-----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, LfgGKLKh+eMr/UOWkTRRnSfjir/OQfzLDTsrJDK8TXjKobBVVCzJGDnOmZcIp5cr foaSAPscIxMsPapATGejeQ== 0000018508-97-000008.txt : 19970814 0000018508-97-000008.hdr.sgml : 19970814 ACCESSION NUMBER: 0000018508-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658263 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 June 30, 1997 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 (Address of principal executive offices) (Zip Code) Mailing address: P.O. Box 2450, Grand Rapids, Michigan 49501 Registrant's telephone number, including area code (616)942-3000 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 Exhange Act of 1934 during the preceding 12 months 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 issuer's classes of common stock, as of the close of the period covered by this report. Common Stock, $1.00 par value, Outstanding at June 30, 1997: 9,233,695 shares FOREMOST CORPORATION OF AMERICA INDEX Page No. Part I. Financial Information: Item 1. - Financial Statements: Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 1 Consolidated Statements of Income - Six Months Ended June 30, 1997 and 1996 2 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 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
June 30, December 31, 1997 1996 ----------- ----------- (In thousands, except share data) Assets: Investments- Fixed maturities held to maturity .................. $ 2,267 $ 2,342 Securities available for sale: Fixed maturities .................................. 345,619 339,860 Equity securities ................................. 88,016 93,485 Mortgage loans and land contracts on real estate ... 11,956 12,222 Investment real estate ............................. 14,986 15,169 Short-term investments ............................. 24,773 30,746 --------- --------- Total investments ................................. 487,617 493,824 Cash ................................................ 2,291 5,141 Accrued investment income ........................... 5,649 5,565 Premiums receivable ................................. 74,363 68,076 Due from reinsurance companies ...................... 22,188 21,416 Other receivables ................................... 2,262 5,125 Prepaid policy acquisition costs .................... 76,040 70,231 Prepaid reinsurance premiums ........................ 577 1,056 Real estate and equipment ........................... 33,738 34,439 Other assets ........................................ 15,295 16,705 --------- --------- Total assets ....................................... $ 720,020 $ 721,578 ========= ========= Liabilities: Unearned premium .................................... $ 253,862 $ 241,313 Insurance losses and loss adjustment expenses ....... 87,395 93,420 Accounts payable and accrued expenses ............... 28,197 34,053 Notes and other obligations payable ................. 99,263 94,851 Income taxes ........................................ 12,597 11,456 Other liabilities ................................... 14,709 15,063 --------- --------- Total liabilities .................................. 496,023 490,156 --------- --------- Stockholders' Equity: Common stock $1 par - shares authorized 35,000,000, issued 14,000,000 .................................. 14,000 14,000 Additional paid-in capital .......................... 138,905 138,852 Unrealized appreciation of securities available for sale, net of applicable taxes ........ 15,673 16,423 Retained earnings ................................... 210,100 196,818 Restricted stock - deferred compensation ............ (4) (4) --------- --------- Total .............................................. 378,674 366,089 Treasury stock at cost, 4,766,305 and 4,437,676 shares .............................. (154,677) (134,667) --------- --------- Total stockholders' equity ......................... 223,997 231,422 --------- --------- Total liabilities and stockholders' equity ......... $ 720,020 $ 721,578 ========= ========= 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 Six Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- (In thousands except per share data) Income: Property and casualty premium earned . $106,958 $106,624 $213,536 $213,455 Net investment income ................ 6,324 6,540 12,603 13,429 Realized gains ....................... 5,411 1,404 6,950 2,170 Other ................................ 564 1,119 1,222 1,684 -------- -------- -------- -------- Total income ....................... 119,257 115,687 234,311 230,738 -------- -------- -------- -------- Expense: Insurance losses and loss expenses ... 61,695 64,164 133,399 144,386 Amortization of prepaid policy acquisition costs .................. 30,937 30,575 61,863 61,251 Operating ............................ 5,231 5,393 10,254 10,628 Interest ............................. 2,277 2,070 4,303 4,142 -------- -------- -------- -------- Total expense ...................... 100,140 102,202 209,819 220,407 -------- -------- -------- -------- Income before taxes .............. 19,117 13,485 24,492 10,331 Income tax provision ................... (5,657) (3,604) (6,223) (1,503) -------- -------- -------- -------- Net income - continuing operations ... 13,460 9,881 18,269 8,828 Net income (loss)-discontinued operations ........................... 90 (586) 90 383 -------- -------- -------- -------- Net income ........................... $ 13,550 $ 9,295 $ 18,359 $ 9,211 ======== ======== ======== ======== Per share of common stock: Net income - continuing operations .... $ 1.46 $ 0.99 $ 1.95 $ 0.88 Net income (loss)-discontinued operation ........................... 0.01 (0.06) 0.01 0.04 -------- -------- -------- -------- Net income .......................... $ 1.47 $ 0.93 $ 1.96 $ 0.92 ======== ======== ======== ======== Average shares outstanding ............. 9,246 9,961 9,361 10,003 ======== ======== ======== ======== Cash dividends per share ............... $ 0.27 $ 0.27 $ 0.54 $ 0.54 ======== ======== ======== ======== 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
