-----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, VFcVjOmfXZF8wXVPDDTA9BT46g+ttDoaUUtexxUzuAcoRktaBk7z4LVOi+KqiG4X 9Cg7xzxmR4pL1rtO/3pU2Q== 0001030798-99-000073.txt : 19990816 0001030798-99-000073.hdr.sgml : 19990816 ACCESSION NUMBER: 0001030798-99-000073 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99689618 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 6/30/99 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 JUNE 30, 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 August 12, 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." In particular, future claims under the Small Comp Workers' Compensation Program may be higher than anticipated. 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 June 30, 1999 and December 31, 1998 Consolidated Statements of Operations Three Months and Six Months Ended June 30, 1999 and 1998 Consolidated Statements of Changes in Stockholders' Equity For Periods Indicated Consolidated Statements of Cash Flows Six Months Ended June 30, 1999 and 1998 Notes to Financial Statements STONEVILLE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets June 30, 1999 and December 31, 1998 (Unaudited) June 30, December 31, 1999 1998 -------- ------------ Assets Investments: Securities available-for-sale at fair value - amortized cost of $862,182 and $1,139,000 $ 868,927 $1,175,757 Short-term investments, at cost which approximates market 244,954 342,358 ------------ ------------- Total Investments 1,113,881 1,518,115 Cash and Cash Equivalents 1,113,231 1,222,322 Premiums receivable 705,729 420,902 Accounts receivable 137,770 Accrued interest receivable 17,054 19,888 Refundable income taxes 69,634 68,618 Reinsurance recoverable 1,023,532 1,023,532 Equipment, net of accumulated depreciation of $41,471 and $27,000 131,651 84,598 Deferred tax assets 243,123 134,715 Other 199,025 9,912 ------------ ------------- Total Assets $4,754,630 $4,502,602 ============ ============= Liabilities Reserve for losses and loss adjustment expenses $1,808,042 $1,780,687 Unearned premiums 748,296 475,106 Accounts payable and accrued liabilities 441,100 323,415 Capital lease obligations 7,733 8,341 ------------ ------------- Total Liabilities 3,005,171 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 1,241,328 1,388,334 Accumulated other comprehensive income - Unrealized gains on securities available for sale, net of income taxes of $1,998 and $14,000 4,747 23,335 ------------ ------------- Total Shareholders' Equity 1,749,459 1,915,053 ------------ ------------- Total Liabilities and Shareholders' Equity $4,754,630 $4,502,602 ============ ============= See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Operations Three Months and Six Months Ended June 30, 1999 and 1998 (Unaudited) Three Months Ended Six Months Ended June 30 June 30 ------------------ ----------------- 1999 1998 1999 1998 --------- -------- ------- --------- Revenues Net premiums earned (less ceded amount of approximately $98,067 and $152,774 in 1999 and $0 in 1998) $534,540 $27,576 769,932 139,872 Investment income 23,821 21,282 49,229 38,845 Gain on sale of securities 6,387 6,387 Administrative and management fees 198,873 569,215 Other 20,447 28,820 22,109 72,213 --------- --------- ----------- --------- Total Revenues 784,068 77,678 1,416,872 250,930 --------- --------- ----------- --------- Expenses Loss and loss adjustment expenses 437,298 14,290 660,068 79,040 Policy acquisition fees 37,225 1,930 61,348 9,791 Program administration fees 75,262 4,137 118,284 20,981 Regulatory fees 29,711 14,070 46,949 19,685 General expenses 427,132 168,732 773,753 277,403 ---------- --------- ----------- --------- Total Expenses 1,006,628 203,159 1,660,402 406,900 ---------- --------- ----------- --------- Loss before Income Taxes (222,560) (125,481) (243,530) (155,970) Provision (benefit) for income taxes (88,345) (50,462) (96,524) (60,828) ---------- --------- ----------- --------- Net Loss (134,215) (75,019) (147,006) (95,142) Other Comprehensive Income, net of income tax effect - Unrealized loss on investments in securities (6,372) 1,754 (18,588) (2,128) ---------- --------- ----------- --------- Comprehensive Loss (140,587) (73,265) (165,594) (97,270) ========== ========= =========== ========= Net Loss Per Share $(0.27) $(0.15) $(0.29) $(0.19) ========== ========= =========== ========= See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARIES 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) (147,006) (147,006) Net decrease in unrealized appreciation of securities available for sale (18,588) (18,588) ------------------------------------------------------------- Balance at June 30, 1999 (Unaudited) 503,384 $503,384 $1,241,328 $4,747 $1,749,459 =============================================================
See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Six Months Ended June 30, 1999 and 1998 (Unaudited) 1999 1998 ----------- ------------ Cash Flows From Operating Activities Premiums collected $641,864 Administrative fees collected 287,472 Losses and loss adjustment expenses paid (345,578) Administrative expenses paid (883,860) $(346,586) Income tax refund received $166,943 Investment income received 54,688 54,571 Other income received 2,278 61,713 Interest paid (497) (250) ----------- ------------ Net Cash Provided by Operating Activities (243,633) (63,609) ----------- ------------ Cash Flows From Investing Activities Proceeds from sales of available-for-sale securities 281,392 43,832 Purchase of available-for-sale securities (131,414) Reclass available-for-sale securities as cash equivalents 196,712 Capital expenditures (211,541) (70,475) ----------- ------------ Net Cash Provided by Investing Activities 135,149 (26,643) ----------- ------------ Cash Flows From Financing Activities Principal payments under capital lease obligations (607) (1,677) ----------- ------------ Net Cash Used in Financing Activities (607) (1,677) ----------- ------------ Net Increase (Decrease) in Cash and Cash Equivalents (109,091) (91,929) Cash and Cash Equivalents at Beginning of Period 1,222,322 425,493 ----------- ------------ Cash and Cash