-----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, GljBcVI/H8UkzztblgNRRg8nNxdWVZdUpCfT8o0SFzYUCVxlomMv3Jld6THsuwjx el4hlbsFL+RgQJsUGUzbbA== 0000703701-95-000007.txt : 19951119 0000703701-95-000007.hdr.sgml : 19951119 ACCESSION NUMBER: 0000703701-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTBRIDGE CAPITAL CORP CENTRAL INDEX KEY: 0000703701 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 731165000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08538 FILM NUMBER: 95592818 BUSINESS ADDRESS: STREET 1: 777 MAIN ST STREET 2: STE 900 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8178783300 MAIL ADDRESS: STREET 1: 777 MAIN ST STE 900 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 9/95 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 1995 Commission File Number 1-8538 WESTBRIDGE CAPITAL CORP. (Exact name of Registrant as specified in its Charter) DELAWARE 73-1165000 (State of Incorporation) (I.R.S. Employer Identification No.) 777 Main Street, Fort Worth, Texas 76102 (Address of Principal Executive Offices) (Zip Code) 817-878-3300 (Registrant's Telephone Number, including Area Code) 800-437-8690 (Registrant's Shareholder and Investor Relations Toll Free Telephone Number) Not Applicable (Former Name, Address and Former Fiscal Year, if changed since Last Report) Indicate, by check mark whether the Registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of l934 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_____ Common Stock - Par Value $.l0 5,986,458 Shares Outstanding at November 10, 1995 Form 10-Q Company or group of companies for which report is filed: WESTBRIDGE CAPITAL CORP. This quarterly report, filed pursuant to Rule 13a-13 and 15d-13 of the General Rules and Regulations under the Securities Exchange Act of l934, consists of the following information as specified in Form 10-Q:
Pages(s) Part I - FINANCIAL INFORMATION Item 1 - Financial Statements. 1. Consolidated Balance Sheets at September 30, 1995, December 31, 1994 and September 30, 1994. 3-4 2. Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1994. 5 3. Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 1995 and 1994. 6-7 4. Notes to Consolidated Financial Statements. 8-10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. 11-18 Part II - OTHER INFORMATION Item 1 - Legal Proceedings. 19 Item 6 - Exhibits and Reports on Form 8-K. 19
WESTBRIDGE CAPITAL CORP. CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS
September 30, December 31, September 30, 1995 1994 1994 (Unaudited) (Audited) (Unaudited) Investments: Fixed maturities: Available-for-sale, at market value (amortized cost $11,052 $11,310 and $11,488) $ 11,571 $ 10,787 $ 11,183 Held-to-maturity, at amortized cost (market value $77,442, $75,238 and $79,400) 76,026 80,377 82,391 Equity securities, at market 538 469 463 Investment in Freedom Holding Company, on the equity basis 6,086 5,945 5,858 Mortgage loans on real estate 654 768 786 Investment real estate 141 141 141 Policy loans 282 291 285 Short-term investments 3,154 7,189 10,476 ------- ------- ------- Total Investments 98,452 105,967 111,583 Cash 105 2,871 1,394 Accrued investment income 1,546 1,924 1,772 Receivables from agents, net of allowance for doubtful accounts 13,360 7,353 6,176 Deferred policy acquisition costs 52,435 58,654 61,679 Leasehold improvements and equipment, at cost, net of accumulated depreciation and amortization 1,583 1,215 1,026 Other assets 11,826 9,597 7,764 ------- ------- ------- Total Assets $179,307 $187,581 $191,394 ======= ======= ======= The accompanying notes are an integral part of these financial statements.
WESTBRIDGE CAPITAL CORP. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
September 30, December 31, September 30, 1995 1994 1994 (Unaudited) (Audited) (Unaudited) Liabilities: Policy liabilities and accruals: Future policy benefits $ 46,217 $ 62,893 $ 63,704 Claims 37,755 41,387 42,263 ------- ------- ------- 83,972 104,280 105,967 Accumulated policyholders' funds 367 372 366 Other liabilities 13,619 8,678 7,495 Deferred income taxes 2,814 3,231 7,875 Senior subordinated debentures, net of unamortized discount - 24,665 24,600 Senior subordinated notes, due 2002, net of unamortized discount 19,244 - - ------- ------- ------- Total Liabilities 120,016 141,226 146,303 ------- ------- ------- Redeemable Preferred Stock 20,000 20,000 20,000 ------- ------- ------- Stockholders' Equity: Common stock, ($.l0 par value, 30,000,000 shares authorized; 5,986,458, 4,430,458, and 4,422,608 shares issued) 599 443 442 Capital in excess of par value 29,124 19,328 19,321 Unrealized appreciation (depreciation) of investments carried at market value 544 (147) (9) Retained earnings 9,194 6,901 5,507 ------- ------- ------- 39,461 26,525 25,261 Less - Aggregate of shares held in treasury and investment by affiliate in Westbridge Capital Corp. common stock (28,600 at September 30, 1995, December 31, 1994 and September 30, 1994), at cost (170) (170) (170) ------- ------- ------- Total Stockholders' Equity 39,291 26,355 25,091 ------- ------- ------- Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity $179,307 $187,581 $191,394 ======= ======= ======= The accompanying notes are an integral part of these financial statements.
