-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWCPTSH0g3pXSWskDaur8o8M7/sW1Hs3n9GtDt8FglKg0E0r7+wGRMRL53Rguuly CjfN1yR0d45lEV0Aq5p/Jw== 0001030798-98-000088.txt : 19980817 0001030798-98-000088.hdr.sgml : 19980817 ACCESSION NUMBER: 0001030798-98-000088 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STONEVILLE INSURANCE CO CENTRAL INDEX KEY: 0001036506 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 721341156 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-24739 FILM NUMBER: 98691403 BUSINESS ADDRESS: STREET 1: 633 NORTH STATE ST STE 200 CITY: JACKSON STATE: MS ZIP: 39202-7817 BUSINESS PHONE: 6013527817 MAIL ADDRESS: STREET 1: STONEVILLE INSURANCE CO STREET 2: 633 NORTH STATE ST STE 200 CITY: JACKSON STATE: MS ZIP: 39202-7817 10-Q 1 STONEVILLE INSURANCE COMPANY FORM 10-Q FOR 6/30/98 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 333-24739 STONEVILLE INSURANCE COMPANY ----------------------------------------------------------------- (exact name of Registrant as specified in its charter) MISSISSIPPI 72-1341156 - ----------------------------------------------- -------------------- (State or other jurisdiction (I.R.S. Identification Number) of incorporation of organization) 633 North State Street, Suite 200, Jackson, Mississippi 39202-7817 - -------------------------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrants telephone number, including area code: (601-352-7817) ---------------------- Securities registered pursuant to section 12(g) of the Act: None ------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act if 1934 during the preceding 12 months (or for such shorted 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 () Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Class Outstanding at August 12, 1998 Common stock, $1.00 par value 503,384 Shares PART I: FINANCIAL INFORMATION Item 1 - Stoneville Insurance Company Financial Statements Balance Sheets June 30, 1998 and December 31, 1997 Statements of Income and Comprehensive Income Three Months and Six Months Ended June 30, 1998 and 1997 Statements of Changes in Stockholders' Equity Period Ended December 31, 1997 Six Months Ended June 30, 1998 Statements of Cash Flows Six Months Ended June 30, 1998 and 1997 Notes to Financial Statements
STONEVILLE INSURANCE COMPANY Balance Sheets June 30, 1998 and December 31, 1997 June 30, December 31, 1998 1997 -------------- --------------- Assets Investments: Trading securities (at fair value) Equity securities $0 $247 Securities available-for-sale (at fair value) Fixed maturities (amortized cost - $1,246,289 and $1,295,572) 1,269,444 1,320,855 -------------- --------------- Total Investments 1,269,444 1,321,102 Cash and Cash Equivalents 333,564 425,493 Funds held by ceding companies 130,654 0 Accrued interest receivable 19,977 29,819 Capital equipment leases at cost less accumulated depreciation of $16,561 and $12,087 82,867 7,292 Prepaid expenses 50,700 25,300 Deferred tax assets 216,323 322,438 Other assets 1,325 575 -------------- --------------- Total Assets $2,104,854 $2,132,019 ============== =============== Liabilities Reserve for losses and loss adjustment expenses $56,506 $0 Unearned Premium 52,480 0 Accounts payable and accrued liabilities 70,448 117,226 Capital lease obligations 9,153 1,256 -------------- --------------- Total Liabilities 188,587 118,482 -------------- --------------- Shareholders' Equity Common stock ($1 par value; 650,000 shares authorized; 503,384 shares issued) 503,384 503,384 Retained earnings 1,389,728 1,484,870 Accumulated other comprehensive income Unrealized gains (losses) from investments in securities 23,155 25,283 -------------- --------------- Total Shareholders' Equity 1,916,267 2,013,537 -------------- --------------- Total Liabilities and Shareholders' Equity $2,104,854 $2,132,019 ============== =============== See accompanying notes to financial statements.
