-----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, U+rIkCJ92BBrZeN95hrscwUdJf96ceK7qgi7BqFLYYjrPATlPBsYIzG1tF7thr1O HkYfymqOPyIhR/dss3r1nQ== 0001030798-99-000065.txt : 19990518 0001030798-99-000065.hdr.sgml : 19990518 ACCESSION NUMBER: 0001030798-99-000065 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 10QSB SEC ACT: SEC FILE NUMBER: 333-24739 FILM NUMBER: 99627950 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 10QSB 1 STONEVILLE INSURANCE CO. FORM 10QSB FOR 3/31/99 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 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) -------------- 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. 503,384 Common Shares were outstanding as of May 15, 1999 for financial statement purposes. Transitional Small Business Disclosure Format (check one): Yes [ ] No [x] PART I: FINANCIAL INFORMATION In addition to historical information, this report contains statements which constitute forward-looking statements and information which are based on management's beliefs, plans, expectations and assumptions and on information currently available to management. The words "may," "should," "expect," "anticipate," "intend," "plan," "continue," "believe," "seek," "estimate," and similar expressions used in this report that do not relate to historical facts are intended to identify forward-looking statements. These statements appear in a number of places in this report, including, but not limited to, statements found in Item 2 "Management's Discussion and Analysis." All phases of the Company's operations are subject to a number of risks and uncertainties. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projects in the forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this report, including, without limitation, the portions referenced above, and the uncertainties set forth from time to time in the Company's other public reports and filings and public statements, many of which are beyond the control of the Company, and any of which, or a combination of which, could materially affect the results of the Company's operations and whether forward-looking statements made by the Company ultimately prove to be accurate. Item 1 - Stoneville Insurance Company and Subsidiary Consolidated Financial Statements Consolidated Balance Sheets March 31, 1999 and December 31, 1998 Consolidated Statements of Income Three Months Ended March 31, 1999 and 1998 Consolidated Statements of Changes in Stockholders' Equity Year Ended December 31, 1998 Three Months Ended March 31, 1999 Consolidated Statements of Cash Flows Three Months Ended March 31, 1999 and 1998 Notes to Financial Statements STONEVILLE INSURANCE COMPANY AND SUBSIDIARY Consolidated Balance Sheets March 31, 1999 and December 31, 1998 March 31, December 31, 1999 1998 --------- ------------ Assets Investments: Securities available-for-sale at fair value - amortized cost of $1,136,399 and $1,139,000 $1,163,170 $1,175,757 Short-term investments, at cost which approximates market 341,615 342,358 ---------- ----------- Total Investments 1,504,785 1,518,115 Cash and Cash Equivalents 1,057,666 1,222,322 Premiums receivable 466,094 420,902 Accounts receivable 92,315 0 Accrued interest receivable 27,214 19,888 Refundable income taxes 68,618 68,618 Reinsurance recoverable 1,023,532 1,023,532 Equipment, net of accumulated depreciation of $34,124 and $27,000 120,944 84,598 Deferred tax assets 146,967 134,715 Other 156,477 9,912 ---------- ----------- Total Assets $4,664,612 $4,502,602 ========== =========== Liabilities Reserve for losses and loss adjustment expenses $1,687,785 $1,780,687 Unearned premium 622,210 475,106 Accounts payable and accrued liabilities 450,625 323,415 Capital lease obligations 8,102 8,341 ---------- ----------- Total Liabilities 2,768,722 2,587,549 ---------- ----------- Shareholders' Equity Common stock ($1 par value; 10,000,000 shares authorized; 503,384 shares issued and outstanding) 503,384 503,384 Retained earnings 1,375,543 1,388,334 Accumulated other comprehensive income - Unrealized gains on securities available for sale, net of income taxes of $9,808 and $14,000 16,963 23,335 ---------- ----------- Total Shareholders' Equity 1,895,890 1,915,053 ---------- ----------- Total Liabilities and Shareholders' Equity $4,664,612 $4,502,602 ========== =========== See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARY Consolidated Statements of Income Three Months Ended March 31, 1999 and 1998 Three Months Ended March 31, 1999 1998 ---- ---- Revenues Net premiums earned (less ceded amount of approximately $54,706 and $0) $305,537 $112,296 Investment income 25,407 17,563 Administrative and management fees 300,197 43,393 Other 1,662 0 -------- --------- Total Revenues 632,803 173,252 -------- --------- Expenses Loss and loss adjustment expenses 222,769 64,750 Policy acquisition fees 24,123 7,861 Program administration fees 43,022 16,844 Regulatory fees 17,238 5,615 General expenses 346,621 108,671 -------- --------- Total Expenses 653,773 203,741 -------- --------- Income before Income Taxes (20,970) (30,489) Provision (benefit) for income taxes (8,179) (10,366) -------- --------- Net Loss (12,791) (20,123) Other Comprehensive Income, net of income tax effect - Unrealized loss on investments in securities (6,372) (3,982) -------- -------- Comprehensive Loss (19,163) (24,105) ======== ======== Net Loss Per Share ($0.03) ($0.04) ======== ======== See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARY Consolidated Statements of Changes in Shareholders' Equity For Periods Indicated
