-----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, UaxW4m4iEu5N+03TvdcxSdgG/4BsrGtwFDgmDTLbYEYN7GsHVgX/VCBTlYxVljoM mhlf9HGViAh1Dat86cg5xg== 0000025118-97-000008.txt : 19970813 0000025118-97-000008.hdr.sgml : 19970813 ACCESSION NUMBER: 0000025118-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COTTON STATES LIFE INSURANCE CO / CENTRAL INDEX KEY: 0000025118 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 580830929 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-39729 FILM NUMBER: 97656924 BUSINESS ADDRESS: STREET 1: 244 PERIMETER CENTER PKWY NE CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 4043918600 MAIL ADDRESS: STREET 1: P.O. BOX 15303 CITY: ATLANTA STATE: GA ZIP: 30348 FORMER COMPANY: FORMER CONFORMED NAME: COTTON STATES LIFE & HEALTH INSURANCE CO DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 30, 1997 Commission File Number 2-39729 COTTON STATES LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) GEORGIA 58-0830929 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 244 Perimeter Center Parkway, N. E., Atlanta, Georgia 30346 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 391-8600 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 of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to the filing requirements for at least the past 90 days. YES __X__ NO______ The Registrant, as of June 30, 1997, has 4,266,720 shares of common stock outstanding. All shares and per share amounts have been retroactively restated to reflect the April 30, 1997 five for four stock dividend. PART I - CONSOLIDATED FINANCIAL STATEMENTS The following consolidated statements have been prepared by management. In management's opinion, all adjustments and certain reclassifications necessary to a fair statement of the results for the three months ended June 30, 1997 and 1996 have been made. COTTON STATES LIFE INSURANCE COMPANY Unaudited Consolidated Condensed Balance Sheets June 30, 1997 and December 31, 1996 ASSETS 1997 1996 Investments Fixed maturities, held for investment, at amortized cost (market value $19,657,578 in 1997 and $20,397,039 in 1996) $19,708,416 $20,245,783 Fixed maturities, available for sale, at market (amortized cost $81,962,800 in 1997 and $80,071,698 in 1996) 82,205,729 80,622,249 First mortgage loans on real estate 4,330,555 4,770,277 Policy loans 7,468,803 7,037,745 Short-term investments 4,184,224 2,250,551 Total investments 117,897,727 114,926,605 Cash 1,500,204 279,742 Accrued investment income 1,897,624 1,791,048 Accounts receivable, principally premiums 2,278,761 2,371,562 Amount due from reinsurers 2,627,076 2,027,229 Deferred policy acquisition costs 28,314,296 26,790,307 Other assets 1,104,177 637,694 $155,619,865 $148,824,187 LIABILITIES AND STOCKHOLDERS' EQUITY Policy liabilities and accruals: Future policy benefits $99,985,153 $96,935,660 Policy and contract claims 1,557,422 1,319,416 Federal income taxes 2,869,654 2,650,383 Other liabilities 5,864,067 5,004,876 Total liabilities 110,276,296 105,910,335 Stockholders' Equity: Common Stock 4,503,096 4,503,469 Additional paid-in capital 1,283,969 1,283,969 Net unrealized gains (losses) on fixed maturities available for sale 130,022 297,609 Retained earnings 40,562,153 37,964,476 Less treasury stock, at cost, (236,376 shares in 1997 and 236,376 in 1996) (1,135,671) (1,135,671) Total stockholders' equity 45,343,569 42,913,852 $155,619,865 $148,824,187 COTTON STATES LIFE INSURANCE COMPANY Unaudited Consolidated Summary of Earnings Six months ended Three months ended June 30, June 30, 1997 1996 1997 1996 Income: Premium income $3,558,926 $2,749,177 1,780,168 $1,375,889 Mortality and expense charges earned 4,625,194 4,241,931 2,308,049 2,096,955 Investment income 3,991,510 3,750,438 2,048,113 1,904,824 Realized investment gains 48,261 54,646 48,261 362 Brokerage and other income 1,067,320 673,367 689,523 328,811 Total income 13,291,211 11,469,559 6,874,114 5,706,841 Benefits and expenses: Life benefits and claims 5,108,221 4,629,785 2,627,149 2,413,514 A & H benefits and claims 131,804 67,662 52,208 45,984 Amortization of policy acquisition costs 1,218,532 1,233,981 579,727 601,976 Operating expenses 2,922,742 2,548,456 1,515,752 1,293,373 Total