STONEVILLE INSURANCE COMPANY Statements of Income and Comprehensive Income Six Months and Three Months Ended June 30, 1998 and 1997 Three Months Ended Six Months Ended June 30, June 30, --------------------------- --------------------------- 1998 1997** 1998 1997** --------------------------- --------------------------- Revenue Premium assumed $27,576 $0 $139,872 $0 Premiums ceded 0 0 0 0 --------------------------- ---------------------------- Net premiums earned 27,576 0 139,872 0 Investment income 21,282 39,178 38,845 90,856 Net realized gains and losses on securities available-for-sale 0 0 0 Other 28,820 844 72,213 (9,115) --------------------------- ---------------------------- Total Revenue 77,678 40,022 250,930 81,741 --------------------------- ---------------------------- Expenses Loss and loss adjustment expenses 14,290 0 79,040 0 Policy acquisition fees 1,930 0 9,791 0 Program administration fees 4,137 20,981 0 Regulatory fees 14,070 2,502 19,685 11,502 General expenses 168,732 98,890 277,403 183,760 --------------------------- ---------------------------- Total Expenses 203,159 101,392 406,900 195,262 --------------------------- ---------------------------- Net Income Before Income Tax Provision (125,481) (61,370) (155,970) (113,521) Provision (benefit) for income taxes (50,462) (31,938) (60,828) (40,489) --------------------------- ---------------------------- Net Income ($75,019) ($29,432) (95,142) ($73,032) Other Comprehensive Income Unrealized gain (loss) on investments in securities net of income tax affect 1,754 10,253 (2,128) 2,539 --------------------------- ---------------------------- Comprehensive Income ($73,265) ($19,179) ($97,270) ($70,493) =========================== ============================ Per Share Data Net Income ($0.14) ($0.18) ============ ========== ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements.
STONEVILLE INSURANCE COMPANY Statements of Changes in Shareholders' Equity For Periods Indicated Accumulated Common Stock Other Total ----------------------- Comprehensive Retained Shareholders' Shares Amount Income Earnings Equity ------------------------------------------------------------------------- Balance at December 31, 1996 0 $0 ($9,236) $2,462,693 $2,453,457 1997** Net income (loss) (474,439) (474,439) Issuance of stock upon conversion from a Trust 503,384 503,384 (503,384) 0 to a stock company Net increase in unrealized appreciation of securities available for sale net of tax 34,519 34,519 ------------------------------------------------------------------------- Balance at December 31, 1997 503,384 $503,384 $25,283 $1,484,870 $2,013,537 1998 Net income (loss) (95,142) (95,142) Net increase (decrease) in unrealized appreciation of securities available for sale net of tax (2,128) (2,128) ------------------------------------------------------------------------- Balance at June 30, 1998 503,384 $503,384 $23,155 $1,389,728 $1,916,267 ======= ======== ======= ========== ========== ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements.
STONEVILLE INSURANCE COMPANY Statements of Cash Flows Six Months Ended June 30, 1998 and 1997 1998 1997** ---------- --------- Cash Flows From Operating Activities Premiums collected $0 $0 Losses and loss adjustment expenses paid 0 (879,879) Refunds and premium adjustments paid 0 (60,241) Administrative expenses paid (346,586) (208,011) Income taxes (paid) refund received 166,943 (37,417) Investment income received 54,571 105,953 Other income received 61,713 0 Net (increase) decrease in trading securities 0 1,680,339 Interest paid (250) 0 ---------- --------- Net Cash Provided by Operating Activities (63,609) 600,744 ---------- --------- Cash Flows From Investing Activities Proceeds from sales of available-for-sale securities 43,832 0 Purchase of held-to-maturity securities (589,285) Transfer of held-to-maturity security to cash equivalent 0 507,686 Capital expenditures (80,049) 0 ---------- --------- Net Cash Provided by Investing Activities (36,217) (81,599) ---------- --------- Cash Flows From Financing Activities Proceeds from capital leases 9,574 0 Principal payments under capital lease obligations (1,677) (170) ---------- --------- Net Cash Used in Financing Activities 7,897 (170) ---------- --------- Net Increase (Decrease) in Cash and Cash Equivalents (91,929) 518,975 Cash and Cash Equivalents at Beginning of Period 425,493 1,379,935 ---------- ---------- Cash and Cash Equivalents at End of Period $333,564 $1,898,910 ========== ========== ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY Statements of Cash Flows (Continued) Six Months Ended June 30, 1998 and 1997 Reconciliation of net income to net cash provided 1998 1997** ---------- --------- by Operating Activities Net Income ($95,142) ($73,032) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,474 3,919 Decrease in trading securities 0 1,696,697 Decrease in premiums receivable 0 0 Increase in Funds held by ceding companies (130,654) 0 Decrease (increase) in prepaid expenses (25,400) (2,867) Decrease (increase) in accrued interest receivable 9,842 11,054 (Increase) decrease in notes and other receivables 0 (9,958) (Increase) decrease in other assets (750) Amortization of bond premium (discount) 5,698 2,201 Increase (decrease) in unpaid loss and loss adjustment 56,506 (879,879) expenses (Decrease) increase in accounts payable and accrued (46,778) (9,294) liabilities Increase in unearned premiums 52,480 0 Increase (decrease) in premium adjustment reserve 0 (60,191) (Decrease) increase in income tax liability 106,115 (77,906) ---------- --------- Net cash provided by operating activities ($63,609) $600,744 ========== ========= ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements. Stoneville Insurance Company Notes to Financial Statements Quarters Ended June 30, 1998 and 1997 1. Basis of Presentation These interim financial statements have been prepared on the basis of accounting principles used in the annual financial statements ended December 31, 1997, and must be read in conjunction with the 1997 statements. In the opinion of management, the accompanying interim unaudited financial statements contain all adjustments necessary for a fair statement of financial position and results of operations of the Trust for the interim periods. 