-----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, A2/B8X+I2zp+NHqCL3QOjLfBPF9VPp6FyyPTA6DDbNwhAm+xsNBsM6ErjnPEiRGf oMycJ92vfMoKt0z7yFLi5w== 0000276380-96-000011.txt : 19960816 0000276380-96-000011.hdr.sgml : 19960816 ACCESSION NUMBER: 0000276380-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEIBELS BRUCE GROUP INC CENTRAL INDEX KEY: 0000276380 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 570672136 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08804 FILM NUMBER: 96615106 BUSINESS ADDRESS: STREET 1: 1501 LADY ST STREET 2: P O BOX 1 CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8037482000 MAIL ADDRESS: STREET 1: 1501 LADY ST STREET 2: P O BOX 1 CITY: COLUMBIA STATE: SC ZIP: 29201 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number 0-8804 THE SEIBELS BRUCE GROUP, INC. (Exact name of registrant as specified in its charter) South Carolina 57-0672136 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1501 Lady Street (PO Box 1), Columbia, SC 29201(2) (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (803) 748-2000 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 12 months (or for such shorter 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 ofthe latest practicable date: 18,407,686 shares of Common Stock, $1 par value, at July 31, 1996 ITEM 1. FINANCIAL STATEMENTS THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars shown in thousands) June 30, December 31 ASSETS 1996 1995 Investments: (Unaudited) Fixed maturities, at market (cost of $35,406 at 1996 and $33,171 at 1995) $ 34,590 $ 33,581 Equity securities available-for-sale, at market (cost of $39 at 1996 and $222 at 1995) 34 377 Cash and short-term investments 14,601 16,649 Other long-term investments 34 34 Total cash and investments 49,259 50,641 Accrued investment income 713 697 Premiums and agents' balances receivable, net 8,819 7,005 Reinsurance recoverable on paid losses and loss adjustment expenses 25,925 27,423 Reinsurance recoverable on unpaid losses and loss adjustment expenses 64,083 84,492 Property and equipment, net 5,443 5,396 Prepaid reinsurance premiums - ceded business 44,967 43,469 Deferred policy acquisition costs 153 293 Other assets 4,758 4,589 Total assets $ 204,120 $ 224,005 LIABILITIES Losses and claims: Reported and estimated losses and claims - retained business $ 41,427 $ 47,445 - ceded business 55,535 74,918 Adjustment expenses - retained business 11,839 13,586 - ceded business 8,548 9,574 Unearned premiums: Property and casualty - retained business 1,049 1,900 - ceded business 44,967 43,469 Credit life 395 758 Balances due other insurance companies 16,838 12,438 Notes payable 0 2,476 Current income taxes payable 57 191 Escrow liability 6,344 0 Other liabilities and deferred items 3,079 7,063 Total liabilities 190,078 213,818 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Special stock, no par value, authorized 5,000,000 shares, none issued and outstanding - Common stock, $1 par value, authorized 50,000,000 shares, issued & outstanding 18,407,686 shares (16,772,686 at 1995) 18,408 16,773 Additional paid-in capital 35,588 34,080 Unrealized gain/(loss) on securities (986) 401 Accumulated deficit (38,968) (41,067) Total shareholders' equity 14,042 10,187 Total liabilities and shareholders' equity $ 204,120 $ 224,005
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION (Unaudited) (Amounts shown in thousands, except per share amounts) Six Months Ended June 30, Second Quarter 1996 1995 1996 1995 Premiums: Property and casualty: Net premiums written $ 2,974 $ 5,058 $ 620 $ 914 Change in unearned premiums 851 455 206 1,291 Premiums earned 3,825 5,513 826 2,205 Credit life premiums earned 225 416 100 221 Commission and service income 21,600 25,552 11,379 12,529 Net investment income 1,248 1,577 588 811 Other interest income 187 774 69 366 Realized gains on investments 194 35 0 (29) Other income 41 807 18 710 Total revenue 27,320 34,674 12,980 16,813 Expenses: Property and casualty: Losses and loss adjustment expense 3,331 7,164 327 2,096 Policy acquisition costs 765 2,113 82 906 Credit life benefits 131 266 61 128 Interest expense 125 103 40 73 Other operating costs and expenses 20,959 26,775 11,226 13,360 Total expenses 25,311 36,421 11,736 16,563 Income (loss) from operations, before 2,009 (1,747) 1,244 250 Provision for income taxes (90) 12 (98) 0 Net income (loss) $ 2,099 $ (1,759) $ 1,342 $ 250 Per share and common equivalent share: Net income (loss) - primary and fully diluted $ 0.11 $ (0.11) $ 0.07 $ 0.01 Shares used in computing per common and common equivalent share: 18,307 16,361 19,223 16,718 Change in value of marketable securities credited /(charged) directly to equity $ (1,387) $ 1,905 $ (352) $ 1,346