benefits and expenses 9,381,299 8,479,884 4,774,836 4,354,847 Earnings before income tax expense 3,909,912 2,989,675 2,099,278 1,351,994 Federal income taxes: Current tax expense 602,369 544,459 334,540 266,535 Deferred tax expense 323,863 63,822 212,358 (19,963) Total Federal income taxes 926,232 608,281 546,898 246,572 Net Earnings $2,983,680 $2,381,394 $1,552,380 $1,105,422 Earnings per share of common stock * $0.70 $0.56 $0.36 $0.26 Weighted average number of shares used in computing earnings per share 4,267,093 4,251,860 4,267,093 4,251,860 * 1996 share and per share amounts have been adjusted for the April 30, 1997 five-for-four stock split.
COTTON STATES LIFE INSURANCE COMPANY Unaudited Consolidated Statements of Cash Flows Six months ended June 30, 1997 and 1996 1997 1996 Cash flows from operating activities: Net Earnings $2,983,679 $2,381,394 Adjustments to reconcile net earnings to net cash provided from operating activities: Increase in policy liabilities and accruals 3,287,499 3,215,905 Increase in deferred policy acquisition costs (1,488,348) (1,313,490) Change in Federal income taxes 224,815 72,171 Decrease (increase) in accounts receivable and (307,560) (766,067) amounts due from reinsurers Other, net 239,124 354,774 Net cash provided from operating activities 4,939,209 3,944,687 Cash flows from investing activities: Purchase of fixed maturities held for investments 0 (1,495,781) Purchase of fixed maturities available for sale (7,546,941) (11,133,129) Sale of fixed maturities available for sale 3,973,090 1,009,332 Proceeds from maturity and redemption of fixed maturities held for investment 525,000 1,050,000 Proceeds from maturity and redemption of fixed maturities available for sale 1,641,489 4,537,449 First mortgage loans originated Principal collected on first mortgage loans 439,722 412,119 Policy Loans, net (431,058) (229,605) Other, net 0 62,671 Net cash provided (used) in investing activities (1,398,698) (5,786,944) Cash flows from financing activities: Cash dividends paid (386,376) (306,520) Proceeds from exercise of stock options 0 99,400 Net cash (used) by financing activities (386,376) (207,120) Net increase (decrease) in cash and cash equivalents: $3,154,135 ($2,049,377) Cash and cash equivalents: Beginning of period 2,530,293 5,496,900 End of period $5,684,428 $3,447,523 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Operations There have been no material changes in the Company's financial condition since December 31, 1996. As reported in the Company's Annual Report to its stockholders for the year-ended December 31, 1996, the Company does not anticipate the necessity of entering the debt or equity market in order to meet short-term or long-term obligations. Mortgage Loans The Company's mortgage loan policy stipulates that the Company will lend no more than 80% of the value on residential loans and no more than 75% on commercial loans. For the past five years, the Company has granted loans only to employees (excluding officers and directors), agents, agents' relatives, employees of Gold Kist, Inc. ( a related party), and current mortgagees. The geographic distribution of the loan portfolio as of June 30, 1997 and December 31, 1996 is: No. of Loans Book Value 06/30/97 12/31/96 State 06/30/97 12/31/96 6 5 Alabama 443,697 $313,697 7 6 Florida 523,688 443,165 70 81 Georgia 3,363,170 4,013,415 83 92 $4,330,555 $4,770,277 The Company has a large concentration of loans in Georgia. Because the loan-to-value ratio on delinquent loans is 48%, the Company does not anticipate any loss should it choose to foreclose. The Company has foreclosed on only one loan since 1985 and incurred no loss on the sale of the underlying collateral. Results of Operations Premium Income Total premium income was up 29% when compared to the second quarter of 1996. The increase is attributable to increased sales of the Company's new guaranteed-issue-simplified issue and participating whole life policies. Individual accident and health premiums are flat when compared to 1996. The Company has not written any new individual health premiums since 1988 and anticipates continued declines on this closed block of business. Mortality and Expense Charges Earned