-----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, K5BEkvD0uOl4pUYfQn/VyfAPO/T2ARvQg3EUuHJ2/LQ195cebgE0MCQ6F47SOvB6 F5w/AJMqKA+fZfme8AFKjQ== 0000950144-97-005762.txt : 19970515 0000950144-97-005762.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950144-97-005762 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BANKERS INSURANCE GROUP INC CENTRAL INDEX KEY: 0000350571 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 591985922 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09633 FILM NUMBER: 97605071 BUSINESS ADDRESS: STREET 1: 11222 QUAIL ROOST DR CITY: MIAMI STATE: FL ZIP: 33157 BUSINESS PHONE: 3052532244 MAIL ADDRESS: STREET 1: 11222 QUAIL ROOST DR CITY: MIAMI STATE: FL ZIP: 33157 10-Q 1 AMERICAN BANKERS INSURANCE GROUP 10-Q 3-31-97 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO --------- ---------- AMERICAN BANKERS INSURANCE GROUP, INC. 11222 QUAIL ROOST DRIVE MIAMI, FLORIDA 33157 (305) 253-2244 Commission File Number: 0-9633 State of Incorporation: Florida I.R.S. Employer Identification Number: 59-1985922 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 report), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Common Stock - Par Value $1.00 20,724,211 Shares Outstanding on May 2, 1997 1 2 Form 10-Q Company or group of companies for which report is filed: AMERICAN BANKERS INSURANCE GROUP, INC. This quarterly report, filed pursuant to Rule 13A-13 of the General Rules and Regulations under the Securities Exchange Act of 1934, consists of the following information as specified in Form 10-Q. Part I - Financial Information Item 1 - Financial Statements 1. Consolidated Balance Sheets at March 31, 1997 and December 31, 1996. 2. Consolidated Statements of Income for the three months ended March 31, 1997 and 1996. 3. Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996. 4. Notes to Consolidated Financial Statements. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Part II - Other Information Item 1 - Legal Proceedings Item 4 - Submission of matters to a vote of security holders Item 6 - Exhibits and Reports a. Exhibits. The following exhibits are included herein: (10) Amended and restated $23,000,000, 10.2% Promissory Notes dated as of September 12, 1991, as amended and restated as of March 15, 1997 and as of April 14, 1994 (11) Statement re: computation of earnings per share (27) Financial Data Schedule b. Report on Form 8-K. None 2 3 Form 10-Q SIGNATURE 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. AMERICAN BANKERS INSURANCE GROUP, INC. May 13, 1997 Date ----------------------------------- Robert Hill Senior Vice President and Principal Accounting Officer (ABIC/ABLAC) 3 4 PART I FINANCIAL INFORMATION 4 5 AMERICAN BANKERS INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 (IN THOUSANDS)
1997 1996 ------------- ------------- Assets (unaudited) - ------ Investments Held-to-Maturity securities, at amortized cost $ 847,863 $ 851,146 Available-for-Sale securities, at approximate market value 823,676 805,124 Trading securities, at fair value - 9,038 Equity securities, at approximate market value 115,461 112,895 Mortgage loans on real estate 10,087 10,236 Policy loans 8,521 8,290 Short-term and other investments 182,161 171,674 ------------ ------------- Total investments 1,987,769 1,968,403 Cash 21,097 30,434 Accounts receivable, net of allowance for doubtful accounts of $3,964 in 1997 and $4,526 in 1996 102,448 128,963 Reinsurance receivable 226,195 202,626 Accrued investment income 25,998 24,296 Deferred policy acquisition costs 410,979 387,993 Prepaid reinsurance premiums 476,565 507,077 Other assets 220,241 219,711 ------------ ------------- Total assets $ 3,471,292 $ 3,469,503 ============ ============= Liabilities and Stockholders' Equity - ------------------------------------ Policy liabilities $ 295,763 $ 291,756 Unearned premiums 1,278,796 1,291,142 Claim liabilities 520,736 487,596 ------------ ------------- 2,095,295 2,070,494 Other policyholders' funds 7,895 6,795 Notes payable 223,452 222,490 Deferred income taxes 35,271 40,795 Accrued commissions and other expenses 128,105 156,896 Other liabilities 259,855 261,826 ------------ ------------- Total liabilities 2,749,873 2,759,296 ------------ ------------- Commitments and Contingencies (Note 4) Stockholders' Equity - -------------------- Preferred Stock. $3.125 Series B Cumulative Convertible Preferred Stock Authorized 3,500 shares. Issued and Outstanding: 2,300 shares in 1997 and 1996 115,000 115,000 Common stock of $1 par value. Authorized 35,000 shares. Issued and outstanding: 1997-20,698 shares; 1996-20,530 shares 20,698 20,530 Additional paid-in capital 220,789 217,939 Net unrealized investment and foreign exchange (losses) gains (4,196) 7,437 Retained earnings 379,874 359,359 Less: Treasury stock, at cost - 93 shares in 1997 and 93 shares in 1996 (1,426) (1,426) Unamortized restricted stock (5,601) (4,382) Collateralization of loan to Leveraged Employee Stock Ownership Plan (3,719) (4,250) ------------ ------------- Total stockholders' equity 721,419 710,207 ------------ ------------- Total liabilities and stockholders' equity $ 3,471,292 $ 3,469,503 ============ =============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 6 AMERICAN BANKERS INSURANCE GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (IN THOUSANDS EXCEPT PER COMMON SHARE DATA) (UNAUDITED)
