reinsurance inforce with respect to variable annuities for 3,352
policies with reinsured annuity contract benefits of $55.47 million. There is no
prior comparable March 31 period for variable annuity reinsurance since such
business was first reinsured in the third quarter of 1997. This is an increase
of 1,455 annuity policies and $24.58 million of annuity contract benefits from
December 31, 1997.
The following table indicates the percentage of WMA Life's reinsurance
revenues derived from the Ceding Life Companies:
<TABLE>
<CAPTION>
Ceding Life Company 3/31/98 1997 1996
------------------- ------- ---- ----
<S> <C> <C> <C>
Western Reserve 90.8% 95.5% 100%
American Skandia 7.3 3.6 0
Kemper 1.9 0.9 0
---- ----- ----
Total 100% 100% 100%
</TABLE>
MRT REINSURANCE
During 1998, WMA Life's reinsurance indemnity agreements included two
agreements relating to VUL policies. The reinsurance of the VUL policies
includes business previously and currently being sold through WMA Agency and
issued by Western Reserve Life Assurance Company of Ohio ("Western Reserve") and
Kemper Investors Life Insurance Company ("Kemper"). The Western Reserve and
Kemper reinsurance agreements provide for the reinsurance of a portion of all
individual VUL policies sold by WMA Agency on a Monthly Renewable Term basis
("MRT"). Under the MRT reinsurance agreements with Western Reserve and Kemper,
WMA Life assumes a portion of the mortality risk related to the VUL policies
written by the ceding companies. Settlements made under these agreements are
made on a monthly basis.
However, commencing April 1, 1998, WMA Life began reinsuring on a
coinsurance and modified coinsurance basis with Western Reserve all Financial
Freedom Builder VUL policies sold through WMA Agency. WMA Life ceased reinsuring
Financial Freedom Builder VUL policies sold after March 31, 1998 on a MRT basis.
(See discussion under "Coinsurance and Modified Coinsurance" below.) Financial
Freedom Builder VUL policies previously reinsured on a MRT basis will continue
to remain in force.
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COINSURANCE AND MODIFIED COINSURANCE
Under a coinsurance arrangement, WMA Life assumes a proportionate
share of the insurance risks and expenses and receives a proportionate share of
the premiums and revenues from the underlying policies. The insurance risks
include mortality, lapses, cash surrenders and investment risk. Additionally,
under coinsurance WMA Life must establish a proportionate share of the policy
reserves. Modified coinsurance ("ModCo") is a variation of coinsurance. ModCo is
similar to coinsurance except that reserves and assets related to the reserves
that would otherwise be recorded and held by the Company are retained by the
ceding company. ModCo is used primarily for products that develop cash values,
which allows the ceding company to retain the associated assets for investment
purposes. Under coinsurance and modified coinsurance, the mortality and
investment risks are reinsured on the same plan as that of the original policy.
The Ceding Life Companies and the Company share in these risks in the same
manner.
Due to the nature of the VUL products reinsured, the Company is
significantly insulated from the impact of changes in investment yields as the
policyholder retains virtually all of the investment risk. However, on an
overall basis, a decline in investment yields is expected to cause a decrease in
the Company's investment income and revenues under its coinsurance and modified
coinsurance agreements, as the reinsured policy account balances upon which some
of the Company's revenues are calculated would presumably be lower. Accordingly,
the Company's income before income taxes will be smaller. Conversely, an
increase in investment yields is expected to have the opposite effect. If
mortality experience is worse than assumed (i.e., higher claims), it is expected
to cause an increase in Benefits, claims and settlements, and a decrease in
current and future revenues that would have otherwise resulted from the policies
reinsured. Conversely, if mortality experience is better than assumed (i.e.,
lower claims), it is expected to cause an increase in current and future
revenues that would have otherwise resulted from the policies reinsured.
WMA Life commenced reinsurance on a ModCo basis with American Skandia
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 products exclusively distributed and sold by WMA Agency. Settlement
is made under this agreement on a monthly basis.
Effective January 1, 1998, WMA Life commenced reinsurance on a
coinsurance and modified coinsurance basis with Western Reserve of a portion of
all Freedom Wealth Creator variable annuity policies sold through WMA Agency.
This new agreement will enable the Company to participate in revenues arising
principally from mortality and expenses charges, sales charges associated with
surrenders, credited interest rate spreads, administrative charges, and asset
based allowances. Settlement under this agreement is made on a quarterly basis.