Accumulated Common Stock Other Total ---------------- Retained Comprehensive Shareholders' Shares Amount Earnings Income Equity --------------------------------------------------------------- Balance at December 31, 1997 503,384 $503,384 $1,484,870 $15,852 $2,004,106 1998 Net income (loss) (96,536) (96,536) Net increase in unrealized appreciation of securities available for sale 7,483 7,483 ---------------------------------------------------------------- Balance at December 31, 1998 503,384 $503,384 $1,388,334 $23,335 $1,915,053 1999 Net income (loss) (12,791) (12,791) Net increase in unrealized appreciation of securities available for sale (6,372) (6,372) ---------------------------------------------------------------- Balance at March 31, 1999 503,384 $503,384 $1,375,543 $16,963 $1,895,890 ================================================================
See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows Three Months Ended March 31, 1999 and 1998 Three Months Ended March 31, 1999 1998 ----------- ----------- Cash Flows From Operating Activities Premiums collected $412,626 Administrative fees collected 129,039 Losses and loss adjustment expenses paid (214,538) Administrative expenses paid (318,551) ($171,396) Investment income received 18,928 24,463 Other income received 1,662 28,393 Interest paid (203) (27) ------------ ----------- Net Cash Provided by Operating Activities 28,963 (118,567) ------------ ----------- Cash Flows From Investing Activities Proceeds from sales of available-for-sale securities 36,847 Capital expenditures (193,487) ------------ ----------- Net Cash Provided by Investing Activities (193,487) 36,847 ------------ ----------- Cash Flows From Financing Activities Principal payments under capital lease obligations (132) (494) ------------ ----------- Net Cash Used in Financing Activities (132) (494) ------------ ----------- Net Increase (Decrease) in Cash and Cash Equivalents (164,656) (82,214) Cash and Cash Equivalents at Beginning of Period 1,222,322 425,493 ----------- ----------- Cash and Cash Equivalents at End of Period $1,057,666 $343,279 =========== =========== Continued See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows (Continued) Three Months Ended March 31, 1999 and 1998 Three Months Ended March 31, Reconciliation of net income to net cash provided 1999 1998 by Operating Activities --------- ---------- Net Income ($12,791) ($20,123) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,642 969 Deferred income tax benefit (8,179) (10,366) Decrease (increase) in accrued interest receivable (7,326) 1,865 Decrease in premiums and reinsurance receivables (45,192) Decrease (increase) in other assets (4,065) (9,824) (Increase) decrease in notes and other receivables (92,315) Amortization of bond premium (discount) 5,357 Decrease in unpaid losses and loss adjustment expenses (92,902) 53,366 Increase (decrease) in unearned premiums 147,104 (Decrease) increase in accounts payable and accrued liabilities 129,987 (139,811) ---------- ---------- Net cash provided by operating activities $28,963 ($118,567) ========== ========== See accompanying notes to financial statements. Stoneville Insurance Company and Subsidiary Notes to Consolidated Financial Statements Quarters Ended March 31, 1999 and 1998 1. Basis of Presentation These interim consolidated financial statements have been prepared on the basis of accounting principles used in the annual financial statements ended December 31, 1998, and must be read in conjunction with the 1998 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. Consolidation of Subsidiary In January, 1999, the Company formed Stoneville Service Company, Inc., a Mississippi corporation owned entirely by Stoneville Insurance Company. Stoneville Service Company, Inc. provides claims and risk control services primarily to Arkansas groups that are self-funded for workers' compensation purposes. The accompanying financial statements present the two companies on a consolidated basis. All necessary eliminating entries have been made. 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 and began direct writing of workers' compensation insurance in the fourth quarter of 1998. In July, 1998, the Company began providing claims and risk control services as well as program management services to the insurance programs being reinsured by the Company. In January, 1999, the Company began providing claims and risk control services to Arkansas self-funded workers' compensation groups through its newly formed subsidiary, Stoneville Service Company, Inc. 4. Assets Pledged Of the $1,163,170 in securities available-for-sale, $500,000 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 not to discount such reserves. Management believes that the reserve for loss and LAE as of March 31, 1999 is adequate to cover ultimate gross cost of losses and LAE incurred through March 31, 1999. 