1997 1996 ------- ------- Gross collected premiums $ 637,126 $ 604,649 Premiums and other revenues: Net premiums earned $ 363,775 $ 341,854 Net investment income 32,106 27,439 Realized investment gains 1,930 1,029 Other income 7,070 5,375 =========== ============ Total premiums and other revenues 404,881 375,697 =========== ============ Benefits and expenses: Net benefits, claims, losses and settlement expenses 138,890 147,358 Commissions 151,637 127,694 Operating expense 73,083 65,657 Interest expense 3,957 4,101 =========== ============ Total benefits and expenses 367,567 344,810 =========== ============ Income before taxes 37,314 30,887 =========== ============ Income tax expense: Current 9,504 7,299 Deferred 1,391 2,952 =========== ============ 10,895 10,251 =========== ============ Net Income $ 26,419 $ 20,636 =========== ============ PER COMMON SHARE AND COMMON EQUIVALENT SHARE DATA Primary: Net Income $ 1.18 $ .99 =========== ============ Weighted average number of shares outstanding 20,948 20,929 =========== ============ Fully diluted: Net Income $ 1.13 $ .99 =========== ============ Weighted average number of shares outstanding 23,395 20,976 =========== ============ Dividends per common share $ .20 $ .19 =========== ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 7 AMERICAN BANKERS INSURANCE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (IN THOUSANDS) (UNAUDITED)
1997 1996 --------- ---------- OPERATING ACTIVITIES: Net income $ 26,419 $ 20,636 Adjustments to reconcile net income to net cash provided by operating activities: Change in policy liabilities, unearned premiums, claim liabilities, reinsurance receivable and prepaid reinsurance premiums 36,830 66,543 Change in other assets and other liabilities (10,828) (13,240) Decrease (increase) in accounts receivable 26,515 (618) (Increase) decrease in accrued investment income (1,702) 843 (Decrease) increase in accrued commission and expenses (28,791) 19,929 Increase in policyholders' funds 1,100 158 Increase in policy loans (231) (110) Amortization of deferred policy acquisition costs 145,018 127,753 Amortization of cost of insurance acquired 381 481 Policy acquisition costs deferred (168,005) (156,372) Provision for amortization and depreciation 3,721 4,189 Provision for deferred income taxes 1,798 2,952 Net gain on sale of investments (1,930) (1,029) Compensation and tax effect on stock option shares 477 477 Net cash flow from purchases and sales of trading securities 13,808 (5,884) --------- ---------- Net cash provided by operating activities 44,580 66,708 --------- ---------- INVESTING ACTIVITIES: Purchase of investments Held-to-maturity securities (34,343) (91,900) Available-for-sale securities (293,753) (38,126) Proceeds from sale of investments Available-for-sale securities 248,286 21,412 Mortgage loans 152 149 Real Estate 18 - Proceeds from maturities of investments Held-to-maturity securities 26,363 22,302 Available-for-sale securities 13,309 11,557 Increase in short-term investments (4,433) (18,925) Transactions related to capital assets Capital expenditures (6,565) (3,689) Sales of capital assets 58 255 --------- ---------- Net cash used in investing activities (50,908) (96,965) --------- ---------- FINANCING ACTIVITIES: Proceeds from issuance of debt 1,493 58,000 Repayment of debt -- (37,000) Dividends paid to shareholders (5,904) (3,829) Proceeds from issuance of stock 1,322 334 Purchase of treasury stock -- (175) --------- ---------- Net cash (used in) financing activities (3,089) 17,330 --------- ---------- Net decrease in cash (9,417) (12,927) Cash at beginning of period 30,434 23,257 Rate change effect on cash flow 80 40 Cash at end of period --------- ---------- $ 21,097 $ 10,370 ========= ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 2,365 $ 2,904 Income taxes $ 6,457 $ 12,043
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 7 8 AMERICAN BANKERS INSURANCE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) 1. Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report Form 10-K for the year ended December 31, 1996. 2. Translation of Foreign Currencies Unrealized foreign exchange losses, totaling $10,731,000 and $9,688,000 as of March 31, 1997 and December 31, 1996 respectively, are included in Stockholders' Equity under the caption "Net unrealized investment and foreign exchange (losses) gains." 3. Reinsurance The Company accounts for reinsurance contracts under Financial Accounting Standards Board's Statement 113. The Company recognizes the income on reinsurance contracts principally on a pro-rata basis over the life of the policies covered under the reinsurance agreements. Reinsurance Recoverables on Unpaid Losses are included as an asset in the Balance Sheet under the caption "Reinsurance Receivable". Ceded Unearned Premiums are included as an asset in the Balance Sheet under the caption "Prepaid Reinsurance Premiums". The effect of reinsurance on premiums earned is as follows for the three months ended March 31, 1997 and 1996:
(in thousands) Three Months Ended March 31, 1997 March 31, 1996 -------------- -------------- Direct premiums $ 596,607 $ 537,903 Reinsurance assumed 35,072 19,435 Reinsurance ceded (267,904) (215,484) ============= ============== Net premiums earned $ 363,775 $ 341,854 ============= ==============
Reinsurance ceded incurred losses for the three months ended March 31, 1997 and 1996 were $116,652,000 and $82,919,000 respectively. 4. Commitments and Contingencies For a comprehensive description of the Company's litigation, see Item III of the Company's 1996 Form 10-K. Alabama and Related Litigation: Certain of ABIG's subsidiaries, including ABIC, ABLAC and Voyager, are presently parties to a number of individual consumer and class action lawsuits pending in Alabama involving premium, rate, marketing and policy coverage issues. While a number of similar suits have been filed in other jurisdictions, the insurance and finance industries have been targeted in Alabama by plaintiffs' 8 9 lawyers who enjoy a favorable judicial climate. The Company typically has been named as a co-defendant with one or several retailer or finance companies who have sold the Company's product to a consumer. A number of other insurers are also named as co-defendants in many of the suits. Although the Alabama lawsuits and similar suits pending in other jurisdictions generally involve relatively small amounts of actual or compensatory damages, they typically assert claims requesting substantial punitive awards or purport to represent a large class of policyholders. The Company denies any wrongdoing in any of these suits and believes that it has not engaged in any conduct that would warrant an award of punitive damages or that the class allegations have merit. The Company has been advised by legal counsel that it has meritorious defenses to all claims being asserted against it. While no one individual lawsuit is necessarily significant in terms of financial risk to the Company, the judicial climate in Alabama is such that the outcome of these cases is extremely unpredictable. Moreover, class action lawsuits to which the Company is a party do not lend themselves to potential damage calculation. Without admitting any wrongdoing, the Company has settled a number of these suits, but there are still a significant number of cases pending, and it is expected that more suits alleging essentially the same causes of action are likely to continue to be filed during 1997. The Company intends to continue to defend itself vigorously against all such suits and believes, based on information currently available, that any liabilities that could result are not expected to have a material adverse effect on the Company's financial position. The Company is involved with a number of cases in the ordinary course of business relating to insurance matters, or more infrequently, certain corporate matters. Generally, the Company's liability is limited to specific amounts relating to insurance or policy coverage for which provision has been made in the financial statements. Other cases involve general corporate matters which generally do not represent significant contingencies for the Company. 9 10 5. Segment Information Gross collected premiums, net premiums earned and income (loss) before federal income taxes are summarized as follows:
(in thousands) Three Months Ended March 31, -------- 1997 1996 ---- ---- GROSS COLLECTED PREMIUMS: Life $ 187,577 $ 178,091 Property and Casualty 449,549 426,558 ============ ========== Total $ 637,126 $ 604,649 ============ ========== NET PREMIUMS EARNED: Life $ 100,077 $ 101,164 Property and Casualty 263,698 240,690 ============ ========== Total $ 363,775 $ 341,854 ============ ========== INCOME (LOSS) BEFORE INCOME TAXES: Life $ 18,400 $ 16,333 Property and Casualty 26,450 22,789 Other (3,579) (4,134) ============ ========== 41,271 34,988 Interest Expense 3,957 4,101 ============ ========== Total Income before Income Taxes $ 37,314 $ 30,887 ============ ==========