WESTBRIDGE CAPITAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Premiums: First-year $ 9,653 $ 3,984 $23,109 $10,135 Renewal 20,901 23,712 64,255 61,525 ------ ------ ------ ------ 30,554 27,696 87,364 71,660 Net investment income 1,722 1,610 5,306 3,942 Fee and service income 666 445 1,556 1,269 Net realized gains (losses) on investments 37 127 (35) 320 Other income (1) 4 4 37 ------ ------ ------ ------ 32,978 29,882 94,195 77,228 ------ ------ ------ ------ Benefits, claims and expenses: Benefits and claims 17,128 15,102 50,637 38,198 Amortization of deferred policy acquisition costs 2,789 3,091 8,737 7,157 Commissions 2,825 2,919 8,639 8,284 General and administrative expenses 6,085 4,566 15,696 12,313 Taxes, licenses and fees 991 827 3,057 2,404 Interest expense 568 797 1,858 2,266 ------ ------ ------ ------ 30,386 27,302 88,624 70,622 ------ ------ ------ ------ Income before income taxes, equity in earnings of Freedom Holding Company and extraordinary item 2,592 2,580 5,571 6,606 Provision for income taxes 881 886 1,894 2,246 Equity in Freedom Holding Company 85 87 261 258 ------ ------ ------ ------ Net income before extraordinary item 1,796 1,781 3,938 4,618 Extraordinary loss from early extinguishment of debt, net of income tax benefit of $210 - - 407 - ------ ------ ------ ------ Net Income $ 1,796 $ 1,781 $ 3,531 $ 4,618 ====== ====== ====== ====== Preferred stock dividends 413 412 1,238 777 Income applicable to common stockholders $ 1,383 $ 1,369 $ 2,293 $ 3,841 ====== ====== ====== ====== Earnings per common share: Primary: Income before extraordinary item $ .23 $ .30 $ .47 $ .83 ====== ====== ====== ====== Extraordinary item - - (.07) - ------ ------ ------ ------ Net Earnings $ .23 $ .30 $ .40 $ .83 ====== ====== ====== ====== Fully diluted: Income before extraordinary item $ .21 $ .26 $ .49 $ .76 ====== ====== ====== ====== Extraordinary item - - (.05) - ------ ------ ------ ------ Net Earnings $ .21 $ .26 $ .44 $ .76 ====== ====== ====== ====== Weighted average shares outstanding: Primary 6,063 4,606 5,756 4,614 Fully diluted 8,441 6,912 8,114 6,056 The accompanying notes are an integral part of these financial statements.