Commencing April 1, 1998, WMA Life will also reinsure on a coinsurance
and modified coinsurance basis with Western Reserve a portion of all Financial
Freedom Builder VUL policies sold through WMA Agency. This new agreement will
enable the Company to participate in revenues arising principally from mortality
and expenses charges, cost of insurance charges, sales charges associated with
surrenders, credited interest rate spreads, administrative charges, and asset
based allowances. Coincidental with this new agreement, WMA Life will cease
reinsuring the Financial Freedom Builder VUL product on a MRT reinsurance basis
for all policies issued after March 31, 1998. The Company will continue to
reinsure all Financial Freedom Builder VUL policies currently inforce in
accordance with the terms of the MRT reinsurance agreement with Western Reserve.
Settlement under this agreement is made on a quarterly basis.
Under the above agreements with Western Reserve, the Company is
reinsuring such policies on a coinsurance basis, except the separate accounts of
such policies which will be reinsured on a ModCo basis. Western Reserve will
initially cede to WMA Life a 20% quota share of the Financial Freedom Builder
VUL policies effective April 1, 1998 and a 40% quota share of the Freedom Wealth
Creator variable annuity policies effective January 1, 1998. The percentage of
reinsurance to be ceded in subsequent years will be determined before the close
of each calendar year. This determination will be based upon two factors: (i)
the expected new or "first year" VUL "target" premium and variable annuity
premium to be collected by Western Reserve written through WMA Agency for the
ensuing calendar year, and (ii) total first year VUL "target" premiums and
variable annuity premium written through WMA Agency with all insurance companies
during a given year. The latter factor is used to determine Western Reserve's
market share of
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the total new VUL and variable annuity premium or volume in a given year. VUL
"target" premium is an amount, specific to the insurance product, which varies
by issue age, sex and issue class, that provides for basic insurance benefits
coverage.
The Company's VUL reinsurance percentages will be 20%, 25%, 30%, 35%
or 40% based on expected first year VUL collected target premium levels of
$50-149 million, $150-199 million, $200-249 million, $250-599 million, or $600
million or more, respectively. These reinsurance percentages will be reduced if
the percentage of Western Reserve's "market share" of WMA Agency first year VUL
collected target premium falls below certain thresholds. Western Reserve's
market share is measured by first year VUL target premium collected by Western
Reserve to total first year VUL target premium written by WMA Agency. These
market share thresholds are 90%, 85%, 80%, 75% and 70% for first year VUL
collected target premium levels of $50-149 million, $150-199 million, $200-249
million, $250-350 million or more, respectively.
The reinsurance percentages may be reduced 5% for each full 10% of
realized market share below the thresholds above. The VUL reinsurance
percentages may also be reduced to the extent WMA Agency's VUL first year target
premium production attributed to any insurance company, other than Western
Reserve, is greater than 10% of total VUL first year target premium written by
WMA Agency. The reinsurance percentage may be reduced 5% for each full 5% in
excess of the 10% limitation.
The Company's variable annuity reinsurance percentages will be 40% or
50% based on expected first year variable annuity collected premium levels of
$100-249 million or $250 million or more, respectively. These reinsurance
percentages may be reduced if the percentage of Western Reserve's market share
of WMA Agency first year variable annuity collected premium falls below certain
thresholds. Western Reserve's market share is measured by first year variable
annuity premiums collected by Western Reserve to total first year variable
annuity premiums written by WMA Agency. These market share thresholds are 45%
and 30% for first year variable annuity collected premium amounts of $100-249
million and $250 million or more, respectively. The reinsurance percentages may
be reduced 5% for each full 5% of realized market share below the thresholds
above, subject to a minimum reinsurance percentage of 25%. The variable annuity
reinsurance percentage may also be reduced 5% if WMA Agency's first year
variable annuity premium growth rate is 0% or less.
ACCOUNTING
WMA Life recognizes premiums as earned on MRT reinsurance for the
mortality risk reinsured. Reinsured policy revenues that are reported in the
period reflect policy mortality and expense charges, policy administration
charges, asset-based allowances and deferred sales charges that have been
assessed against the reinsured policy account balances under the coinsurance and
modified coinsurance agreements, as they relate to universal life-type
contracts.
Net investment income is the gross income earned from the invested
assets less the investment management expenses and custodial fees.
WMA Life also recognizes costs that vary with and are directly
associated with the acquisition of the reinsured policies. These costs include
actuarial, legal and accounting fees, and salaries and expenses incurred
directly by WMA Life and reinsurance commission and expense allowances paid to
the Ceding Life Companies in accordance with the reinsurance agreements. These
expenses are deferred to the extent that such costs are deemed to be recoverable
from future policy revenues in accordance with Generally Accepted Accounting
Principles ("GAAP") and are recorded as deferred acquisition costs on the
balance sheet. Deferred acquisition costs increased $2.06 million during the
first three months of 1998 to $6.56 million at March 31, 1998.