Equivalents at End of Period $1,113,231 $333,564 =========== ============ See accompanying notes to financial statements. STONEVILLE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Quarters Ended June 30, 1999 and 1998 (Unaudited) 1. BASIS OF PRESENTATION These interim consolidated financial statements have been prepared in accordance with the instructions to Form 10Q and do not include all of the information and note disclosures required by Generally Accepted Accounting Principles and must be read in conjunction with the 1998 statements. The accompanying financial statements have not been audited by independent accountants in accordance with Generally Accepted Auditing Standards, but 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 SUBSIDIARIES 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. In May, 1999, the Company acquired all of the outstanding stock of American Colonial Insurance Company, an Arkansas property and casualty insurance company. Immediately after the acquisition, the name was changed to Stoneville Insurance Company of Arkansas. The Company plans to write small premium workers' compensation insurance in Arkansas and will reinsure other workers' compensation carriers on a limited risk basis. The Company also plans to provide claims administration and program management services for these insurance programs through its Arkansas subsidiary. The accompanying financial statements present the Company and its subsidiaries, Stoneville Service Company, Inc. and Stoneville Insurance Company of Arkansas, on a consolidated basis. All material inter-company profits, transactions and balances have been eliminated. 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. The Company also plans to duplicate its Mississippi workers' compensation programs in Arkansas through Stoneville Insurance Company of Arkansas. 4. ASSETS PLEDGED Of the $868,927 in securities available-for-sale, $500,000 is pledged as collateral for a letter of credit issued to an insurance carrier that the Company reinsures on a quota share basis. A claim may be made against the letter of credit if the ceding insurer is unable to pay claims from premiums collected by it. 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 June 30, 1999 is adequate to cover ultimate gross cost of losses and LAE incurred through June 30, 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. 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, 1999 and 1998. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - June 30, 1999 Compared to December 31, 1998 Total shareholders' equity decreased by $165,594 or 8.6% from $1,915,053 at December 31, 1998 to $1,749,459 at June 30, 1999. This decrease was caused by a net loss from operations of $147,006 for the first six months of 1999 and a decrease in unrealized gain on securities available-for-sale of $18,588. Total assets increased by $252,028 or 5.6% at June 30, 1999 compared to December 31, 1998. Cash and investments decreased a total of $513,325 during the six months ended June 30, 1999 due largely to the purchase of American Colonial Insurance Company and the formation of Stoneville Service Company, a wholly owned subsidiary of Stoneville Insurance Company, and the associated start-up costs with that operation. Total liabilities increased by $417,622 or 16% at June 30, 1999 compared to December 31, 1998. This increase was due partially to the receipt of certain quota share reinsurance agreement payments prior to the time such payments were earned. Additionally, with the increase in premium written and assumed in the first six months of 1999, unearned premium increased by $117,685. Results of Operations - Second Quarter 1999 Compared to Second Quarter 1998 The Company experienced a net loss of $134,215 during the second quarter of 1999 compared to a net loss of $75,019 during the second quarter of 1998. This loss is due primarily to the costs associated with the start-up and acquisition costs of subsidiaries in 1999 and to unusually high claims incurred in the Company's Small Comp Workers' Compensation Program during the second quarter of 1999. It is expected that these claims will be significantly lower in subsequent quarters, thus improving the Company's profitability. As a result of increased workers' compensation premium written and assumed, earned premium during the second quarter of 1999 was $534,540 compared to $27,576 in 1998. Losses and loss adjustment expenses were $437,298 during the second six months of 1999 compared to $14,290 in the same period in 1998. Other expenses directly associated with the Company's insurance programs totaled $142,198 during the second quarter of 1999 compared to $20,137 in the second 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 $21,282 in the second quarter of 1998 to $23,821 in the second quarter of 1999. This increase is a result of having more cash available for investment in the second quarter of 1999 compared to 1998 due to increased insurance business written coupled with increased fee based income. General expenses increased from $168,732 in the second quarter of 1998 to $427,132 in 1999. This increase is due primarily to the claims administration operation which did not exist during the second quarter of 1998 and costs associated with acquiring American Colonial Insurance Company. The Company recorded an income tax benefit for the quarter ended June 30, 1999 in the amount of $88,345 compared to a tax benefit for the same quarter in 1998 of $50,462. PART II: OTHER INFORMATION 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: August 13, 1999 BY: /s/ Richard L. Eaton -------------------------------------- Richard L. Eaton, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) DATE: August 13, 1999 EX-27 2 STONEVILLE INSURANCE COMPANY FDS 6/30/99
7 6-MOS DEC-31-1998 JUN-30-1999 1,113,881 1,107,136 1,113,881 0 0 0 1,113,881 1,113,231 1,023,532 0 4,754,630 1,808,042 748,296 0 0 7,733 0 0 503,384 1,246,075 4,754,630 769,932 49,229 6,387 591,324 660,068 61,348 938,986 (243,530) (96,524) (147,006) 0 0 0 (147,006) (.29) (.29) 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----