Universal Life contract deposits increased 4.3% year to date. Mortality and expense charges earned on these deposits increased 9% year to date and 10% for the second quarter. Mortality and expense charges earned on the Company's payroll deduction universal life product continue to grow as new cases are added and other inforce cases mature through re-enrollments. On an overall annual basis, the Company expects increases in the 8% to 10% range. Annuity contract deposits continue to decrease as the Company does not actively solicit annuity business. Investment Income Investment income was up 7.5% over the year earlier quarter. The increase is due to a larger investment portfolio and favorable market conditions. Brokerage and Other income Brokerage and other income increased 59% year to date and 120% for the second quarter of 1997. As previously discussed in the Company's annual Report to Stockholders, CSI Brokerage Services, in conjunction with Cotton States Mutual Insurance Company, finalized a contract to transfer management of Mutual's multi-peril crop and crop hail insurance to Blakely Crop Hail, a Kansas based company. Through a brokerage agreement with Blakely, CSI Brokerage Services will receive an override commission based on premium volume generated by Cotton States Mutual's multi-line exclusive agents. At June 30, 1997 approximately $336,00 of gross income has been realized under this agreement. This equates to approximately $200,000 after tax or $.05 per share. This agreement will continue to have a positive impact on Company earnings for the remainder of 1997 when compared to previous quarters. Excluding this effect, brokerage and other income is up 8% year to date which is in line with the Company's expectations for both CSI Brokerage Services and CS Marketing Resources, Inc. Both Companies receive override commissions from other insurance carriers and their revenues may fluctuate based on the timing of receipt of the overrides. Benefits and Operating Expenses Ordinary benefits as a percentage of premium income and mortality and expense charges earned decreased 7% over the year earlier quarter. Year to date traditional and universal life death benefits were approximately $65,000 higher than 1996 levels. The small amount of accident and health benefits is due to the runoff of individual accident and health that the Company ceased writing in 1988. Expenses (including amortization of policy acquisition costs) as a percentage of premium income, mortality and expenses charges and brokerage income decreased 6% from the year earlier quarter. Without the effect of the additional brokerage commission previously discussed, the decrease for the second quarter was 3%. Continued emphasis on cost controls enables the Company to keep this ratio relatively flat. Federal Income Taxes Current taxes are provided based on estimates of the projected effective annual tax rate. Deferred taxes are provided on the basis of SFAS 109 adopted January 1, 1993. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is a defendant in various actions incidental to the conduct of its business. The Company intends to vigorously defend the litigation and while the ultimate outcome of these matters cannot be estimated with certainty, management does not believe the actions will results in any material loss to the Company. Item 2. Changes in Securities NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of shareholders held on April 28, 1997, the following directors were elected for three year terms expiring in 2000. W. W. Gaston R. C. McMahan T. A. Harris In addition, the shareholders approved an amendment to the Company's charter increasing the number of shares authorized from 5,000,000 to 10,000,000. Item 5. Other Information On March 24, 1997, the Company declared a 25% stock dividend to be distributed to stockholders of record as of April 15, 1997. Item 6. Exhibits and Reports on Form 8-K. NONE 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. COTTON STATES LIFE INSURANCE COMPANY Registrant Date: 07/10/97 Gary W. Meader Chief Financial Officer/Treasurer Date: 07/10/97 William J. Barlow Vice President/Controller EX-27 2
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