Deferred acquisition costs are amortized over the lives of the
underlying policies (with regard to the terms of the reinsurance agreement).
Under the MRT agreements, the amortization is in proportion to the ratio of
premiums collected during the then current period to total anticipated premiums.
The rate of amortization is based upon methods that include assumptions, such as
estimates of expected investment yields, mortality, persistency and expenses
applicable at the time the policies are reinsured. The assumptions include
provision for risk of adverse deviation. Original
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assumptions continue to be used in subsequent accounting periods to determine
changes in the deferred acquisition costs unless a premium deficiency exists. (A
premium deficiency is recognized if the sum of expected claim costs, unamortized
acquisition costs, and maintenance costs exceeds related unearned premiums. A
premium deficiency is first recognized by charging any unamortized acquisition
costs to expense to the extent required to eliminate the deficiency. If the
premium deficiency is greater than unamortized acquisition costs, a liability
shall be accrued for the excess deficiency.) Although the Company will begin
reinsuring on a coinsurance and modified coinsurance basis with Western Reserve
a portion of all Financial Freedom Builder VUL policies previously reinsured on
a MRT basis, no premium deficiency exists because all inforce policies will
continue to be reinsured in accordance with the MRT reinsurance agreement with
Western Reserve.
Under the ModCo agreement, the amortization of the deferred acquisition
cost is in proportion to the ratio of gross profits recognized during the then
current period to total anticipated gross profits. During each accounting
period, assumptions used in calculating the amortization of the Company's
deferred acquisition expense reflect actual experience for the then current
accounting period. Management also reviews on a periodic basis evolving
experience with regard to the Company's assumptions concerning future experience
with regard to mortality, persistency, investment yields and expenses in
determining its estimates of future gross profits. To the extent management
believes variances from expected assumptions are permanent, rather than
temporal, assumptions used with regard to future experience will be changed.
Upon adoption of any change in assumptions used with regard to future
experience, the amortization of the Company's deferred acquisition cost will be
recalculated and be reflected during the then current accounting period.
Life insurance claims settled and the increase in the liability for
future policy benefits, related to MRT reinsured VUL policies, are recorded as
Benefits, claims and settlement expenses in the Consolidated Financial
Statements. The liability for future policy benefits was $1.50 million at March
31, 1998 in comparison to $1.29 million at December 31, 1997. The liability at
March 31, 1998 is comprised of two components: the liabilities related to the
coinsurance of variable annuity policyholder obligations and liabilities under
the Company's MRT reinsurance agreements. The liability, with regard to the MRT
reinsurance, which represents the present value of future benefits to be paid
and related expenses, less the present value of future net premiums (that
portion of the premium required to provide for all benefits and expenses), is
estimated using the same methods and assumptions used to amortize the deferred
acquisition costs under the MRT agreements. The liability for the fixed account
portion of the Western Reserve variable annuity coinsurance agreement is equal
to reinsured policy account balances. To date, management believes the
assumptions used regarding its liability for future policy benefits are
appropriate for its circumstances.
Professional fees, management fees, and other expenses include expenses
incurred for salaries paid, actuarial, legal, and accounting services received.
Amortization of deferred organization costs, interest expense and miscellaneous
operating expenses are also included.
RESULTS OF OPERATIONS
Three Month Period Ending March 31, 1998 Compared to Three Month Period Ending
March 31, 1997.
Revenues. The Company's revenues increased by $813,000, or 62%, to
$2,138,000 in 1998 from $1,325,000 in 1997. The increase was attributable
primarily to the growth in premiums associated with the Western Reserve MRT
agreement. Additional revenue increase of $160,000 was attributable to the
coinsurance and modified coinsurance agreements WMA Life entered into with
American Skandia during 1997 and with Western Reserve in 1998.
Premiums. Premiums increased by $661,000, or 62%, to $1,729,000 in 1998
from $1,068,000 in 1997. The increase was attributable primarily to the growth
in premiums associated with a MRT reinsurance agreement WMA Life entered into
with Western Reserve during the second quarter of 1996, and to a much lesser
extent to a MRT agreement executed during the fourth quarter of 1996 with
Kemper. The increase in premiums was due to an increase in the number and
reinsured amount of VUL policies sold by WMA Agency. At March 31, 1998 and 1997,
WMA Life's reinsurance in force constituted 167,204 and 105,493 life insurance
policies, respectively, which represented a 58% increase.
