-----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, MdajXnqa8XxNff02RRpqzXmBgfP0La+J3jCR1YBd5Uku0mVSyhyB5Fz2yyJp5B2X qWgXPzQPsDZDOL7mwSJCBw== 0001030798-98-000073.txt : 19980515 0001030798-98-000073.hdr.sgml : 19980515 ACCESSION NUMBER: 0001030798-98-000073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 98619432 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 3/31/98 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 May 12, 1998 Common stock, $1.00 par value 503,384 Shares PART I: FINANCIAL INFORMATION Item 1 - Stoneville Insurance Company Financial Statements Balance Sheets March 31, 1998 and December 31, 1997 Statements of Income Three Months Ended March 31, 1998 and 1997 Statements of Changes in Stockholders' Equity Period Ended December 31, 1997 Three Months Ended March 31, 1998 Statements of Cash Flows Three Months Ended March 31, 1998 and 1997 Notes to Financial Statements STONEVILLE INSURANCE COMPANY Balance Sheets March 31, 1998 and December 31, 1997 March 31, December 31, 1998 1997 --------- ------------ Assets Investments: Trading securities (at fair value) Equity securities $247 $247 Securities available-for-sale (at fair value) Fixed maturities (amortized cost - $1,253,367 and 1,274,769 1,320,855 $1,295,572) --------- --------- Total Investments 1,275,016 1,321,102 Cash and Cash Equivalents 343,279 425,493 Funds held by ceding companies 70,592 0 Accrued interest receivable 27,954 29,819 Capital equipment leases at cost less accumulated depreciation of $12,087 and $9,775 6,323 7,292 Prepaid expenses 35,124 25,300 Deferred tax assets 332,804 322,438 Other assets 575 575 ---------- ---------- Total Assets $2,091,667 $2,132,019 ========== ========== Liabilities Reserve for losses and loss adjustment expenses $53,366 $0 Accounts payable and accrued liabilities 48,007 117,226 Capital lease obligations 762 1,256 ---------- ---------- Total Liabilities 102,135 118,482 ---------- ---------- Shareholders' Equity Common stock ($1 par value; 650,000 shares authorized; 503,384 shares issued) 503,384 503,384 Retained earnings 1,464,747 1,484,870 Net unrealized loss on securities available for sale, net of deferred taxes 21,401 25,283 ---------- ---------- Total Shareholders' Equity 1,989,532 2,013,537 ---------- ---------- Total Liabilities and Shareholders' Equity $2,091,667 $2,132,019 ========== ========== See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY Statements of Income Three Months Ended March 31, 1998 and 1997 1998 1997** --------- --------- Revenues Premiums earned $112,296 $0 Premiums ceded 0 0 --------- --------- Net premiums earned 112,296 0 Investment income 17,563 51,678 Other 43,393 (9,959) --------- --------- Total Revenues 173,252 41,719 --------- --------- Expenses Loss and loss adjustment expenses 64,750 0 Policy acquisition fees 7,861 Program administration fees 16,844 0 Regulatory fees 5,615 9,000 General expenses 108,671 84,870 --------- --------- Total Expenses 203,741 93,870 --------- --------- Income before Income Taxes (30,489) (52,151) Provision (benefit) for income taxes (10,366) (8,551) --------- --------- Net Income ($20,123) ($43,600) ========= ========= Per Share Data Net Income ($0.04) ========= ** 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 Net Unrealized Appreciation on Securities Total Common Stock Available Retained Shareholders' Shares Amount for Sale 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 503,384 503,384 (503,384) 0 Trust to a stock company Net increase in unrealized appreciation of securities available for sale 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) (20,123) (20,123) Net increase in unrealized appreciation of securities available for sale (3,882) (3,882) ------------------------------------------------------------------------- Balance at March 31, 1998 503,384 $503,384 $21,401 $1,464,747 $1,989,532 ========================================================================= ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements.