6. Accounting for Investments The Company accounts for its investments according to the Financial Accounting Standards Board's Statement 115 - Accounting for Certain Investments in Debt and Equity Securities. This Statement addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Those investments are to be classified in three categories and accounted for as follows: Held-to-Maturity - Securities for which the enterprise has the positive intent and ability to hold to maturity. These securities are carried at amortized cost. Trading Securities - Securities that are bought and held principally for the purpose of selling them in the near term. These securities are carried at market value with the unrealized holding gain or loss included in earnings. Available-for-Sale - Securities not classified as trading or held-to-maturity. These securities are carried at market value with the unrealized holding gain or loss reported as a separate component of equity, net of the income tax effect. 10 11 The detail of Cost and Statement Value for the Fixed Maturities and Equity Securities held at March 31, 1997 is as follows:
(in thousands) Amortized Statement Cost Value ------------ ----------- Fixed Maturities Held-to-Maturity Securities $ 847,863 $ 847,863 Available-for-Sale Securities 825,700 823,676 Trading Securities - - ============ =========== Total Fixed Maturities $ 1,673,563 $ 1,671,539 ============ =========== Net unrealized loss $ (2,024) =========== Market Cost Value ------------ ----------- Equity Securities Held-to-Maturity Securities $ - $ - Available-for-Sale Securities 102,975 115,461 Trading Securities - - ============ =========== Total Equity Securities $ 102,975 $ 115,461 ============ =========== Net unrealized gain $ 12,486 ===========
The net unrealized gain for "Available-for-Sale Securities" decreased by $10,595,000 (net of $5,087,000 in deferred income taxes) from December 31, 1996 to March 31, 1997. There were no unrealized gains and losses from transfers of Held-to-Maturity Securities. An analysis of the realized gains and losses of the Company for the three months ended March 31, 1997 is as follows:
(in thousands) Gross realized gains from sales of Available-for-Sale Securities $ 5,151 Gross realized losses from sales of Available-for-Sale Securities (3,044) Gross realized gains from sales of Trading Securities 165 Gross realized losses from sales of Trading Securities (315) ---------- Net realized gain from investment activity 1,957 Net realized loss from other investment activity (27) ---------- Total realized gain $ 1,930 ==========
The Company uses the specific identification method to determine cost for computing the realized gains and losses. There were no transfers of securities from Available-for-Sale to Trading for the three months ended March 31, 1997. The Company disposed of certain Held-to-Maturity securities due to deteriorating credit quality, mandatory redemption, or that were within three months of maturity. 11 12 AMERICAN BANKERS INSURANCE GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Gross collected premiums increased $32.5 million or 5% to $637.1 million for the three months ended March 31, 1997, from $604.6 million for the same period of 1996. Approximately 60% or $19.4 million of the increase came from the largest product line - Credit Unemployment. During the three months ended March 31, 1997, total premiums and other revenues were $404.9 million, an increase of $29.2 million over total premiums and other revenues of $375.7 million for the same period in 1996. The increase includes a $21.9 million increase in net premiums earned. The overall growth in invested assets generated an additional $4.7 million of investment income for the first quarter of 1997 as compared to the same period of 1996. The benefits and claims ratio improved to 38.2% for the three months ended March 31, 1997, compared to 43.1% for the same period of 1996. However, this improvement was offset by an increase in the commissions ratio from 37.4% for the three months ended March 31, 1996, to 41.7% for the same period of 1997. The effective tax rate improved from 33.2% for the three months ended March 31, 1996, to 29.2% for the same period of 1997. The improvement is primarily attributable to the improved operating results in the Company's United Kingdom subsidiary compared with the same period last year. The 1996 operating loss in the United Kingdom did not generate a tax benefit and adversely affected the tax rate in the first quarter of 1996. The continued use of tax advantaged investments, also favorably impacts the statutory rate. Financial Condition Stockholders' Equity increased $11.2 million from $710.2 million at December 31, 1996, to $721.4 million at March 31, 1997. The contribution of net income of $26.4 million less stockholder dividends of $5.9 million was the primary cause for the increase. This increase was offset partially by unrealized investment losses recorded by the Company. The unrealized investment losses were a result of the impact of increasing interest rates on the market values of the Company's investment portfolio. Liquidity and Capital Resources On March 31, 1997, $2.0 billion of securities, short-term investments and cash comprised 57% of the Company's total assets. The securities were principally readily marketable and did not include any significant concentration in private placements. The Company does not hold significant investments in equity securities; consequently, market changes in the