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Reinsured Policy Revenues. An increase of $160,000 was due to the
revenues generated from the ModCo variable annuity agreement with American
Skandia and from the coinsurance and modified coinsurance variable annuity
agreement with Western Reserve. The revenues reflect policy mortality and
expense charges, policy administration charges, asset-based allowances and
deferred sales charges that have been assessed against the reinsured policy
account balances under the coinsurance and modified coinsurance agreements, as
they relate to universal life-type contracts.
Net Investment Income. Net investment income, including Net realized
gains on investments, decreased by $7,000 to $250,000 in 1998 from $257,000 in
1997. Investment income is earned from the investment in securities (fixed
income and equity) and cash equivalents. Investment expenses of $17,000 and
$8,000 for 1998 and 1997 respectively related to investment advisor fees and
custodial fees that were netted with gross investment income. Controlling
interest in Falcon Asset Management, Inc. ("Falcon"), the Company's outside
investment advisor and manager, recently changed. Falcon advised the Company
that it was terminating their engagement as of the end of May 1998. The Company
expects to retain a new manager coincidental with the termination of Falcon. The
Company is unaware of any affiliation of Falcon with the Company, WMA Agency,
WMA Securities or the Ceding Life Companies.
Benefits, Claims and Settlement Expenses. Benefits, claims and
settlement expenses increased by $482,000, or 122%, to $875,000 in 1998 from
$393,000 in 1997. This increase primarily resulted from an increase in volume of
in force business. The amount of business in force at March 31, 1998, was $4.66
billion as compared to $2.98 billion at March 31, 1997, which represented a
$1.68 billion, or 56% increase.
The Company's profitability, in part, depends on the volume and amount
of death claims incurred. While death claims are reasonably predictable over a
period of many years, claims become less predictable over shorter periods and
are subject to fluctuation from quarter to quarter and year to year. As of March
31, 1998, the Company had not reinsured ("retroceded") any of its reinsurance.
However, the Company intends to retrocede portions of the mortality risk in
excess of its retention limit due to the new proposed reinsurance agreement with
Western Reserve. Standard mortality risks in excess of $100,000 per life will be
retroceded to American Phoenix Life and Reinsurance Company, Swiss Re Life &
Health America, Inc., The Lincoln National Life Insurance Company, and
Transamerica Occidental Life Insurance Company.
Reinsurance Premium Allowances, Net. Net reinsurance premium allowances
increased by $169,000, or 56%, to $472,000 in 1998 from $303,000 in 1997. Gross
reinsurance premium allowances represent a portion of reinsurance premiums paid
or allowed by WMA Life to the ceding companies for each policy reinsured. A
certain portion of the gross reinsurance allowances, with regard to the
production of new business, was primarily related to the Company's share of
commissions, certain development costs and other expenses from such production
of new business. These amounts have been deferred to the extent that such costs
are deemed recoverable from future policy revenue in accordance with 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 (e.g.,
renewal reinsurance allowances). Similar to the increase in Benefits, claims and
settlement expenses, the increase in net reinsurance premium allowances was due
to an increase in the volume of business in force and placement of the reinsured
variable annuity business.
Professional Fees, Management Fees and Other Expenses. Professional
fees, management fees and other expenses increased by $88,000, or 87%, to
$189,000 in 1998 from $101,000 in 1997. Total expenses for each year included
professional fees for legal, actuarial and accounting expenses incurred,
management fees to WMA Management, consulting fees to WMA Agency, and other
miscellaneous expenses. The increase in expenses was primarily associated with
an increase in the amount of reinsurance business activities and expenses
relating to the administration of the Company.
Amortization of Deferred Acquisition Costs. Amortization of deferred
acquisition costs increased by $126,000 to $125,000 in 1998. The increase in
amortization of deferred acquisition costs was attributable primarily to
increased revenues associated with business reinsured and with the assumption of
new business.
The deferred acquisition cost balance is equal to the prior period
deferred acquisition cost balance, plus interest, and acquisition costs
capitalized, less amortization as a function of premium revenue. Amortization of
deferred
12
<PAGE> 13
acquisition costs is equal to amortization as a function of premium revenue,
less interest capitalized. During the first quarter of 1997, interest
capitalized exceeded amortization as a function of premium revenue, creating a
negative balance. As each block of reinsured policies ages under the MRT
reinsurance agreements, amortization as a function of premium revenue will
exceed interest capitalized.