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Temporary Cash Investments (Unaudited) Six Months Ended June 30, 1996 1995 Cash flows from operating activities: Net income (loss) $ 2,099 $ (1,759) Adjustments to reconcile net income (loss) to - - net cash used in operating activities: - - Depreciation 483 398 (Gains) on investments (194) (35) Net change in assets and liabilities affecting cash flows from operating activities (8,977) (8,995) Net cash used in operating activities (6,589) (10,391) Cash flows from investing activities: Proceeds from investments sold 1,281 8,042 Proceeds from investments matured 3,095 2,030 Cost of investments acquired (6,238) (3,182) Net change in short-term investments - (21) Proceeds from property and equipment sold 113 105 Purchases of property and equipment (627) (37) Net cash provided by (used in) investing activities (2,376) 6,937 Cash flows from financing activities: Issuance of capital stock held in escrow 6,250 - Issuance of capital stock 3,143 - Repayment of notes payable (2,476) - Proceeds from stock rights offering - 5,321 Increase in notes payable - 2,037 Net cash provided by financing activities 6,917 7,358 Net increase (decrease) in cash and temporary cash investments (2,048) 3,904 Cash and temporary cash investments, January 1, 16,649 20,243 Cash and temporary cash investments, June 30, $ 14,601 $ 24,147 Supplemental cash flow information: Cash paid for - interest $ 271 - - income taxes paid $ 43 $ 147
PART I. FINANCIAL INFORMATION Item 1. Notes to Consolidated Financial Statements NOTE 1. NOTES PAYABLE Notes payable at June 30, 1996 and December 31, 1995, are summarized as follows: June 30, December 31, 1996 1995 (amounts in thousands) Note payable (due 5/1/96, interest accrues at a rate equal to NationsBank's Prime Rate plus 2%, compounded daily $ 0 $ 2,000 Interest note payable, due 5/1/96, interest at 8.5% 0 476 Notes payable $ 0 $ 2,476 As discussed in Note 2, the proceeds of the capital contribution made at the end of the first quarter of 1996 were used to pay off the above note balances on May 1, 1996. This leaves the Company debt-free as of June 30, 1996, excluding current payables. NOTE 2. CAPITAL CONTRIBUTIONS During the first quarter of 1996, the Company issued 6,250,000 shares of authorized but unissued shares at a price of $1.00 to several related investors. The proceeds of the sale were deposited into escrow pending approval of the transaction by shareholders and by the South Carolina Department of Insurance ("DOI"). On June 14, 1996, the shareholders approved the transaction at a special meeting. The DOI held a hearing to consider the approval of the transaction on July 29, 1996. The proceeds are still being held in escrow pending issuance of an order by the DOI. In conjunction with the sale of common stock, the Company also has issued stock options to acquire an additional 3,125,000 shares at the higher of $1.50 per share or book value at December 31, 1998 and 3,125,000 shares at the higher of $2.00 or book value at December 31, 2000. Also during the first quarter of 1996, the Company issued 1,635,000 shares of authorized but unissued shares at a price of $2.00 per share to a different group of investors. The proceeds of this stock sale were used to liquidate the notes payable that were due May 1, 1996. In addition, the Company has issued to this group stock options expiring December 31, 2000 to acquire an additional 1,635,000 shares at the higher of $2.50 per share or book value at the date of exercise. NOTE 3. BENEFIT PLANS On June 14, 1996, the Company's shareholders approved the following benefit plans: a) The 1996 Stock Option Plan for Employees supersedes the 1987 Stock Option Plan and became effective November 