2. Plan of Reorganization and Conversion A Plan and Agreement of Reorganization and Conversion was entered into on September 11, 1997 by and between Delta Agricultural and Industrial Trust and Stoneville Insurance Company whereby the Trust transferred all of its existing assets and liabilities to Stoneville on December 31, 1997 in exchange for stock in Stoneville. The Trust was then liquidated and dissolved with the stock of Stoneville distributed to its former members in accordance with the terms outlined in the Plan. 3. Operations of the Company The Company was formed to become the successor to the Delta Agricultural and Industrial Trust, a Mississippi self-funded workers compensation trust. The Company entered the workers compensation market in the first quarter of 1998 as a reinsurer. The Company currently does not write workers compensation insurance on a direct basis. 4. Assets Pledged Of the $1,269,444 in securities available-for-sale, $234,921 is pledged as collateral for a letter of credit issued to an insurer that the Company reinsures on a quota share basis. A claim can be made against the letter of credit if the ceding insurer is unable to pay claims from premiums collected by it. It is unlikely that there will be such a claim against the letter of credit. 5. Reserve for Losses and Loss Adjustment Expenses The reserve for losses and loss adjustment expenses ("LAE") is based upon case reserve reports received from ceding insurance companies and the company's own estimates. Loss and LAE reserves also include estimates of incurred but not reported losses based on past experience modified for current trends and estimates of expenses for investigating and settling claims. It is the company's policy to discount workers' compensation claims on reported and unreported losses to present value using an interest rate of 4.5%. Such discount resulted in a reduction in gross loss reserves of $9,078 as of June 30, 1998. The reserve for losses and LAE is attributable to a quota share reinsurance arrangement in which the Company participates only as a reinsurer. Management believes that the reserve for loss and LAE as of June 30, 1998 is adequate to cover ultimate gross cost of losses and LAE incurred through June 30, 1998. The reserve is based on estimates of losses and LAE incurred and, therefore, the amount ultimately paid may be more or less than such estimates. 6. Operations of Previously Separate Companies As indicated in the financial statements, the information presented for the six months and three months ended June 30, 1997 represents the combined information from two previously separate companies. Presented below are the operating results of each entity and the intercompany adjustments made as a result of the combination combination for the six months ended June 30, 1997. Delta Stoneville Agricultural Insurance & Industrial Company Trust Combined ----------- ------------ ----------- Total Revenues $ 0 $ 81,741 $ 81,741 Net Income (588) (72,444) (73,032) Intercompany Interest Expense Eliminated 588 Intercompany Interest Income Eliminated 588 7. Other Income Other Income for the six months ended June 30, 1998 includes $57,044 in fees paid to the Company for management of certain insurance programs for a ceding carrier. For the six months ended June 30, 1997, other income represented a loss on the sale of trading securities. 8. Earnings (Loss) Per Share Earnings (loss) per common share is based on net income or (loss) and the weighted average number of shares outstanding during each interim period. The number of shares used in computing earnings per share is 503,384 for the quarter ended June 30, 1998. No shares were issued until December 31, 1997, therefore no earnings per share amounts are presented for the period ended June 30, 1997. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - June 30, 1998 Compared to December 31, 1997 Total shareholders' equity decreased by $97,270 or 4% from $2,013,537 at December 31, 1997 to $1,916,267 at June 30, 1998. This decrease was caused by a net loss from operations of $95,142 for the first six months of 1998 and a decrease in unrealized gain on securities available-for-sale of $2,128. Total assets decreased by $27,165 or 1.3% at June 30, 1998 compared to December 31, 1997. Cash and investments decreased a total of $143,587 during the six months ended June 30, 1998 due primarily to limited revenue producing activities in the first six months of 1998 coupled with the payment of certain costs associated with the development of the Company's claims and risk control services. In July of 1998, the Company entered into two agreements with another insurance carrier. Under one agreement the Company will service certain workers compensation claims on behalf of the other insurance carrier in Mississippi. Under the other agreement the Company will provide loss control services to certain insureds of the other insurance carrier. Additional expenditures were made relating to the Plan of Reorganization and Conversion