equity securities markets do not significantly affect the investment portfolio. The Company expects to continue its policy of paying regular cash dividends; however, future dividends are dependent on the Company's future earnings, capital requirements and financial condition. In addition, the payment of dividends is subject to the restrictions described in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 12 13 Private Securities Litigation Reform Act of 1995 - Safe Harbor Cautionary Statement Except for the historical information contained herein, certain of the matters discussed in this quarterly report are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve certain risks and uncertainties, including but not limited to, changes in general economic conditions, interest rates, consumer confidence, competition, environmental factors, and governmental regulations affecting the Company's operations. See the Company's Annual Report Form on 10-K for the year ended December 31, 1996, for a further discussion of these and other risks and uncertainties applicable to the Company's business. 13 14 PART II OTHER INFORMATION 14 15 Item 1 - Legal Proceedings Commitments and Contingencies information which appears on pages 8 and 9 elsewhere in this report is incorporated by reference in this item. Additional information regarding litigation can be found in the Company's 1996 Annual Report on Form 10-K. Item 4 - Submission of Matters to a Vote of Security Holders None Item 6(a) - Exhibits Exhibit 10 - Amended and restated $23,000,000, 10.2% Promissory Notes dated as of September 12, 1991 as amended and restated as of March 15, 1997 and as of April 14, 1994 Exhibit 11 - Statement Re: Computation of Earnings Per Share Exhibit 27 - Financial Data Schedule (for SEC use only) Item 6(b) - Reports on Form 8-K None 15 EX-10 2 AMENDED PROMISSORY NOTES 1 EXHIBIT 10 NOTE MODIFICATION AGREEMENT AND WAIVER THIS NOTE MODIFICATION AGREEMENT AND WAIVER dated as of March 15, 1997 ("Effective Date") by and among American Bankers Insurance Group, Inc. a Florida corporation (the "Company"), and the lenders signatory hereto (the "Lenders"). WITNESSETH: WHEREAS, on September 12, 1991, the Company issued its $23,000,000 aggregate principal amount of 10.20% Promissory Notes (the "Notes") to the several Lenders pursuant to that certain Loan Agreement dated as of September 12, 1991 (the "Loan Agreement"), by and between the Company, on the one hand, and the several Lenders, on the other hand; and WHEREAS, the Company has informed the Lenders that prior to the effective date of this Note Modification Agreement and Waiver, Company or its subsidiaries entered into and maintained, on a continuous basis in any 12-month period, Rentals (as defined in Section 9(J) of the Notes) in aggregate amounts up to $7,500,000; and WHEREAS, the provisions of the Notes may be amended and/or waived if the Company obtains the agreement or consent in writing to such amendment and waiver by the holders of at least 66 2/3% in aggregate principal amount of all outstanding Notes; and WHEREAS, the Lenders listed below as signatories to this Note Modification Agreement and Waiver represent that collectively they hold, at a minimum, the requisite percentage referenced above; and WHEREAS, the Lenders pursuant to Section 10 of the Notes agree to waive Company's compliance with the provision of Section 9(J) relative to the authorized Rental amounts for all time periods prior to the effective date of this Note Modification Agreement and Waiver and further, agree to modify and increase the maximum authorized aggregate amount of Rentals as set forth below; and NOW, THEREFORE, in consideration of the premises and the agreements herein contained and other consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Modification to the Notes: The Notes are each hereby amended and modified as follows: A. Paragraph (J) of Section 9 of each of the Notes is hereby amended to read in its entirety as follows: Rentals. The Company will not, and will not cause or permit any subsidiary to, enter into, as lessee, or be a party to, any lease having an original or unexpired term (including renewals at the option of the lessor or lessee) of more than three (3) years, if after giving effect to such lease, the aggregate amount of rentals for any period of twelve (12) consecutive months payable by the Company and its subsidiaries with respect to all such leases shall exceed $7,500,000 (excluding any rentals payable under leases between the Company and any subsidiary or between any subsidiaries, any rentals included within the definition of "Funded Indebtedness" and any rentals resulting from any sale and leaseback of the Company's Miami Headquarters). For purposes of this Paragraph (J), the term "rentals," with respect to any lease and for any -1- 2 period, shall mean the aggregate amount payable under such lease for such period by the lessee to the lessor. 