-----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, OHb8bQzgPI7yI0nYBQc1DUWwVin9/lcK+owhXKRYKnWpIwHwLlGMylT4kjLkYMzB eRsLDyFkMDHr6+uMNwg0FA== 0000018508-96-000013.txt : 19961118 0000018508-96-000013.hdr.sgml : 19961118 ACCESSION NUMBER: 0000018508-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREMOST CORP OF AMERICA CENTRAL INDEX KEY: 0000018508 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] 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: 96663803 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 September 30, 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 September 30, 1996 Common Stock, $1.00 par value 9,650,166 FOREMOST CORPORATION OF AMERICA INDEX Page No. Part I. Financial Information: Item 1. - Financial Statements: Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 1 Consolidated Statements of Income - Nine Months Ended September 30, 1996 and 1995 2 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 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 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
September 30, December 31, 1996 1995 ------------- ------------ (In thousands, except share data) Assets: Investments- Fixed maturities held to maturity ................. $ 2,878 $ 7,131 Securities available for sale: Fixed maturities ................................. 334,284 348,753 Equity securities ................................ 95,244 65,574 Mortgage loans and land contracts on real estate .. 12,295 12,527 Investment real estate ............................ 15,168 19,140 Short-term investments ............................ 29,765 39,955 --------- --------- Total investments ................................ 489,634 493,080 Cash ............................................... 4,147 4,975 Accrued investment income .......................... 6,297 5,875 Premiums receivable ................................ 75,146 70,629 Due from reinsurance companies ..................... 28,281 23,341 Other receivables .................................. 5,328 7,360 Prepaid policy acquisition costs ................... 73,407 72,560 Prepaid reinsurance premiums ....................... 39 62 Real estate and equipment .......................... 34,798 36,035 Other assets ....................................... 13,665 13,644 Net assets - discontinued operations ............... 0 18,806 --------- --------- Total assets ...................................... $ 730,742 $ 746,367 ========= ========= Liabilities: Unearned premium ................................... $ 257,951 $ 248,953 Insurance losses and loss adjustment expenses ...... 90,127 93,771 Accounts payable and accrued expenses .............. 34,305 35,728 Notes and other obligations payable ................ 95,663 99,247 Income taxes ....................................... 9,248 11,575 Other liabilities .................................. 15,352 12,896 --------- --------- Total liabilities ................................. 502,646 502,170 --------- --------- Shareholders' Equity: Common stock $1 par - shares authorized 35,000,000, issued 14,000,000 ................................. 14,000 14,000 Additional paid-in capital ......................... 138,852 139,344 Unrealized appreciation (depreciation) of securities available for sale, net of applicable taxes ....... 12,178 13,802 Retained earnings .................................. 192,964 183,944 Restricted stock - deferred compensation ........... (4) (5) --------- --------- Total ............................................. 357,990 351,085 Treasury stock at cost, 4,349,834 and 3,965,220 shares ............................. (129,894) (106,888) --------- --------- Total shareholders' equity ........................ 228,096 244,197 --------- --------- Total liabilities and shareholders' equity ........ $ 730,742 $ 746,367 ========= ========= 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 INCOME
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 -------- -------- -------- -------- (In thousands except per share data) Income: Property and casualty premium earned . $107,430 $108,136 $320,885 $320,058 Net investment income ................ 6,840 7,052 20,269 20,592 Realized gains ....................... 83 10 2,253 6 Other ................................ 705 749 2,388 2,168 -------- -------- -------- -------- Total income ....................... 115,058 115,947 345,795 342,824 -------- -------- -------- -------- Expense: Insurance losses...................... 67,337 58,223 211,723 183,452 Amortization of prepaid policy acquisition costs .................. 29,978 31,213 91,229 93,786 Operating ............................ 