Income Taxes. Income taxes decreased by $43,000 to $162,000 in 1998
from $205,000 in 1997. The Company's effective tax rate was 34.1% in 1998 and
38.8% in 1997. The higher effective tax rate in 1997 was due to the reversal of
a valuation allowance for deferred tax assets during 1997.
Net Income. As a result of the foregoing, net income for the quarter
ended March 31, 1998, was $313,000 compared to $323,000 for the quarter ended
March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the principal sources of the Company's cash flow have
been premiums received from Ceding Life Companies, investment income, maturing
investments and proceeds from sales of invested assets, and the Company's common
stock. Premiums are generally received in advance of related claims payments. In
addition to the need for cash flow to meet operating expenses, the liquidity
requirements of the Company relate primarily to the payment of gross reinsurance
allowances, operating expenses, investment purchases, and reinsurance claims.
The Company's cash requirements will consist of salary and benefits;
management service fees; investment management and custodial account fees;
accounting and consulting services fees; expenses related to regulatory issues
and compliance with corporate and tax matters; and other incidental
administrative expenses. Prior to 1998 the Company incurred no expense for
salary and benefits because it had no employees. The Company incurred no capital
expenditures in 1997 or through the first quarter of 1998.
For the period ended March 31, 1998, net cash flows used in operating
activities were $156,000 compared to net cash provided by operating activities
of $169,000 for the period ended March 31, 1997. This change is due primarily to
additional cash required to reimburse the Ceding Life Companies for reinsurance
allowances as a result of the new coinsurance and modified coinsurance agreement
with Western Reserve in 1998. For the first quarter of 1997, the Company only
had two MRT agreements in place, which provided a small amount of revenue. To
reimburse the Ceding Life Companies for such allowances for the first quarter of
1998, the Company has used its invested assets. The net cash provided by
investing activities for the period ended March 31, 1998 was $699,000 compared
to net cash used in investing activities of $1.08 million for the period ended
March 31, 1997. The Company received cash from the issuance of common stock in
the first quarter of 1997, which allowed the Company to purchase additional
investments. The net cash used in financing activities was $21,000 for the
period ended March 31, 1998 compared to net cash provided by financing
activities of $1.10 million for the period ended March 31, 1997. The Company
purchased a small amount of stock from its shareholders, which represented the
cash from financing activities for 1998.
The Company has no assets other than the stock of its subsidiaries and
investment assets. The Company will rely on income from its investment assets
and dividends from WMA Life to meet holding company cash requirements.
The minimum solvency margin for WMA Life as a long-term insurer under
Bermuda regulations is $250,000. As of December 31, 1997, WMA Life had total
statutory capital and surplus of $6,407,578. The amount available for
distribution of dividends is $6,157,578. Additionally, the amount available for
dividend distribution must be supported by liquid assets. As of December 31,
1997, WMA Life met this requirement as the amount of invested assets and quoted
investments and cash was greater than $6,157,578.
The Company's primary source of liquidity was $1.99 million in cash and
cash equivalents at March 31, 1998, a decrease of $183,000 from the prior
comparable period. The effective duration of the Company's fixed income
portfolio is just over four years, with over 95% of the fixed income securities
having a maturity of less than 10 years. The Company's fixed income portfolio
represents over 96% of the total invested assets, and has an average quality of
rating Aa2 by Moody's.
13
<PAGE> 14
In recognition of these liquidity requirements during the first quarter
of 1998, the Company contributed additional capital to WMA Life through a
transfer of assets, and corresponding due and accrued investment income, with an
amortized cost of approximately $10.16 million.
As a result of the new VUL coinsurance reinsurance agreement with
Western Reserve, the Company will require substantially greater amounts of cash
to make required payments to Western Reserve than it has been required to make
under its MRT agreement. During the first year in which a policy is reinsured on
a coinsurance basis, the Company is required to reimburse Western Reserve for
acquisition costs, including first year commissions and issuance expenses. Under
the MRT reinsurance agreements, premiums vary in proportion to expected
mortality claims reinsured. The Company's cash inflows under the MRT agreements
equal premiums for the mortality risk reinsured. The Company's cash outflows
equal reinsurance expense allowances and death benefit claims. The reinsurance
expense allowances represent the Company's share of acquisition and maintenance
expenses incurred by the ceding company that are attributable to the risks
reinsured. With respect to the first policy year, the Company's net cash outlay
is approximately equal to death benefit claims because of the expense allowance
structure; thereafter, in renewal policy years, it is anticipated no further
cash outlays will occur because reinsurance expense allowances are materially
less as a function of premium.