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. Results of Operations - Subsidiary As indicated in Note 2, the financial statements of the Company and its wholly owned subsidiary are presented on a consolidated basis. Presented below are the operating results of each entity for the three months ended March 31, 1999. Stoneville Stoneville Insurance Service Company Company Consolidated Total Revenues $ 571,448 $ 61,355 $ 632,803 Net Income $ 8,209 $ (21,000) $ (12,791) 7. 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, 1999 and 1998. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - March 31, 1999 Compared to December 31, 1998 Total shareholders' equity decreased by $19,163 or 1% from $1,915,053 at December 31, 1998 to $1,895,890 at March 31, 1999. This decrease was caused by a net loss from operations of $12,791 for the first three months of 1999 and a decrease in unrealized gain on securities available-for-sale of $6,372. Total assets increased by $162,010 or 3.6% at March 31, 1999 compared to December 31, 1998. Cash and investments decreased a total of $177,986 during the three months ended March 31, 1999 due primarily to the formation of Stoneville Service Company, a wholly owned subsidiary of Stoneville Insurance Company, and the start-up costs associated with that operation. Total liabilities increased by $181,173 or 7% at March 31, 1999 compared to December 31, 1998. This increase was due primarily to the receipt of certain quota share reinsurance agreement payments prior to the time such payments were earned. Results of Operations - First Quarter 1999 Compared to First Quarter 1998 The Company experienced a net loss of $12,791 during the first quarter of 1999 compared to a net loss of $20,123 during the first quarter of 1998. Results the first quarter of 1999 and the first quarter of 1998 differ significantly because of the development of the Company's operations over the last year. In early 1998, the Company began its active reinsurance business operations, in July of 1998 the Company began its claims administration and risk control operations, and in the fall of 1998, the Company began its direct insurance business operations. As a result of increased workers' compensation premium written and assumed, earned premium during the first quarter of 1999 was $305,537 compared to $112,296 in 1998. Losses and loss adjustment expenses were $222,769 during the first three months of 1999 compared to $64,750 in the same period in 1998. Other expenses directly associated with the Company's insurance programs totaled $83,383 during the first quarter of 1999 compared to $30,320 in the first quarter of 1998. The increase in expenses directly related to insurance programs was due to increased business written in 1999. Investment income of the Company increased from $17,563 in the first quarter of 1998 to $25,407 in the first quarter of 1999. This increase is a result of having more funds available for investment in 1999 due to increased insurance business written coupled with increased fee based income. General expenses increased from $108,671 in the first quarter of 1998 to $346,621 in 1999. This increase is due primarily to the costs associated with the claims administration operation which did not exist during the first quarter of 1998. The Company recorded an income tax benefit for the quarter ended March 31, 1999 in the amount of $8,179 compared to a tax benefit for the same quarter in 1998 of $10,366. 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 5 - Other Information On May 3, 1999, the Company acquired American Colonial Insurance Company ("American Colonial") for $319,266 in cash. American Colonial is a small Arkansas domestic property and casualty insurer formed April 15, 1958 and is licensed to write workers' compensation insurance in the State of Arkansas. American Colonial has been re-named Stoneville Insurance Company of Arkansas and will write direct workers' compensation insurance for small employers in Arkansas. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27: Financial data schedule (b) A report on Form 8-K was filed on January 28, 1999 and amended on February 25, 1999 reporting the appointment of Deloitte & Touche to act as the Company's independent accountants. 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 BY: /s/ Harry E. Vickery -------------------------------------- Harry E. Vickery, President DATE: May 15, 1999 BY: /s/ Richard L. Eaton -------------------------------------- Richard L. Eaton, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) DATE: May 15, 1999 EX-27 2 STONEVILLE INSURANCE COMPANY FDS 3/31/99
7 3-MOS DEC-31-1999 MAR-31-1999 1,504,785 1,478,014 1,504,785 0 0 0 1,504,785 1,057,666 1,023,532 0 4,664,612 1,687,785 622,210 0 0 8,102 0 0 503,384 1,392,506 4,664,612 305,537 25,407 0 301,859 222,769 24,123 406,881 (20,970) (8,179) (12,791) 0 0 0 (12,791) (.03) (.03) 0 0 0 0 0 0 0
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