WESTBRIDGE CAPITAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,796 $ 1,781 $ 3,531 $ 4,618 Adjustments to reconcile net income to cash provided by (used for) operating activities: Decrease in policy liabilities and accruals (688) (984) (2,308) (5,014) Amortization of deferred policy acquisition costs 2,789 3,091 8,737 7,157 Additions to deferred policy acquisition costs (9,010) (3,405) (20,518) (8,485) Increase (decrease) in deferred income taxes (512) 229 (417) 981 Depreciation expense 126 75 360 208 Increase in receivables from agents (2,210) (694) (6,007) (1,226) Increase (decrease) in other assets 557 (469) (2,229) (4,423) Equity in earnings of Freedom Holding Company (85) (87) (141) (258) Net realized (gains) losses on investments (37) (127) 35 (320) Increase (decrease) in other liabilities 6,491 (308) 4,935 176 Other, net (210) (283) (984) (309) ------ ------ ------ ------ NET CASH USED BY OPERATING ACTIVITIES (993) (1,181) (15,006) (6,895) ------ ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of NFI and AICT - - - (20,178) Proceeds from investments sold: Fixed maturities, classified as held-to-maturity, called or matured 873 1,218 1,392 2,358 Fixed maturities, classified as available-for-sale, called or matured 94 - 171 1,368 Fixed maturities, classified as held-to-maturity, sold - - - - Fixed maturities, classified as available-for-sale, sold - 2,117 3,939 7,275 Short-term investments, sold or matured 84 5,144 10,614 40,201 Other investments, sold or matured 86 25 124 85 Cost of investments acquired - (7,808) (7,424) (48,532) Notes receivable from related parties - - - 1,381 Additions to leasehold improvements and equipment, net of retirements (133) (546) (728) (670) ------ ------ ------ ------ NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 1,004 150 8,088 (16,712) ------ ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (retirement) of senior subordinated debentures, at par - - (25,000) 5,000 Issuance of subordinated notes - - 19,200 - Issuance of redeemable preferred stock - - - 20,000 Issuance of common stock 148 269 10,098 378 Purchase and cancellation of common stock (146) (506) (146) (525) ------ ------ ------ ------ NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 2 (237) 4,152 24,853 ------ ------ ------ ------ INCREASE (DECREASE) IN CASH DURING PERIOD 13 (1,268) (2,766) 1,246 CASH AT BEGINNING OF PERIOD 92 2,662 2,871 148 ------ ------ ------ ------ CASH AT END OF PERIOD $ 105 $ 1,394 $ 105 $ 1,394 ====== ====== ====== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the periods for (in thousands): Interest $ 549 $ 1,467 $ 2,892 $ 2,674 Income taxes $ 322 $ 650 $ 650 $ 1,065 The accompanying notes are an integral part of these financial statements.
WESTBRIDGE CAPITAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: The Company purchased the outstanding capital stock of a health insurer and its subsidiary in the second quarter of 1994 for a cash purchase price of $20.1 million. This purchase resulted in the Company receiving tangible assets and assuming liabilities as follows: Assets $61,293,000 Liabilities $72,199,000 The Company purchased a block of Supplemental Health insurance in the first quarter of 1994. This purchase resulted in the Company disbursing assets and assuming liabilities as follows: Investments $ 545,000 Policy liabilities $ 2,626,000 The accompanying notes are an integral part of these financial statements. WESTBRIDGE CAPITAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements for Westbridge Capital Corp. ("Westbridge" and, together with its consolidated subsidiaries, the "Company") 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 ("GAAP") 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 nine month period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. NOTE 2 - COMMITMENTS AND CONTINGENCIES In the normal course of their business operations, National Foundation Life Insurance Company ("NFL"), National Financial Insurance Company ("NFI"), and American Insurance Company of Texas ("AICT"), Westbridge's primary insurance subsidiaries, are involved in various claims and other business related disputes. In the opinion of management, the disposition of these matters will have no material adverse effect on the Company's consolidated financial position. NOTE 3 - ACQUISITION OF NFI AND AICT On April 12, 1994, Westbridge consummated the acquisition (the "Acquisition") of all of the outstanding capital stock of NFI and its wholly owned subsidiary AICT. NFI and AICT are health insurers domiciled in the state of Texas. The Acquisition has been accounted for under the purchase method and, accordingly, the operating results of NFI and AICT have been included in the consolidated operating results since the date of acquisition. Effective April 1, 1995, the Company recorded an adjustment to the liability for future policy benefits relating to insurance policies obtained in the Acquisition. The effect of this adjustment was to reduce the liability for future policy benefits and to reduce deferred policy acquisition costs by approximately $18,500,000. The adjustment resulted from calculating the lia-bility using current actuarial assumptions rather than the historical actuarial assumptions which were present at the time of the Acquisition. The difference is accounted for as an adjustment to the purchase price as it falls within the one-year "look-back" period following the Acquisition, in accordance with Statement of Financial Accounting Standard No. 38 "Accounting for Preacquisition Contingencies of Purchased Enterprises". NOTE 4 - FINANCING ACTIVITY On February 28, 1995, the Company issued 1,500,000 shares of its