Under the Western Reserve VUL coinsurance and modified coinsurance
agreement, since the Company is reinsuring risks on the same plan as that of the
original policy, reinsurance premiums are materially greater than premiums paid
on the MRT reinsurance--perhaps as much as fifteen times or more. During the
first year in which a policy is reinsured on a coinsurance basis, the Company is
required to reimburse Western Reserve for acquisition costs, including first
year commissions and issuance expenses. Further, under modified coinsurance, the
Company will allow Western Reserve to retain assets related to reserves in
support of reinsured policy benefits (e.g., cash values). Accordingly, because
of the type of reinsurance and the plan reinsured, the net cash outlays could be
as much as, or more than, the first year premium paid.
Under the Company's reinsurance agreements, the Company is required to
provide security through a Letter of Credit ("LOC") for the benefit of the
Ceding Life Companies. WMA Life has previously secured a LOC of $2,000,000 in
favor of Western Reserve. The LOC for Western Reserve conforms to provisions
contained in the Ohio Insurance Code, Administrative Code and Rules and National
Association of Insurance Commissioner's Model Law on Credit for Reinsurance with
regard to LOCs. The Company is not aware whether the state of Ohio has reviewed
the LOC. The LOCs were issued by IBJ Schroder, the Company's custodian and
collateralized by the Company's assets held with the custodian.
WMA Life also has previously secured a LOC of $30,000 in favor of
Kemper. Illinois has reviewed and accepted the LOC for KILICO. The Company is
assessing its LOC needs in support of each of the new reinsurance agreements in
place with Western Reserve. If determined to be necessary, WMA Life will develop
facilities for future LOCs and trust arrangements in support of additional
reinsurance agreements.
As a result of the 1995 offering, the Company sold 2,000,000 shares of
Common Stock and 500,000 warrants for gross proceeds of $20.5 million (excluding
deferred organization costs of $517,000). The Company incurred no capital
expenditures during 1997.
The Company believes that the sources of cash from the 1995 offering
will be sufficient to meet the Company's cash needs until October 1998 with
respect to the administration of WMA Life's current MRT agreements with Western
Reserve and Kemper, its modified coinsurance agreements with American Skandia
and Western Reserve and its new VUL reinsurance agreement with Western Reserve.
The Company intends to offer shares of common stock sometime in 1998 to
provide sufficient capital to fund payments of reinsurance allowances to Western
Reserve in relation to the new VUL agreement. If an offering is not consummated,
or if the Company's cash requirements are greater than anticipated, the Company
may have to resort to other methods of raising the necessary capital to finance
its growth, such as borrowing from financial institutions or the
14
<PAGE> 15
sale of additional securities in other private or public offerings. There can be
no assurance that such alternatives would be available to the Company at an
acceptable cost, if at all. If the offering is not consummated and alternative
courses of financing cannot be obtained at an acceptable cost, the Company may
seek to terminate or amend the new reinsurance agreements in light of available
capital. The termination or amendment of the new reinsurance agreements would
result in a material disruption in the Company's growth and business plan.
YEAR 2000 ISSUE
The Company has reviewed its internal business systems and believes its
systems, primarily its computer systems, will process date information
accurately and without interruption when required to process dates in the year
1999 and beyond. The Company has discussed the Year 2000 issue with the Ceding
Life Companies and the steps they have taken to address the situation. The
Company believes its operations will not be affected. The Company has not been
required to expend significant resources to address the Year 2000 issue and does
not anticipate any significant expenditure.
The Company is dependent on the data processing systems of the Ceding
Life Companies and for the year 2000 and beyond. There can be no assurance that
these systems will be able to properly process information relating to the year
2000 and beyond. The failure of these systems to be Year 2000 compliant could
have a material adverse effect upon the Company.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
are subject to the safe harbor provisions of that Act. These statements include,
but are not limited to, statements relating to increases in reinsurance revenues
and net income in future periods resulting from, among other things, the Company
expanding the types of reinsurance written, expanded reinsurance capacity and
investment results. Because such forward-looking statements involve risks, both
known and unknown, and uncertainties, there are important factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements, including but not limited to, changes in the
Company's relationship with WMA Agency, adverse reinsurance experience,
increased competition from within the insurance industry, the extent to which
the Company is able to develop new reinsurance programs and markets for its
reinsurance, changes in the control of the Company, the Company's cash
requirements, and the availability of capital on acceptable terms and other
factors discussed in this report.
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15
<PAGE> 16
PART II
ITEM 1. LEGAL PROCEEDINGS.