1, 1995. The 1996 Plan reserves 5 million shares of Company stock which may be issued as stock options, incentive stock and restricted stock to employees of and consultants to the Company. The exercise price will be greater than or equal to the market value on the date of grant. During the six months ended June 30, 1996, 994,100 options were granted at exercise prices ranging from $1.50 to $5.50 per share. b) The 1995 Stock Option Plan for Non-employee Directors became effective June 15, 1995. Under the plan, all non-employee directors will be automatically granted 5,000 options to purchase Company stock on an annual basis every June 15th. The exercise price will be the market value at the date of grant. The options will be fully vested at the date of grant. On June 15, 1996, 35,000 options were granted at an exercise price of $2.625 per share. c) The 1995 Stock Option Plan for Independent Agents became effective December 21, 1995. The exercise price will be greater than or equal to the market value on the date of grant. Vesting will be determined on an individual grant basis. During the six months ended June 30, 1996, 294,000 options were granted at exercise prices ranging from $1.50 to $2.94 per share. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The interim financial statements in Item 1 are unaudited, but in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report Form 10-K for the year ended December 31, 1995. The following table indicates the more significant financial comparisons with the applicable prior periods (dollars shown in thousands, except per share amounts): June 30 December 31, FINANCIAL CONDITION 1996 1995 Total cash and investments $ 49,259 $ 50,641 Total assets 204,120 224,005 Total liabilities 190,078 213,818 Shareholders' equity 14,042 10,187 Per Share 0.76 0.61 Six Months Ended June 30 Second Quarter RESULTS OF OPERATIONS 1996 1995 1996 1995 Operating revenues Insurance Commission and service income $ 21,600 $ 25,552 $ 11,379 $ 12,529 Premiums earned 4,050 5,929 926 2,426 Net investment and other interest income 1,435 2,351 657 1,177 Realized gains (losses) on investments 194 35 - (29) Other income 41 807 18 710 Total operating revenues $ 27,320 $ 34,674 $12,980 $ 16,813 Net income (loss) $ 2,099 $(1,759) $ 1,342 $ 250 Per share $ 0.11 (0.11) $ 0.07 $ 0.01 Results of Operations The Company had net income during the second quarter of 1996 of $1.3 million, compared to $0.3 million for the second quarter of 1995. The six months ended June 30, 1996 reflect net income of $2.1 million, compared to a net loss of $1.8 million in 1995. Total revenues in the second quarter of 1996 decreased $3.8 million (22.8%), when compared to the second quarter of 1995. Total revenues for the six month period ended June 30, 1996 decreased $7.4 million (21.2%), when compared to the same period in 1995. The majority of this is related to the decrease in commission and service income due to the Company obtaining a smaller book of business at lower rates during the bid process in late 1994. However, total expenses (including losses and loss adjustment expenses) also decreased in the second quarter of 1996 and the six months ended June 30, 1996 by $4.8 million (29.2%) and $11.1 million (30.5%), respectively, when compared to 1995. While the Company has seen premiums earned decrease as the related policies runoff, the losses and loss adjustment expenses on the business earned prior to 1996 have stabilized. Results in the first six months of 1996, and the last three quarters of 1995, confirm management's opinion that reserves appear to be adequate to cover any future development on this business. In addition, the Company continues its constant monitoring of expenses related to the contracts it services to keep the profit margin from decreasing at the same rate as revenues. The six months ended June 30, 1995 includes $5.9 million of losses and loss adjustment expenses ("LAE") on this business the Company no longer retains. Premiums earned on this business for the six months was $5.3 million. Premiums earned had been reduced by the premiums the Company pays for catastrophe reinsurance. Effective July 1, 1995, the Company had renewed this coverage at a cost more