Common Stock in an underwritten public offering. The shares of Common Stock were issued at a price of $7.00 per share, less an underwriting discount of $.42 per share. Also on February 28, 1995, the Company issued $20,000,000 aggregate principal amount of its 11% Senior Subordinated Notes due 2002 (the "Notes"), in an under-written public offering. The Notes were issued at par, less an underwriting discount of 4%. The Company may redeem the Notes at any time on or after March 1, 1998, upon 30 days' written notice, at par plus accrued interest. Upon the death of any holder of the Notes, the Company will repay such holder's Notes at par plus accrued interest. The Company is not obligated to redeem more than $50,000 in principal amount per holder per calendar year or in aggregate for all holders more than $250,000 in principal amount per calendar year. The Notes contain certain covenants which limit the Company's ability to, (i) incur certain types of indebtedness, (ii) pay dividends or make distributions to holders of the Company's equity securities, or (iii) consolidate, merge, or transfer all or substantially all of the Company's assets. The Notes also contain covenants which require the Company to maintain, (i) a minimum amount of liquid assets, (ii) a minimum consolidated net worth, and (iii) a minimum fixed charge ratio. Concurrent with the Common Stock and Note offerings, on February 28, 1995 the Company placed funds in escrow sufficient to cover all remaining principal and interest payments on its outstanding 11.7% Senior Subordinated Debentures due 1996, which were called for redemption on March 30, 1995. The redemption price was par plus accrued interest. This redemption prior to scheduled maturity resulted in a loss from early extinguishment of debt. The loss related to amortization of the remaining original issue discount and write-off of deferred financing costs, offset in part by interest earned on the funds in escrow. This loss is reported, net of tax, as an extraordinary item on the accompanying statement of operations. As a result of the issuance of the Common Stock, the conversion rate of the Series A Preferred Stock has been adjusted. The Series A Preferred Stock is now convertible into an aggregate of 2,378,120 shares of Common Stock. NOTE 5 - EARNINGS PER SHARE Primary Income Before Extraordinary Item. Calculated by dividing net income before extraordinary item, less preferred stock dividends, by primary weighted average shares outstanding. Primary weighted average shares outstanding do not assume the conversion to Common Stock of the Series A Preferred Stock. Fully Diluted Income Before Extraordinary Item. Calculated by dividing net income before extraordinary item by fully diluted weighted average shares outstanding. The preferred stock dividend is not deducted from income for the fully diluted calculation, but the fully diluted averages shares outstanding number is larger. The fully diluted calculation assumes the conversion of the Series A Preferred Stock to Common Stock at the beginning of the period. Were such a conversion to occur, (a) preferred dividends would not be paid, and are therefore not deducted from earnings for the calculation and, (b) there would be a greater number of shares of Common Stock outstanding as a result of the conversion. At September 30, 1995, the Series A Preferred Stock was convertible to Common Stock at a conversion price of $8.41, which would result in 2,378,120 additional shares of Common Stock upon conversion. NOTE 6 - DEFERRED POLICY ACQUISITION COSTS During the quarter ended September 30, 1995, the Company refined its method of estimating deferred policy acquisition costs by implementing the factor method of calculating deferred policy acquisition costs and related amortization. The Company previously used the worksheet method of amortization, which, in the Company's opinion, approximated the amortization which would result if the "factor method" was used. The adoption of the factor method did not have a material impact on the calculation of deferred policy acquisition costs. WESTBRIDGE CAPITAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW AND COMPARABILITY OF PERIODS Westbridge Capital Corp. ("Westbridge" and, together with its consolidated subsidiaries, the "Company") through its subsidiaries and affiliated companies, principally underwrites and sells specialized health insurance products to supplement medical expense coverage usually provided by employers and government programs. The Company's insurance subsidiaries and affiliates include the following: * National Foundation Life Insurance Company ("NFL") - A wholly-owned subsidiary of the Company which is engaged primarily in the sale and administration of accident and health insurance. * National Financial Insurance Company ("NFI") and its wholly-owned subsidiary, American Insurance Company of Texas ("AICT") - These companies were acquired by the Company in April, 1994 (the "Acquisition"). NFI and AICT are engaged in the sale of new policies and the administration of blocks of insurance business which are substantially similar to the business administered by NFL. * Freedom Holding Company ("FHC") - The Company owns a 40% interest in FHC, which in turn, owns 100% of Freedom Life Insurance Company of America ("FLICA"). FLICA is engaged primarily in the sale of Cancer and Specified Disease Products. The Company's major product lines are Cancer and Specified Disease Products, Medical Expense Products and Medicare Supplement Products. Cancer and Specified Disease Products include policies designed to provide daily indemnity for hospital confinement and convalescent care for