-----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, D9i5xsFiMh+lrbt1ecL22sNnExflFMbULc4tAlzTcciGUZllKiE8ehwSLxjOTk41 p1FuJlZdc/JRCzp0RkeWwQ== 0000018508-96-000009.txt : 19960513 0000018508-96-000009.hdr.sgml : 19960513 ACCESSION NUMBER: 0000018508-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREMOST CORP OF AMERICA CENTRAL INDEX KEY: 0000018508 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 381863522 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11687 FILM NUMBER: 96559515 BUSINESS ADDRESS: STREET 1: 5600 BEECH TREE LN CITY: GRAND RAPIDS STATE: MI ZIP: 49501 BUSINESS PHONE: 6169423000 MAIL ADDRESS: STREET 1: P O BOX 2450 CITY: GRAND RAPIDS STATE: MI ZIP: 49501 FORMER COMPANY: FORMER CONFORMED NAME: CENTENNIAL CORP DATE OF NAME CHANGE: 19790320 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1996 Commission File Number 0-6478 FOREMOST CORPORATION OF AMERICA (Exact name of Registrant as specified in its charter) Delaware 38-1863522 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 5600 Beech Tree Lane, Caledonia, Michigan 49316 Mailing address: P.O. Box 2450, Grand Rapids, Michigan 49501 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (616)942-3000 The registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding at March 31, 1996 Common Stock, $1.00 par value 10,030,894 FOREMOST CORPORATION OF AMERICA INDEX Page No. -------- Part I. Financial Information: Item 1. - Financial Statements: Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 1 Consolidated Statements of Income - Three Months Ended March 31, 1996 and 1995 2 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1996 and 1995 3 Condensed Notes to Consolidated Financial Statements 4 Item 2. - Management's Discussion and Analysis 5-6 Part II. Other Information: Item 5. - Other Information 7 Item 6. - Exhibits and Reports on Form 8-K 7 Signatures 7 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FOREMOST CORPORATION OF AMERICA CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 ----------- ----------- (In thousands, except share data) Assets: Investments- Fixed maturities held to maturity .................. $ 7,481 $ 7,511 Securities available for sale: Fixed maturities .................................. 379,770 372,210 Equity securities ................................. 79,518 66,084 Mortgage loans and land contracts on real estate ... 12,487 12,550 Investment real estate ............................. 15,453 19,140 Short-term investments ............................. 14,808 42,666 --------- --------- Total investments ................................. 509,517 520,161 Cash ................................................ 2,132 5,184 Accrued investment income ........................... 7,355 6,246 Premiums receivable ................................. 74,152 72,387 Due from reinsurance companies ...................... 23,707 23,342 Other receivables ................................... 4,829 7,381 Prepaid policy acquisition costs .................... 73,829 74,052 Prepaid reinsurance premiums ........................ 54 62 Real estate and equipment ........................... 35,597 36,035 Other assets ........................................ 14,314 13,644 --------- --------- Total assets ....................................... $ 745,486 $ 758,494 ========= ========= Liabilities: Unearned premium .................................... $ 249,671 $ 251,630 Insurance losses and loss adjustment expenses ....... 98,914 97,504 Accounts payable and accrued expenses ............... 38,135 39,269 Notes and other obligations payable ................. 96,851 99,247 Income taxes ........................................ 9,755 13,017 Other liabilities ................................... 15,619 13,630 --------- --------- Total liabilities .................................. 508,945 514,297 --------- --------- Shareholders' Equity: Common stock $1 par - shares authorized 35,000,000, issued 14,000,000 .................................. 14,000 14,000 Additional paid-in capital .......................... 138,496 139,344 Unrealized appreciation of securities available for sale, net of applicable taxes .................. 11,325 13,802 Retained earnings ................................... 181,148 183,944 Restricted stock - deferred compensation ............ (5) (5) --------- --------- Total .............................................. 344,964 351,085 Treasury stock at cost, 3,969,106 and 3,965,220 shares .............................. (108,423) (106,888) --------- --------- Total shareholders' equity ......................... 236,541 244,197 --------- --------- Total liabilities and shareholders' equity ......... $ 745,486 $ 758,494 ========= ========= See accompanying condensed notes to consolidated financial statements.