5,314 4,462 15,942 14,269 Interest ............................. 2,031 2,238 6,172 7,555 -------- -------- -------- -------- Total expense ...................... 104,660 96,136 325,066 299,062 -------- -------- -------- -------- Income before taxes .............. 10,398 19,811 20,729 43,762 Income tax provision ................... (2,516) (6,146) (4,019) (12,484) -------- -------- -------- -------- Net income - continuing operations ... 7,882 13,665 16,710 31,278 Net income-discontinued operations ..... 0 524 383 1,553 -------- -------- -------- -------- Net income ........................... $ 7,882 $ 14,189 $ 17,093 $ 32,831 ======== ======== ======== ======== Per share of common stock: Net income - continuing operations .... $ 0.80 $ 1.34 $ 1.68 $ 3.05 Net income-discontinued operations .... 0.00 0.05 0.04 0.15 -------- -------- -------- -------- Net income .......................... $ 0.80 $ 1.39 $ 1.72 $ 3.20 ======== ======== ======== ======== Average shares outstanding ............. 9,888 10,204 9,965 10,268 ======== ======== ======== ======== Cash dividends per share ............... $ 0.27 $ 0.27 $ 0.81 $ 0.81 ======== ======== ======== ======== 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
Nine Months Ended September 30, 1996 1995 --------- --------- (In thousands) Operating Activities: Net cash from operating activities ............. $ 13,035 $ 68,078 --------- --------- Investing Activities: Purchases of securities and loans made ............ (106,868) (138,834) Purchases of real estate and equipment ............ (262) (169) Sales of securities ............................... 29,483 100,886 Maturities of securities and receipts from repayments of loans ......................... 69,236 23,098 Sales of real estate and equipment ................ 3,939 994 Net proceeds from sale of subsidiary .............. 17,437 0 Decrease (increase) in short-term investments ..... 10,003 (30,917) --------- --------- Net cash from (for) investing activities ......... 22,968 (44,942) --------- --------- Financing Activities: Repayments of long-term debt ...................... (1,584) (7,601) Acquisition of treasury shares .................... (27,339) (7,547) Dividends paid .................................... (8,073) (8,330) Decrease in short-term debt ....................... (2,000) (2,000) Receipts from exercise of stock options ........... 2,165 68 --------- --------- Net cash for financing activities ................ (36,831) (25,410) --------- --------- Cash increase (decrease) ................. (828) (2,274) Cash at beginning of year .......................... 4,975 3,899 --------- --------- Cash at end of year ...................... $ 4,147 $ 1,625 ========= ========= 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. Interim results are not necessarily indicative of the results to be expected in any other period. 3. On June 11, 1996, the Company completed the sale of its life insurance subsidiary, Foremost Life Insurance Company, to Woodmen Accident and Life Company for a final purchase price of $40,133,000. The net loss on the sale was $676,000 after taxes totaling $6,167,000. Accordingly, the Consolidated Financial Statements presented herein have been restated to reflect the Life Insurance Segment as discontinued operations for all periods presented. -4- PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOREMOST CORPORATION OF AMERICA OPERATING RESULTS AND FINANCIAL POSITION Operating Results The continued emphasis of Foremost Corporation of America on managing catastrophe exposures allowed the Company to record solid third quarter earnings, despite significant weather related events in hurricanes Bertha and Fran. Net income from continuing operations for the third quarter of 1996 was $.80 per share, including $.01 per share in realized gains, compared to $1.34 per share, with no realized gains or losses in the same period last year. Net income from continuing operations for the first nine months of 1996 was $1.68 per share compared to $3.05 per share in 1995. Realized gains of $.15 per share for 1996 are included in the nine months net income figure, with no realized gains or losses in the same period last year. In spite of hurricanes Bertha and Fran, the combined loss and expense ratio for the property and casualty group was 94.9% for the third quarter compared to 87.2% for the same period last year. The combined ratio for the first nine months of 1996 was 98.7% compared to 91.4% in the prior year. The rise in the combined ratios was largely due to catastrophe losses, which increased the third quarter and nine month ratios by 6.7 and 5.6 points, respectively, over their previous periods. The