At March 31, 1998, neither the Company nor its subsidiaries were
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.
On March 31, 1998, the Company's stockholders at a special meeting
approved a recommendation of the Company's Board of Directors to amend the
Company's Certificate of Incorporation to change the Company's name to "The WMA
Corporation" from WMA International Corporation. The vote was 1,777,079 shares
voting FOR the name change, 3,057 shares AGAINST and 68,829 share votes were
withheld.
No other business came before the meeting which required a vote of the
stockholders.
ITEM 5. OTHER INFORMATION.
The Company's major shareholder, S. Hubert Humphrey, Jr. in 1995
pledged all of his shares of the Company's common stock in connection with a
loan made by Money Services, Inc. to WMA Agency ("the Agency Loan"). Money
Services, Inc. is a subsidiary of AEGON USA, Inc., as is Western Reserve, for
whom the Company provides reinsurance. Western Reserve underwrites the largest
proportion of VUL business sold by WMA Agency, a large percentage of which was
reinsured by the Company in 1996 and 1997.
Part of the Agency Loan proceeds were allocated for use by WMA Agency
to make loans to certain of its WMA Sales Associates (the "Agent Loans") to
acquire 402,836 shares of common stock in the 1995 offering. As of March 31,
1998, the outstanding principal amount of the Agent Loans was $1,260,000. The
WMA Sales Associates' shares of common stock are pledged to WMA Agency as
security for the Agent Loans. Each pledge is accompanied by an irrevocable proxy
which grants to WMA Agency or its nominee the right to exercise, in its sole and
absolute discretion, all voting power relating to the pledged shares until all
indebtedness owed by the borrower to WMA Agency is no longer outstanding.
The Agency Loan, which was in the initial principal amount of
$2,250,000 in 1995, was subsequently consolidated into a WMA Agency line of
credit facility and the maximum available amount was increased to $7,750,000. On
November 30, 1997, this line of credit facility was again increased to a maximum
available amount of $14,750,000. Mr. Humphrey's pledge of his shares of Common
Stock is one of the various forms of collateral for this line of credit, which
as of March 31, 1998 had an outstanding balance in excess of $12 million. Upon
default on this credit line, the lender, Money Services, Inc. would have the
right to take title to the pledged shares and to exercise voting control. This
line of credit is being amortized over a fifteen year period ending November 1,
2012 with principal and interest payable monthly by WMA Agency. Interest is
calculated in arrears based on AEGON USA's cost of its five year senior debt
instruments, which is in turn, based upon five year U.S. Treasury Notes, plus an
underwriters override. Interest on the line of credit is adjusted every five
years.
The Company reinsures VUL and variable annuity products marketed by WMA
Agency. These products are treated as securities under federal and state
securities laws. In order to sell these products, the WMA Sales Associates must
be individually licensed by the National Association of Securities Dealers
("NASD") and must become affiliated
16
<PAGE> 17
with a registered securities broker-dealer. WMA Securities, Inc. ("WMAS") is a
registered broker-dealer, which is owned by S. Hubert Humphrey, Jr., who also
owns substantially all of the common stock of WMA Agency and is the principal
stockholder of the Company. All of the sales associates of WMA Agency who are
licensed to sell VUL and variable annuity products are registered
representatives of WMAS.
As a registered broker-dealer, WMAS's operations are subject to
periodic examination and review by both the NASD and the Securities and Exchange
Commission ("SEC"), a federal agency. In September 1997, the Atlanta District
Office of the SEC examined the operations of WMAS. On February 3, 1998, WMAS
received a letter from the SEC setting forth certain alleged deficiencies and
violations of the Securities Exchange Act of 1934 pertaining to net capital
requirements, record keeping and other compliance matters. In response to this
letter, WMAS subsequently engaged a consultant to make recommendations to WMAS
on how to improve its compliance practice and has notified the SEC in it's
response that it plans to implement the consultant's recommendations.
Implementation of these recommendations will involve significant capital
expenditures by WMAS and could lead to a disruption of WMAS' business. Such a
disruption could cause a significant interruption in the production of new
business reinsured by the Company due to the Company's dependence upon WMA
Agency and WMA Sales Associates for the marketing of new VUL and variable
annuity policies which the Company may then reinsure.