2. The provisions of Paragraph 9(J) of the Notes shall be waived as follows: Pursuant to Section 10 of the Notes, the Lenders agree for all time periods prior to the effective date of this Note Modification Agreement and Waiver to waive the condition contained in Paragraph 9(J) of the Notes concerning the maximum authorized amount of Rentals which Company may maintain during the term of the Notes and further waive all rights or remedies which Lenders had, have or may have in the future regarding Company's maintenance of Rentals in excess of said authorized maximum Rental amounts during said time periods. 3. Representations and Warranties. As, among other things, an inducement to each of the Lenders to enter into this Note Modification Agreement and Waiver and to consent to the waiver contained herein, the Company represents and warrants as of the date hereof, after giving effect to the execution and delivery of this Note Modification Agreement and Waiver that: (A) Each of the representations and warranties of the Company made in or pursuant to the Loan Agreement, or pursuant to any certificate or other document delivered in connection therewith including all amendments thereto is true and correct in all material respects on and as of the date hereof (except to the extent that any such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) including all representations and warranties made in Note Modification Agreement dated April 14, 1994. (B) Except as otherwise indicated in this Note Modification Agreement and Waiver, no event has occurred nor has any situation existed, since September 12, 1991, which would have resulted, either immediately, or with notice or the lapse of time or both, in an Event of Default under the Loan Agreement or the Notes (in each case as amended by this Note Modification Agreement and Waiver), and the execution and delivery of this Note Modification Agreement and Waiver will not result, either immediately, or with notice or lapse of time or both, in an Event of Default under the Loan Agreement or the Notes (in each case as amended by this Note Modification Agreement and Waiver). No event has occurred which, either immediately, or after the giving of notice or the lapse of time or both, would constitute an event of default under any other evidence of Funded Indebtedness of the Company. 4. Miscellaneous. (A) Defined Terms. Capitalized terms used herein but not defined shall have the respective meanings ascribed thereto in the Notes. (B) No Other Amendments. Except as expressly provided herein, no term or provision of the Notes or the Loan Agreement shall be deemed to be amended, supplemented or modified, and each term and provision of the Notes and the Loan Agreement shall remain in full force and effect. -2- 3 (C) Governing Law. This Note Modification Agreement and Waiver shall be governed by and construed in accordance with the laws of the state of New York. (D) Counterparts. This Note Modification Agreement and Waiver may be executed in any number of counterparts, each of which shall constitute on and the same instrument. All other terms of the Notes and Loan Agreement remain as written. IN WITNESS WHEREOF, the parties hereto have caused this Note Modification Agreement and Waiver to be duly executed and delivered in their respective names by their duly authorized officers, as of the date first above written. AMERICAN BANKERS INSURANCE GROUP, INC. ("Company") By: Name: Floyd Denison Title: Executive Vice President NEW YORK LIFE INSURANCE COMPANY ("Lender") By: Name: Title: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION ("Lender") By: New York Life Insurance Company By: Name: Title: -3- 4 NOTE MODIFICATION AGREEMENT NOTE MODIFICATION AGREEMENT dated as of April 14, 1994 by and among American Bankers Insurance Group, Inc., a Florida corporation (the "Company"), and each of the lenders set forth on Annex I hereto (the "Lenders"). WITNESSETH: WHEREAS, on September 12, 1991, the Company issued its $23,000,000 aggregate principal amount of 10.20% Promissory Notes (the "Notes") to the several Lenders pursuant to that certain Loan Agreement dated as of September 12, 1991 (the "Loan Agreement"), by and between the Company, on the one hand, and the several Lenders, on the other hand; WHEREAS, the Company has informed the Lenders that it intends to issue on a continuous basis up to $200,000,000 aggregate principal amount of medium term notes, due nine months to thirty years from the date of issuance (the "Medium Term Notes"), pursuant to an Indenture of Trust (the "Indenture") between the Company and The Bank of New York, as trustee (the "Trustee"); WHEREAS, the Company has informed the Lenders that, in connection with the issuance of the Medium Term Notes, it will enter into an amendment (the "Amendment") of that certain Amended and Restated Revolving Credit and Reimbursement Agreement by and between the Company and Barclays Bank PLC, New York Branch, as agent (in such capacity, the "Agent"), the Issuing