exposure management program to reduce the impacts of catastrophic losses have proven to be a worthy strategy. The Company's catastrophe loss from Hurricane Fran would have been twice as much if this program had not been started. Growth in mobile home written premium has been surpressed during 1996 because of the Company's catastrophe exposure management program. This strategy reduced mobile home written premium by $3.2 million in the third quarter and $12.6 million in the first nine months. Without these reductions, mobile home written premium would have increased by 3.7% in the third quarter and 3.5% for the first nine months, when compared to their respective previous periods. Written premium by major product line is as follows:
% 3rd Quarter Increase 1996 1995 (Decrease) -------- -------- ---------- (In thousands) Mobile Home ......... $ 93,755 $ 93,483 0.3 RV .................. 10,950 11,798 (7.2) -------- -------- ------- Subtotal ........ 104,705 105,281 (0.5) Automobile .......... 2,575 2,930 (12.1) Homeowners .......... 2,185 1,765 23.8 Other ............... 1,888 2,110 (10.5) -------- -------- ------- Total ........... $111,353 $112,086 (0.7) ======== ======== ======= % Nine Months Increase 1996 1995 (Decrease) -------- -------- ---------- (In thousands) Mobile Home ......... $272,139 $275,132 (1.1) RV .................. 40,523 41,348 (2.0) -------- -------- ------- Subtotal ........ 312,662 316,480 (1.2) Automobile .......... 7,845 9,064 (13.4) Homeowners .......... 5,617 5,453 3.0 Other ............... 4,657 4,840 (3.8) -------- -------- ------- Total ........... $330,781 $335,837 (1.5) ======== ======== =======
During the third quarter of 1996, the Company began the automobile and homeowners insurance program with First USA, Inc., with the direct mailing of information to 25,000 customers in two states. -5- After-tax investment income from continuing operations increased 0.9% from the third quarter last year and was down 0.7% for the year. The relatively flat results for the year are primarily due to the impact of catastrophe loss payments and common stock buy backs on the Company's cash flow and investable asset base. Financial Position The principal sources of cash for the first nine months of 1996 were $108.7 million from sales and maturities of investments, $17.4 million from the sale of Foremost Life Insurance Company, $13 million provided from operations, $3.9 million from sales of real estate and $2.2 million in receipts from the exercise of stock options. The Company used $106.9 million for the purchase of securities, purchased $27.3 million of treasury stock, paid $8.1 million in dividends to shareholders and repaid $3.6 million of debt. The Company had $33.9 million in cash and other liquid assets at September 30, 1996. Interest paid for the first nine months of 1996 totaled $5.7 million compared to $6.6 million for the same period last year. The cost basis of total invested assets from continuing operations at September 30, 1996 was $470.9 million compared to $471.8 million at December 31, 1995. Market values of securities available for sale decreased $1.6 million net of taxes in the first nine months of 1996. The Company continued to purchase its own common stock under a 1.5 million share buy back plan announced in February 1994 and amended in the first quarter of 1996. Since June 30, 1996, the Company has purchased 386,592 shares of its common stock outstanding at an average price of $55.06 per share. The year to date purchases for 1996 total 580,055 shares at an average price of $55.14 per share. Since the inception of this buy back plan, the Company has purchased 1,279,662 shares at an average price of $45.07 per share. Book value per share was $23.64 at September 30, 1996 with 9,650,000 shares outstanding compared to $24.33 per share at December 31, 1995 with 10,035,000 shares outstanding. -6- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8K (b) Reports on 8-K - There were no reports filed on Form 8-K for the quarter ended September 30, 1996. 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: November 13, 1996 Paul D. Yared ------------------------------ Paul D. Yared Its: Senior Vice President, Secretary and General Counsel Date: November 13, 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 9-Mos Dec-31-1996 Jan-01-1996 Sep-30-1996 1 325,997 2,878 2,864 95,244 12,295 15,168 489,634 4,147 28,281 73,407 730,742 90,127 257,951 0 0 95,663 0 0 14,000 214,096 730,742 320,885 20,269 2,253 2,388 211,723 91,229 0 20,729 4,019 16,710 383 0 0 17,093 1.72 1.72 93,771 200,400 (705) 155,862 45,516 90,127 0
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