The Company understands that it is not the current policy of the SEC to
issue any written advice as to whether the steps taken by a recipient of a
deficiency letter to address alleged deficiencies are adequate or satisfactory;
therefore, it is unlikely that WMAS will receive any indication from the SEC
regarding the adequacy of the corrective action that it has taken or intends to
take, until the SEC conducts a subsequent examination of the operations of WMAS
and the alleged deficiencies contained in the current deficiency letter are no
longer found to exist. WMAS cannot determine when and if the SEC will conduct a
subsequent examination of its operations nor can it predict the outcome of such
examination should it occur.
The Company also understands that in situations where the SEC
determines that alleged deficiencies may rise to the level of a potential
violation of the federal securities laws, its policy is to refer the matter to
its Enforcement Division for further investigation. During the course of any
investigation, if initiated, the Enforcement Division may recommend the
imposition of sanctions. These sanctions, should they be imposed, could take
various forms, ranging from the imposition of monetary penalties to permanent
revocation of a broker-dealer's registration or of the licenses of sales
representatives, resulting in the broker-dealer's inability to continue
operations.
Any such sanctions, if imposed against WMAS, could impair the financial
and operating condition of WMAS. If sales associates of WMA Agency are no longer
able to maintain their licenses with WMAS, a significant disruption of the sale
of new VUL and variable annuity products to be reinsured by the Company could
result until the WMA Sales Associates could become registered with another
broker-dealer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports were required to be filed on Form 8-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
3.1 Articles of Incorporation(1)
3.2 By-laws(1)
4.1 Shareholders' Agreement (3)
4.2 Specimen Stock Certificate(2)
4.4 Revised Specimen Warrant (4)
4.5 Loan Agreement between WMA Agency and Offering Subscribers(3)
10.1 Loan Agreement between Money Services, Inc. and WMA Agency(3)
10.2 Modification of Loan & Security agreement between Money Services, Inc. and WMA Agency (5)
10.3 Management Agreement with WMA Management(3)
10.4 Reinsurance Agreement between WMA Life and Western Reserve Life dated July 9, 1996 (5).
Portions of this Exhibit have been omitted, a complete copy of which has been filed separately
with the Secretary of the Commission pursuant to an application for confidential treatment.
10.5 Sublease Agreement between World Marketing Alliance, Inc. and The WMA Corporation dated January
21, 1998 (7)
10.6 Automatic Variable Annuity Reinsurance Agreement between Western Reserve and WMA Life effective
January 1, 1998 (6). Portions of this Exhibit have been omitted, a complete copy of which has been
filed separately with the Secretary of the Commission pursuant to an application for confidential
treatment.
10.7 Management Agreement dated August 2, 1995, between CFM Insurance Managers, Ltd. And WMA Life (7)
10.8 Form of Pledge and Security Agreement and Irrevocable Proxy between Debtor and World Marketing
Alliance, Inc. (7)
27.1 Restated Financial Data Schedule (for SEC use only)
</TABLE>
[FOOTNOTES ON NEXT PAGE]
18
<PAGE> 19
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-32.
(2) Filed on September 22, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-32.
(3) Filed on November 17, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-32.
(4) Filed on December 20, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-32.
(5) Filed on May 15, 1998 as an Exhibit to Form 10-QSB for the period ended
March 31, 1998 and incorporated herein by reference pursuant to Rule
12b-32.
(6) Filed on August 20, 1998 as Exhibit 10.5 to Amended Form 10-QSB/A for
the period ended June 30, 1998 and incorporated herein by reference
pursuant to Rule 12b-32.
(7) Filed on October 1, 1998 as an Exhibit to Amended Form 10-KSB/A for
the fiscal year ended December 31, 1997 and incorporated herein by
reference pursuant to Rule 12b-32.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant) The WMA Corporation
<TABLE>
<S> <C> <C>
By (Signature/Title) /s/ Edward F. McKernan (SEAL) Date: October 1, 1998.
Edward F. McKernan, Senior Vice
President, Chief Financial Officer,
Actuary, and Director
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WMA CORPORATION FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 17,121,692
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 714,597
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 17,836,289
<CASH> 1,991,275
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 6,558,706
<TOTAL-ASSETS> 27,158,682
<POLICY-LOSSES> 1,498,899
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 22,447,084
<TOTAL-LIABILITY-AND-EQUITY> 27,158,682
1,728,837
<INVESTMENT-INCOME> 246,402
<INVESTMENT-GAINS> 3,799
<OTHER-INCOME> 158,957
<BENEFITS> 875,417
<UNDERWRITING-AMORTIZATION> 124,573
<UNDERWRITING-OTHER> 472,505
<INCOME-PRETAX> 475,905
<INCOME-TAX> 162,339
<INCOME-CONTINUING> 313,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313,566
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