Bank, as defined therein, and the Banks, as described therein (the "Revolving Credit Agreement"), pursuant to which the security interest granted by the Company in favor of the Agent for the ratable benefit of the Issuing Bank and the Banks, pursuant to the Pledge Agreement (as defined in the Revolving Credit Agreement), in the Pledged Stock (as defined in the Pledge Agreement) shall be released and the Pledge Agreement shall be terminated; and WHEREAS, the Amendment and the Indenture will provide that if an event of default under the Revolving Credit Agreement shall have occurred and be continuing, immediately upon the request of the Agent, the Company will (i) pledge, or to the extent applicable, cause its Subsidiaries to pledge, free and clear of all encumbrances, all the outstanding capital stock of each Significant Subsidiary (as defined in the Revolving Credit Agreement) on an equal and ratable basis (a) to the Agent, for the ratable benefit of the Issuing Bank and the Banks, and (b) to the Trustee, for the ratable benefit of the beneficial holders of the Medium Term Notes, and (ii) execute and deliver, and to the extent applicable, cause its subsidiaries and the Significant Subsidiaries to execute and deliver, a stock pledge agreement and any other documents in connection with such stock pledge agreement; NOW, THEREFORE, in consideration of the premises and the agreements herein contained and other consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 5 1. Modifications to the Notes. The Notes are each hereby amended and modified as follows: (A) Paragraph (A) of section 9 of each of the Notes is hereby amended to read in its entirety as follows: "(A) Funded Indebtedness. The Company will not, and will not cause or permit any subsidiary to, create, incur, assume, guarantee or in any manner become liable in respect of any Funded Indebtedness other than (i) the Notes and the Medium Term Notes; (ii) Funded Indebtedness of any subsidiary to the Company or to another subsidiary, or Funded Indebtedness owing to a subsidiary; (iii) guarantees of Funded Indebtedness by any subsidiary existing as of April 14, 1994 pursuant to the LESOP Guaranty Agreement; (iv) renewals, extensions or modifications of existing Funded Indebtedness; or (v) additional Funded Indebtedness of the Company, if immediately after giving effect thereto and to the retirement of any indebtedness which is being retired concurrently with the incurrence of such additional Funded Indebtedness of the Company: (i) consolidated Senior Indebtedness, excluding the Notes, does not exceed 40% of Total Capitalization; (ii) consolidated Funded Indebtedness does not exceed 60% of Total Capitalization; and (iii) the Company is not in default in any material respect in any covenant contained in this section 9." (B) Paragraph(D) of section 9 of each of the Notes is amended to replace the reference to "Section 7.02(o) of the Revolving Credit Agreement" with a reference to "Section 7.01(m) of the Revolving Credit Agreement". (C) Paragraph (F) of section 9 of each of the Notes is amended to replace the reference to "Section 7.02(o) of the Revolving Credit Agreement" with a reference to "Section 7.01(m) of the Revolving Credit Agreement". (D) Paragraph (G) of section 9 of each of the Notes is hereby amended to replace the reference to the figure "$150 million" with a reference to the figure "$325 million". 6 (E) Paragraph (N) of section 9 of each of the Notes is hereby amended to replace the reference to the ratio "2.0 to 1" with a reference to the ratio "4.0 to 1". (F) Section 11 of each of the Notes is hereby amended as follows: (i) A new definition of the term "Medium Term Notes" is hereby added in the appropriate alphabetical order, to read "Medium Term Notes" shall mean the promissory notes of the Company issued on a continuous basis in an aggregate principal amount of up to $200,000,000 outstanding at any one time, due nine months to thirty years from the date of issuance, pursuant to an Indenture of Trust dated as of April 15, 1994, between the Company and The Bank of New York, as trustee. (ii) The definition of "Revolving Credit Agreement" set forth in section 11 of each of the Notes is hereby amended to replace the phrase "as amended to the Closing Date" with the phrase "as amended or restated through April 4, 1994". (iii) A new definition of the term "Revolving Credit Agreement Amendment" is hereby added in the appropriate alphabetical order, to read: "Revolving Credit Agreement Amendment" shall mean the amendment dated as of April 4, 1994 to the Revolving Credit Agreement." (G) Paragraph (G) of section 12 of the Notes is hereby amended to read in its entirety as follows: "(G) any default shall occur or condition shall exist in respect of any indebtedness of $1 million or more (other than the Notes) of the Company or any subsidiary outstanding or under any agreement or instrument relating to any such indebtedness, the effect of which is to cause (or permit any holder thereof to cause) the acceleration of the maturity of such indebtedness, and in such event the entire principal of, and all accrued interest on, and a premium calculated in accordance with paragraph (A) of section 4 with respect to, this Note shall become immediately due and payable, without demand or notice of any kind;". 