consistent with the fact that the Company is no longer writing high-risk property premiums. Net investment income for the second quarter of 1996 was $0.6 million, compared to $0.8 million for the same quarter in 1995. The six months ended June 30, 1996 shows a decrease of $0.3 million, when compared to the same time period in 1995. These decreases are due to lower average invested assets during 1996, as compared to 1995. In addition, only minimal earnings were recognized on the two capital contributions discussed below. While the capital investment of $6.3 million is included in short-term investments at the end of both quarters in 1996, the Company will not recognize the interest earnings until the funds are transferred out of escrow in the third quarter. The other capital investment of $3.3 million is included in short-term investments at the end of both quarters of 1996; however, it was only available for earnings the last three days of the first quarter. Other income in 1995 includes a settlement received on litigation the Company was involved in for several years. Also included in other income is a gain on the sale of certain assets of Forest Lake Travel Service, Inc. This subsidiary was dissolved in the second quarter of 1995 as it was no longer a part of the Company's operating plans. Capital Resources and Liquidity Cash used in operations during the six months ended June 30, 1996 was $6.6 million, compared to $10.4 million in 1995. The negative cash flow in both periods was due to reduced premium collections and the payment of claims for the six months. While additional cash drain is anticipated during 1996, the expected amount is less than the $14.6 million of cash and short-term investments held at June 30, 1996. Shareholders' equity at June 30, 1996 was $14.0 million ($0.76 per share), compared to $10.2 million ($0.61 per share) at December 31, 1995. Included in shareholders' equity is depreciation in the market value on the Company's investment portfolio of $1.0 million during the six months ended June 30, 1996. During the first quarter of 1996, the Company issued 6,250,000 shares of authorized but unissued shares at a price of $1.00 to several related investors. The proceeds of the sale are currently deposited into escrow pending approval by the DOI for the Company to write certain retained business. In conjunction with the sale of common stock, the Company also has issued stock options to acquire an additional 3,125,000 shares at the higher of $1.50 per share or book value at December 31, 1998 and 3,125,000 shares at the higher of $2.00 or book value at December 31, 2000. Also during the first quarter of 1996, the Company issued 1,635,000 shares of authorized but unissued shares at a price of $2.00 to a different group of investors. The proceeds of this stock sale were used to liquidate the notes payable that were due May 1, 1996. In addition, the Company has issued to this group stock options expiring December 31, 2000 to acquire an additional 1,635,000 shares at the higher of $2.50 per share or book value at the date of exercise. PART II. OTHER INFORMATION Item 1. Legal Proceedings In July 1996, the Company filed a Statement of Claim for arbitration before the National Association of Securities Dealers, naming Prudential Securities, Inc. and William B. Danzell as respondents. The Company alleges eleven (11) claims against the Respondents as follows: breach of contract, negligence, breach of fiduciary duties, fraud, fraudulent sale of securities under S.C. Code Ann. Section 35-1-1220, fraudulent sale of securities under S.C. Code Ann. Section 35-1-1490, violation of S.C. Code Ann. Section 35-1-1230, deceptive trade practices, fraudulent sale of securities under Securities Act of 1933 Section 17(a), violation of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5, and violation of 15 U.S.C. Section 80b-6. The arbitration involves a contract between the Company and Prudential Securities, Inc., governing the investment of the Company s insurance reserves. The Company seeks to rescind the contract and asks for restitution of all losses resulting from the mismanagement of the investments of the insurance reserve, along with other appropriate relief. Due to the