-1- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) FOREMOST CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, ------------------------- 1996 1995 ---------- ---------- (In thousands except per share data) Income: Property and casualty premium earned ........... $ 106,832 $ 105,739 Life premium earned ............................ 5,280 5,746 Net investment income .......................... 7,344 7,173 Realized gains (losses) ........................ 769 (123) Other .......................................... 566 1,256 --------- --------- Total income ................................. 120,791 119,791 --------- --------- Expense: Insurance losses, death and other benefits ..... 83,589 66,547 Amortization of prepaid policy acquisition costs ............................ 31,965 33,034 Operating and other ............................ 7,291 8,084 --------- --------- Total expense ................................ 122,845 107,665 --------- --------- Income before taxes ........................ (2,054) 12,126 Income tax credit (provision) .................... 1,970 (3,158) --------- --------- Net income (loss) .............................. $ (84) $ 8,968 ========= ========= Per share of common stock: Net income ..................................... $ (0.01) $ 0.87 ========= ========= Average shares outstanding ....................... 10,045 10,349 ========= ========= Cash dividends per share ......................... $ 0.27 $ 0.27 ========= ========= See accompanying condensed notes to consolidated financial statements.
-2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) FOREMOST CORPORATION OF AMERICA CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, ------------------------ 1996 1995 ---------- ---------- (In thousands) Operating Activities: Net cash from (for) operating activities ....... $ (4,914) $ 33,107 -------- -------- Investing Activities: Purchases of securities and loans made ............ (43,504) (31,192) Purchases of real estate and equipment ............ (29) (62) Sales of securities ............................... 14,569 17,896 Maturities of securities and receipts from repayments of loans ......................... 7,213 6,720 Sales of real estate and equipment ................ 3,679 -- Decrease (Increase) in short-term investments ..... 27,851 (22,053) -------- -------- Net cash from (for) investing activities ......... 9,779 (28,691) -------- -------- Financing Activities: Net change in short-term debt ..................... (2,000) 500 Repayments of long-term debt ...................... (396) (521) Acquisition of treasury shares .................... (4,174) (2,195) Dividends paid .................................... (2,712) (2,801) Receipts from exercise of stock options ........... 1,365 -- -------- -------- Net cash for financing activities ................ (7,917) (5,017) -------- -------- Cash decrease ............................ (3,052) (601) Cash at beginning of year .......................... 5,184 4,195 -------- -------- Cash at end of period .................... $ 2,132 $ 3,594 ======== ======== See accompanying condensed notes to consolidated financial statements.
-3- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) FOREMOST CORPORATION OF AMERICA CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The notes to the consolidated financial statements are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. 2. All information is unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) have been made which are necessary to present fairly the results shown. All significant intercompany balances and transactions have been eliminated in consolidation. Intrim results are not necessarily indicative of the results to be expected in any other period. -4- PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOREMOST CORPORATION OF AMERICA OPERATING RESULTS AND FINANCIAL POSITION Results of Operations Foremost Corporation of America's first quarter results for 1996 were negatively impacted by catastrophe losses caused by severe winter storms along the east and west coasts. The effect of these catastrophe losses resulted in the Company's combined loss and expense ratio being 13.9 points higher in the first quarter of 1996 compared to the first quarter last year. The Company had a net loss for the first quarter of $.01 per share, compared to net earnings of $.87 per share for the same period last year. Realized gains of $.05 per share and a realized loss of $.01 per share are included in the first quarter results for 1996 and 1995, respectively. The combined loss and expense ratio for the property and casualty group was 108.5% for the first quarter compared to 94% for the same period last year. Written premium from the Company's core products, mobile home and recreational vehicle, was down 3.1% for the quarter compared to last year. The decrease is the result of the Company's catastrophe exposure management program that is eliminating policies in coastal counties from Maine to Texas. The non-renewal of policyholders, which began last year to reduce the Company's coastal exposure to loss as a result of hurricanes, will be completed by June 30, 1996. Written premium by major product line is as follows:
1st Quarter % ------------------------- Increase 1996 1995 (Decrease) -------- -------- ---------- (In thousands) Mobile Home .......... $ 85,022 $ 88,071 (3.5) RV ................... 14,394 14,571 (1.2) -------- -------- --------- Subtotal ........... 99,416 102,642 (3.1) Automobile ........... 2,977 3,474 (14.3) Homeowners ........... 1,484 1,722 (13.8) Other ................ 1,394 1,496 (6.8) -------- -------- --------- Total .............. $105,271 $109,334 (3.7) ======== ======== =========
-5- After-tax investment income declined slightly in the first quarter to $5,749,000 compared to $5,755,000 for the previous year. The primary reason for the decrease was the negative impact of catastrophe loss payments on the Company's cash flow and investable asset base. Also impacting after-tax investment income was the Company's continued effort to increase its asset allocation to common stocks, which will sacrifice current income for a higher potential total return. Financial Position The principal sources of cash for the first three months of 1996 were $49.6 million from sales and maturities of investments, $3.7 million from sales of real estate and $1.4 million in receipts from the exercise of stock options. The Company used $4.9 million for operations due primarily to the catastrophe losses paid during the quarter. Also during the first quarter, the Company used $43.5 million for the purchase of securities, purchased $4.2 million of treasury stock, paid $2.7 million in dividends to shareholders and repaid $2.4 million of debt. The Company had $16.9 million in cash and other liquid assets at March 31, 1996. Total invested assets on a cost basis decreased 1%, or $6.8 million during the first quarter of 1996 compared to year-end 1995. Market values of securities available for sale decreased $2.7 million net of tax in the first quarter of 1996. The Company's common stock buy back plan, announced in February 1994 for up to 1 million shares, was increased by 500,000 shares during the first quarter of 1996. During the period from January 1, 1996 through April 18, 1996, the Company has purchased 136,031 shares of its common stock outstanding at an average price of $55.99 per share. Since the inception of this buy back plan, the Company has purchased 835,638 shares at an average price of $39.86 per share. On January 31, 1996, The Company announced that it had signed a letter of intent to sell its subsidiary Foremost Life Insurance Company to Woodman Accident and Life Company of Lincoln, Nebraska. Both companies continue to work toward the completion of that sale and it is anticipated that it will close before the end of the second quarter. -6- PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On April 3, 1996 the Company filed a Form 8-A Registration Statement in connection with the application for listing its Common Stock, $1 par value, on the New York Stock Exchange. The registration became effective at the opening of business on April 17, 1996. The Company's Common Stock had previously been listed on the NASDAQ National Market System. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on 8-K On January 31, 1996 the Company filed a Form 8-K announcing it had signed a letter of intent to sell its subsidiary Foremost Life Insurance Company. The sale is subject to certain conditions, including the negotiation and execution of a definitive purchase agreement, completion of the due diligence review, and regulatory approvals and authorizations. The Company would yield approximately $17 million in cash and incur an after-tax loss of approximately $1.3 million from the sale. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FOREMOST CORPORATION OF AMERICA (Registrant) Date: May 8, 1996 Paul D. Yared ------------------------------ Paul D. Yared Its: Senior Vice President, Secretary and General Counsel Date: May 8, 1996 Kenneth C. Haines ------------------------------ Kenneth C. Haines Its: Controller -7- EX-27 2 SEC FINANCIAL DATA SCHEDULE
7 0000018508 Foremost Corporation of America 1,000 US Dollars 3-Mos Dec-31-1996 Jan-01-1996 Mar-31-1996 1 379,770 7,481 7,527 79,518 12,487 15,453 509,517 2,132 23,707 73,829 745,486 98,914 249,671 0 0 96,851 0 0 14,000 222,541 745,486 112,112 7,344 769 566 83,589 31,965 0 (2,054) 1,970 (84) 0 0 0 (84) (0.01) (0.01) 97,504 84,467 (878) 50,559 30,679 98,914 0
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