2. Representations and Warranties. As, among other things, an inducement to each of the Lenders to enter into this Agreement and to consent to the issuance of the Medium Term Notes pursuant to the Indenture and the execution of the Amendment in connection therewith, the Company represents and warrants as of the date hereof, after giving effect to the execution and delivery of this Agreement, the Amendment and the Indenture, and the consummation of the transactions contemplated thereby, that: (A) Each of the representations and warranties of the Company made in or pursuant to the Loan Agreement, or pursuant to any certificate or other document delivered in connection therewith, is true and correct in all material respects on and as of the date hereof as if 7 made on and as of the date hereof (except to the extent that any such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date); provided that for the purposes this clause (A), the reference to the fiscal year ended December 31, 1990 contained in section 2(A) of the Loan Agreement shall be deemed to be a reference to the fiscal year ended December 31, 1993, and references to all reports filed with the Securities and Exchange Commission shall be deemed to be the most recently filed of such report or reports. (B) No event has occurred nor has any situation existed, since September 12, 1991, which would have resulted, either immediately, or with notice or the lapse of time or both, in an Event of Default under the Loan Agreement or the Notes (in each case as amended by this Agreement), and the execution and delivery of the Amendment and the Indenture, and the consummation of the transactions contemplated thereby, will not result, either immediately, or with notice or lapse of time or both, in an Event of Default under the Loan Agreement or the Notes (in each case as amended by this Agreement). No event has occurred nor has any situation existed or is existing which, either immediately, or after the giving of notice or the lapse of time or both, would constitute an event of default under any other evidence of Funded Indebtedness of the Company. 3. Miscellaneous. (A) Defined Terms. Capitalized terms used herein but not defined shall have the respective meanings ascribed thereto in the Notes. (B) No Other Amendments. Except as expressly provided herein, no term or provision of the Notes or the Loan Agreement shall be deemed to be amended, supplemented or modified, and each term and provision of the Notes and the Loan Agreement shall remain in full force and effect. (C) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (D) CounterParts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in their respective names by their duly authorized officers, as of the date first above written. AMERICAN BANKERS INSURANCE GROUP, INC. By: -------------------------- Name: Floyd Denison Title: Executive Vice President NEW YORK LIFE INSURANCE COMPANY By: -------------------------- Name: Title: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: -------------------------- Name: Title: PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY By: -------------------------- Name: Title: CONTINENTAL AMERICAN LIFE INSURANCE COMPANY By: -------------------------- Name: Title: EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 ITEM 6 (A) EXHIBITS EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (in thousands except per common share data)
Three Months Ended March 31 -------------------------- PRIMARY: 1997 1996 ---- ---- Weighted average shares outstanding 20,948 20,929 ======= ======= Net Income $26,419 $20,636 Less convertible preferred stock dividends 1,797 - ------- ------- Total $24,622 $20,636 ======= ======= Net Income - per share $ 1.18 $ .99 ======= ====== FULLY DILUTED: Weighted average of shares outstanding 20,948 20,929 Assumed conversion of common stock equivalents - 47 Assumed conversion of convertible securities 2,447 - ------- ------- Total 23,395 20,976 ======= ======= Net income $26,419 $20,636 Add convertible debenture interest, net of federal income 56 62 tax ------- ------- Total $26,475 $20,698 ======= ======= Net income - per share $ 1.13 $ .99 ======= =======
16 EX-27 4 FINANCIAL DATA SCHEDULE
7 0000350571 AMERICAN BANKERS INSURANCE GROUP 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 823,676 847,863 847,863 115,461 10,087 0 1,987,769 21,097 226,195 410,979 3,471,292 295,763 1,278,796 520,736 7,895 223,452 0 115,000 20,698 585,721 3,471,292 363,775 32,106 1,930 7,070 138,890 0 0 37,314 10,895 26,419 0 0 0 26,419 1.18 1.13 0 0 0 0 0 0 0
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