Six Months Ended June 30, ------------------- 1997 1996 (In thousands) -------- --------- Operating Activities: Net cash from operating activities ....................... $ 3,067 $ 9,801 -------- -------- Investing Activities: Purchases of securities and loans made .................... (61,207) (80,631) Purchases of real estate and equipment .................... (729) (51) Sales of securities ....................................... 46,470 40,900 Maturities of securities and receipts from repayments of loans ................................. 20,096 20,440 Sales of real estate and equipment ........................ 642 3,930 Proceeds from sale of subsidiary .......................... -- 17,437 Decrease in short-term investments ........................ 5,973 3,279 -------- -------- Net cash from (for) investing activities ................. 11,245 5,304 -------- -------- Financing Activities: Net change in short-term debt ............................. 5,500 (2,000) Repayments of long-term debt .............................. (1,088) (983) Acquisition of treasury shares ............................ (19,365) (10,698) Dividends paid ............................................ (5,077) (5,398) Receipts from exercise of stock options ................... 2,868 2,166 -------- -------- Net cash for financing activities ........................ (17,162) (16,913) -------- -------- Cash increase (decrease) ......................... (2,850) (1,808) Cash at beginning of year .................................. 5,141 4,975 -------- -------- Cash at end of period ............................ $ 2,291 $ 3,167 ======== ======== 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. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" effective for financial statements for both interim and annual periods ending after December 15, 1997. The Company will adopt this statement in the fourth quarter of 1997. Had the Company adopted this statement as of June 30, 1997, the Diluted Earnings Per Share would have been $1.92 per share for the six months ended June 30, 1997 and would have been $.90 per share for the same period last year. Diluted Earnings Per Share for the second quarter of 1997 would have been $1.44 compared to $.91 for the same period last year. -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 reported record operating income for the second quarter of 1997. Net income from continuing operations for the second quarter was $1.46, including $.38 per share in realized gains compared to $.99 per share including $.09 per share in realized gains for the same period last year. Net income from continuing operations for the first six months was $1.95 per share compared to $.88 per share in 1996. Realized gains of $.48 per share and $.14 per share are included in the first six months results for 1997 and 1996, respectively. The combined loss and expense ratio for the property and casualty group was 91.3% for the second quarter of 1997 compared to 92.8% for the same period last year. The six months combined ratio was 96% compared to 100.7% in the prior year. The improvement in the combined ratio can be attributed to lower catastrophe losses. The Company experienced moderate growth in written premium with an increase of 2.6% for the quarter and a 3.2% increase for the first six months over last year. The Company's auto and homeowners insurance program with First USA has been rolled out into eight states through the end of June. The results are very encouraging as we continue to enter more states in the coming months. Written premium by major product line is as follows:
Three Months Ended June 30, % ------------------------- Increase 1997 1996 (Decrease) -------- -------- ---------- (In thousands) Mobile Home .......... $ 95,708 $ 93,362 2.5 RV ................... 14,526 15,179 (4.3) Automobile ........... 2,751 2,293 20.0 Homeowners ........... 2,746 1,948 41.0 Other ................ 1,451 1,375 5.5 -------- -------- -------- Total .............. $117,182 $114,157 2.6 ======== ======== ======== Six Months Ended June 30, % ------------------------- Increase 1997 1996 (Decrease) -------- -------- ---------- (In thousands) Mobile Home .......... $182,404 $178,384 2.3 RV ................... 28,651 29,573 (3.1) Automobile ........... 7,132 5,270 35.3 Homeowners ........... 5,274 3,432 53.7 Other ................ 2,980 2,769 7.6 -------- -------- -------- Total .............. $226,441 $219,428 3.2 ======== ======== ========
-5- After-tax investment income from continuing operations declined 1.9% in the second quarter to $5,155,000 compared to $5,256,000 for the previous year. For the first six months of 1997, after-tax investment income declined 3.9% to $10,289,000 compared to $10,705,000 for the same period the previous year. The primary reasons for the decrease is the negative impact of the common stock buy backs and the first quarter catastrophe loss payments on the Company's cash flow and investable asset base. Financial Position The principal sources of cash for the first six months of 1997 were $73.2 million from sales and maturities of investments, $5.5 million from additional borrowings of short-term debt, $3.1 million from operations and $2.9 million from the exercise of stock options. During the first six months, the Company used $61.7 million for the purchase of investments, purchased $19.4 million of treasury stock, paid $5.1 million in dividends to shareholders and repaid $1.1 million of long-term debt. The Company had $27.1 million in cash and other liquid assets at June 30, 1997. Total invested assets on a cost basis decreased 1.5%, or $6.8 million during the first six months of 1997 compared to year end 1996. Market values of securities available for sale decreased $.7 million net of tax in the first six months of 1997. The Company continued to purchase its common stock under a previously announced buy back plan for up to 2 million shares. During the second quarter of 1997, the Company has purchased 168,071 shares of its common stock outstanding. Since the inception of this buy back plan, the Company has purchased 1,687,614 shares. -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 six months ended June 30, 1997. 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: August 12, 1997 Paul D. Yared ------------------------------ Paul D. Yared Its: Senior Vice President, Secretary and General Counsel Date: August 12, 1997 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 6-Mos Dec-31-1997 Jan-01-1997 Jun-30-1997 1 345,619 2,267 2,272 88,016 11,956 14,986 487,617 2,291 22,188 76,040 720,020 87,395 253,862 0 0 99,263 0 0 14,000 209,997 720,020 213,536 12,603 6,950 1,222 133,399 61,863 14,557 24,492 (6,223) 18,269 90 0 0 18,359 1.96 1.96 93,519 129,595 3,803 90,925 48,597 87,395 0
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