nature of their business, certain subsidiaries are parties to various other legal proceedings which are considered routine litigation incidental to the insurance business. Item 4. Submission of Matters to a Vote of Security Holders A Special Meeting of Shareholders (the "Meeting") of the Company was held on June 14, 1996. As of April 11, 1996, and for purposes of the Meeting, there were 18,407,686 shares of common stock of the Company, par value $1.00 per share (the "Common Stock"), issued and outstanding. The Meeting was called for the following purposes and with the following results: (1) To consider and act upon a proposal to increase the authorized Common Stock from 25,000,000 to 50,000,000 shares and to amend the Company s Articles of Incorporation accordingly. Passed with 17,874,791 votes (97%) in favor. (2) To consider and act upon a proposal to approve the issuance of 6,250,000 shares of Common Stock (the "Powers Shares"), the issuance of options (the "Powers Options") to purchase a further 6,250,000 shares of Common Stock at an exercise price per share of the greater of $1.50 or the book value per share at the date of exercise with respect to 3,125,000 shares and the greater of $2.00 or the book value per share at the date of exercise with respect to a further 3,125,000 shares, and the issuance of the shares of Common Stock underlying the Powers Options (the "Powers Option Shares") for an aggregate purchase price of $6,250,000, as contemplated by the Stock Purchase Agreement, dated as of January 29, 1996, as amended January 30, 1996 (the "Powers Agreement") between the Company and Charles H. Powers, Walker S. Powers, Rex Huggins and Jane Huggins (collectively, "the Powers"), which approval is required by the By-Laws of the National Association of Securities Dealers, Inc. (the "NASD"). Passed with 13,326,044 votes (72%) in favor. (3) To consider and act upon a proposal to grant full and unlimited voting rights under the South Carolina Control Share Acquisitions Act to all 12,500,000 shares of Common Stock purchased or to be purchased by the Powers pursuant to the Powers Agreement and the Powers Options, in accordance and in compliance with Title 35, Chapter 2, Article 1, Section 35-2-109 of the South Carolina Code. Passed with 12,864,900 votes (70%) in favor. (4) To consider and act upon a proposal to increase the number of directors of the Company from 11 to 18. Passed with 17,742,035 votes (96%) in favor. (5) To consider and act upon a proposal to adopt a stock option plan for non-employee directors of the Company. Passed with 17,227,693 votes (93%) in favor. (6) To consider and act upon a proposal to adopt a stock option plan to supersede the 1987 Stock Option Plan, for the employees of the Company. Passed with 17,222,698 votes (93%) in favor. (7) To consider and act upon a proposal to adopt a stock option plan for independent agents of the Company. Passed with 17,300,733 votes (94%) in favor. Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K On April 8, 1996, Form 8-K was filed reporting the closing of the capital contribution whereby the Company issued 1,635,000 shares of authorized but unissued shares at a price of $2.00 to a group of investors. In addition, the Company issued to this group stock options expiring December 31, 2000 to acquire an additional 1,635,000 shares at the higher of $2.50 per share or book value at the date of exercise. 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. THE SEIBELS BRUCE GROUP, INC. (Registrant) Date: August 14, 1996 /s/ John A. Weitzel John A. Weitzel Chief Financial Officer and Director Date: August 14, 1996 /s/ Ernst N. Csiszar Ernst N. Csiszar President and Director Date: August 14, 1996 /s/ Mary M. Gardner Mary M. Gardner Controller (Principal Accounting Officer) EX-27 2
7 6-MOS DEC-31-1996 JUN-30-1996 34,590,000 34,590,000 34,590,000 34,000 0 0 55,000,000 (5,741,000) 25,925,000 153,000 204,120,000 53,266,000 1,444,000 0 0 0 0 0 18,408,000 (4,366,000) 204,120,000 4,050,000 1,435,000 194,000 21,641,000 3,462,000 765,000 21,084,000 2,009,000 (90,000) 2,099,000 0 0 0 2,099,000 0.11 0 61,031,000 1,967,000 1,364,000 1,193,000 9,903,000 53,266,000 1,364,000
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