STONEVILLE INSURANCE COMPANY Statements of Cash Flows Three Months Ended March 31, 1998 and 1997 1998 1997** Cash Flows From Operating Activities Premiums collected $0 $0 Losses and loss adjustment expenses paid 0 (489,168) Refunds and premium adjustments paid 0 (60,595) Administrative expenses paid (171,396) (119,107) Income taxes (paid) refund received 0 (37,417) Investment income received 24,463 62,088 Other income received 28,393 0 Net (increase) decrease in trading securities 0 1,678,829 Interest paid (27) 0 --------- --------- Net Cash Provided by Operating Activities (118,567) 1,034,630 --------- --------- Cash Flows From Investing Activities Proceeds from sales of available-for-sale securities 36,847 0 Transfer of held-to-maturity security to cash equivalent 0 99,874 --------- --------- Net Cash Provided by Investing Activities 36,847 99,874 --------- --------- Cash Flows From Financing Activities Principal payments under capital lease obligations (494) (170) --------- --------- Net Cash Used in Financing Activities (494) (170) --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents (82,214) 1,134,334 Cash and Cash Equivalents at Beginning of Period 425,493 1,379,935 --------- --------- Cash and Cash Equivalents at End of Period $343,279 $2,514,269 ========= ========== ** 1997 represents the combined information of two previously separate entities. See accompanying notes to financial statements. Cash and Cash Equivalents at End of Period STONEVILLE INSURANCE COMPANY Statements of Cash Flows (Continued) Three Months Ended March 31, 1998 and 1997 Reconciliation of net income to net cash provided 1998 1997** by Operating Activities --------- --------- Net Income ($20,123) ($43,600) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 969 1,205 Decrease in trading securities 0 1,696,697 Decrease in premiums receivable 0 0 Increase in Funds held by ceding companies (70,592) 0 Decrease (increase) in prepaid expenses (9,824) 2,053 Decrease (increase) in accrued interest receivable 1,865 10,629 (Increase) decrease in notes and other receivables 0 (9,958) Amortization of bond premium (discount) 5,357 625 Decrease in unpaid losses and loss adjustment expenses 53,366 (489,168) (Decrease) increase in accounts payable and accrued (69,219) (27,290) liabilities Increase (decrease) in premium adjustment reserve 0 (60,595) (Decrease) increase in income tax liability (10,366) (45,968) ---------- ---------- Net cash provided by operating activities ($118,567) $1,034,630 ========== ========== ** 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 March 31, 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 Company 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 $1,274,769 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 $5,997 as of March 31, 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 March 31, 1998 is adequate to cover ultimate gross cost of losses and LAE incurred through March 31, 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 first quarter of 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 for the three months ended March 31, 1997. Delta Stoneville Agricultural Insurance & Industrial Company Trust Combined ------------ ------------- --------- Total Revenues $ 0 $ 42,002 $ 42,002 Net Income (283) (43,317) (43,600) Intercompany Interest Expense Eliminated 283 Intercompany Interest Income Eliminated 283 7. Other Income Other Income for the first quarter of 1998 includes $28,393 in fees paid to the Company for management of certain insurance programs for a ceding carrier. For the quarter ended March 31,1997, 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 March 31, 1998. No shares were issued until December 31, 1997, therefore no earnings per share amounts are presented for the quarter ended March 31,1997. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - March 31, 1998 Compared to December 31, 1997 Total shareholders' equity decreased by $24,005 or 1% from $2,013,537 at December 31, 1997 to 1,989,532 at March 31, 1998. This decrease was caused by a net loss from operations of $20,123 for the first three months of 1998 and a decrease in unrealized gain on securities available-for-sale of $3,882. Total assets decreased by $40,352 or 1.9% at March 31, 1998 compared to December 31, 1997. Cash and investments decreased a total of $128,300 during the three months ended March 31, 1998 due primarily to limited revenue producing activities in the first quarter of 1998 coupled with the payment of certain costs associated with the Plan of Reorganization and Conversion of the Delta Agricultural and Industrial Trust that became effective December 31, 1997. Total liabilities decreased by $16,347 or 1.4% at March 31, 1998 compared to December 31, 1997. This decrease was due primarily to the payment of liabilities incurred in 1997 associated with the Plan of Reorganization and Conversion of the Delta Agricultural and Industrial Trust that became effective December 31, 1997. Results of Operations - First Quarter 1998 Compared to First Quarter 1997 The Company experienced a net loss of $20,123 during the first quarter of 1998 compared to a net loss of $43,600 during the first 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 first quarter of 1998 was $112,296 compared to $0 in 1997. Losses and loss adjustment expenses related to this program were $64,750 during the first three months of 1998 compared to $0 in the same period in 1997. Other expenses associated with this program totaled $30,320 during the first quarter of 1998 compared to $0 in the first quarter of 1997.The Company's share of net income associated with this program during the first quarter of 1998 was $17,226 compared to $0 in the first quarter of 1997. Investment income of the Company decreased from $51,678 in the first quarter of 1997 to $17,563 in the first 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. 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 the first quarter of 1998. The Company realized capital losses in the first quarter of 1997 totaling $9,959. No capital gains or losses were realized during the first quarter of 1998. General expenses increased from $84,870 in the first quarter of 1997 to $108,671 in 1998. 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. The Company recorded an income tax benefit for the quarter ended March 31, 1998 in the amount of $10,366 compared to a tax benefit for the same quarter in 1997 of $8,551. 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 March 31, 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: May 13,, 1998 /s/ Harry Vickery -------------------------------------- President and Chief Accounting Officer EX-27 2 STONEVILLE INSURANCE COMPANY FDS 3/31/98
7 3-MOS DEC-31-1997 MAR-31-1998 1,274,769 0 0 247 0 0 1,275,016 343,279 0 0 2,091,667 53,366 0 0 0 762 0 0 503,384 1,486,148 2,091,667 112,296 17,563 0 43,393 64,750 7,861 0 (30,489) (10,366) (20,123) 0 0 0 (20,123) (.04) (.04) 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----