of the Delta Agricultural and Industrial Trust that became effective December 31, 1997. Total liabilities increased by $70,105 or 59.17% at June 30, 1998 compared to December 31, 1997. This increase was due primarily to the purchase of claims administration software, the payment for which was not due until after the balance sheet date. Results of Operations - Quarter and Six Months Ended June 30, 1998 Compared to Quarter and Six Months Ended June 30, 1997 The Company experienced a net loss of $75,019 during the second quarter of 1998 compared to a net loss of $29,432 during the second quarter of 1997. During the first quarter of 1998 the Company entered into a quota share reinsurance arrangement with another insurance carrier in which the Company shares in 25% of the income and is obligated to pay 25% of the expenses associated with the business written within this program. As a result of this arrangement, the Company's portion of earned premium during the second quarter of 1998 was $27,576 compared to $0 in 1997. Losses and loss adjustment expenses related to this program were $14,290 during the second quarter of 1998 compared to $0 in the same period in 1997. Other expenses associated with this program totaled $8,844 during the second quarter of 1998 compared to $0 in the second quarter of 1997. The Company's share of net income before tax associated with this program during the second quarter of 1998 was $4,442 compared to $0 in the second quarter of 1997. The Company experienced a net loss of $95,142 during the six months ended June 30,1998 compared to a net loss of 73,032 during the same period in 1997. As a result of the quota share reinsurance arrangement, the Company had earned premium for the six months ended June 30, 1998 of $139,872 compared to $0 in 1997. Losses and loss adjustment expenses related to this program totaled $79,040 for the first six months of 1998 compared to $0 in 1997. Other expenses related to this program totaled $39,164 for the first six months of 1998 compared to $0 in 1997. Net income before tax from this program was $21,668 for the first six months of 1998 compared to $0 in 1997. Investment income of the Company decreased from $39,178 in the second quarter of 1997 to $21,282 in the second quarter of 1998. This decrease was a result of having less cash to invest due to the funding of an Assumption Reinsurance Agreement in December, 1997 in which the Company was relieved of all of its insurance liabilities as of that date. In conjunction with this agreement, the Company paid a premium of $1,586,463 to the carrier that assumed the Company's insurance liabilities. The payment of this premium resulted in less cash being available for investment during 1998. As a result of having less cash available to invest as described above, investment income of the Company for the six months ended June 30, 1998 decreased to $38,845 from $90,856 for the first six months of 1997. The Company realized capital gains in the second quarter of 1997 totaling $844. No capital gains or losses were realized during the second quarter of 1998. The Company realized capital losses of $9,115 for the six months ended June 30, 1997 compared to $0 in capital gains and losses for the six months ended June 30, 1998. General expenses increased from $98,890 in the second quarter of 1997 to $168,732 in the same period in 1998. This increase is due primarily to the development of a claims and risk control department within the Company that began providing claims and risk control services in July, 1998. Under one agreement the Company will service certain workers compensation claims on behalf of the other insurance carrier in Mississippi. Under the other agreement the Company will provide loss control services to certain insureds of the other insurance carrier. For the six months ended June 30, 1998, general expenses were $277,403 compared to $183,760 for the same period in 1997. This increase is due primarily to the costs involved in re-entering the commercial insurance market in the first quarter of 1998 including the costs associated with the execution of certain reinsurance agreements and the development of a claims and risk control department within the Company. The Company recorded an income tax benefit for the quarter ended June 30, 1998 of $50,462 compared to a tax benefit for the same quarter in 1997 of $31,938. The tax benefit for the six months ended June 30, 1998 was $60,828 compared to $40,489 for the six months ended June 30, 1997. The increased tax benefit for both the quarter and six month period ended June 30, 1998 was a result of larger operating losses experienced by the Company during this period in 1998 compared to 1997. PART II: OTHER INFORMATION Item 1 - Legal Proceedings There have been no material changes to the legal proceedings described in the Company's Registration Statement on Form 10-K (File Number 333-24739). Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27: Financial data schedule (b) No reports on Form 8-K were filed during the quarter ended June 30, 1998. STONEVILLE INSURANCE COMPANY Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STONEVILLE INSURANCE COMPANY (Registrant) DATE: August 14, 1998 /s/ Harry Vickery -------------------------------------- President and Chief Accounting Officer EX-27 2 STONEVILLE INSURANCE COMPANY FDS 6/30/98
7 6-MOS DEC-31-1997 JUN-30-1998 1,269,444 0 0 0 0 0 1,269,444 333,564 0 0 2,104,854 56,506 52,480 0 0 9,513 0 0 503,384 1,412,883 2,104,854 139,872 38,845 0 72,213 79,040 9,791 0 (155,970) (60,828) (95,142) 0 0 0 (95,142) (.18) (.18) 0 0 0 0 0 0 0
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