treatment of specified diseases, as well as "event specific" policies designed to provide daily indemnity for confinement in an intensive care unit or to provide a fixed benefit in the case of accidental death. Medical Expense Products include policies providing reimbursement for various costs of medical and hospital care, catastrophic nursing care and home health care. Medicare Supplement Products are designed to reimburse for the expenses not covered by the Medicare program. The Company also derives revenue through fee and service income from other insurance related activities. The Company's marketing subsidiaries include the following: * LifeStyles Marketing Group, Inc. ("LMG") - LMG is an insurance marketing joint venture which derives fee income in the form of commissions on sales of Medical Expense Products primarily for NFL but also for non-affiliated insurance carriers. LMG is 51% owned by the Company. * Senior Benefits, LLC ("SBL") - SBL is an insurance marketing joint venture which derives fee income in the form of commissions on sales of Medicare Supplement Products for NFL. SBL was formed in November, 1993. The Company holds a 50% ownership interest in SBL. * American Senior Security Plans, LLC ("ASSP") - ASSP is an insurance marketing joint venture which derives fee income in the form of commissions on sales of Medicare Supplement Products for NFI. ASSP was formed in November, 1994. The Company holds a 50% ownership interest in ASSP. Due to the size and the timing of the Acquisition, the Company's results of operations for the nine months ended September 30, 1995 compared to the corresponding period in the prior year show significant increases in certain revenues and expenses. Generally, as a result of the acquisition of policies in force, and the transfer of assets and liabilities relating thereto, the Company receives higher revenues in the form of premiums, net investment income and net realized gains on investments, and experiences higher expenses in the form of benefits and claims, amortization of DPAC, commissions and general and administrative expenses. The Company expects that the levels of premiums, net investment income, net realized gains on investments, benefits and claims, amortization of DPAC, commissions and general and administrative expenses attributable to these acquired policies will continue to decline over time as the acquired businesses run off. The following table shows the premiums received by the Company through internal sales and through acquisitions during the periods indicated.
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Company-Issued Policies: First-year premiums $ 9,292 $ 3,982 $22,748 $10,109 Renewal premiums 9,251 8,447 27,022 25,834 ------ ------ ------ ------ Total Company-issued policies 18,543 12,429 49,770 35,943 ------ ------ ------ ------ Acquired Policies: American Integrity 2,351 3,096 7,631 10,276 Life and Health 506 610 1,627 1,956 Dixie National Life 822 899 2,635 3,002 NFI and AICT 8,332 10,662 25,701 20,483 Total acquired policies 12,011 15,267 37,594 35,717 ------ ------ ------ ------ Total Premiums $30,554 $27,696 $87,364 $71,660 ====== ====== ====== ======
RESULTS OF OPERATIONS Three months and nine months ended September 30, 1995 compared with three months and nine months ended September 30, 1994 Premiums. Premiums increased $2.9 million or 10.5% for the third quarter of 1995, from $27.7 million to $30.6 million. This increase was due primarily to an increase in first-year premiums for Company-issued policies of $5.3 million, or 133.4%, offset, in part, by a decrease in total acquired policy premiums of $3.3 million, or 21.3%. Premiums increased $15.7 million for the first nine months of 1995, or 21.9% from $71.7 million to $87.4 million. This increase was due primarily to an increase in first-year premiums for Company- issued policies of $12.6 million, or 125.0%, and an increase in total acquired policy premiums of $1.9 million, or 5.3%. The decrease in total acquired policy premiums for the third quarter of 1995 when compared to the third quarter of 1994 was due primarily to decreases of $2.3 million, or 21.9%, in premiums from policies obtained in the acquisition of NFI and AICT and $745,000, or 24.1%, in premiums on the block of policies acquired from American Integrity in September, 1992. The increase in total acquired policy premiums for the first nine months of 1995 when compared to the same period in 1994 was due primarily to the acquisition of NFI and AICT in April, 1994. The 1995 period included the operations of NFI and AICT for a full nine months, while the prior year period included the operations from April 12, 1994. The increase in first-year premiums for the third quarter of 1995 when compared to the third quarter of 1994 was due primarily to increases of $2.0 million, or 174.3%, in first-year Medicare Supplement premium generated for NFL by SBL, $1.5 million in first- year Medical expense premiums, and $194,000 of first-year Medicare Supplement premiums written in NFI and AICT which were not present in the prior year period, $463,000, or 67.8%, in first-year Cancer and Specified Disease products reinsured from FLICA and $1.5 million, or 82.1%, in first-year Medical Expense premium generated by LMG. These increases were offset, in part, by a decrease of $94,000, or 26.3% in first-year premium for Cancer and Specified Disease Products written directly by NFL. The increase in first-year premiums for the first nine months of 1995 when compared to same period in 1994 was due primarily to increases of $6.4 million, or 312.1%, in first-year Medicare Supplement premium generated for NFL by SBL, $2.0 million, or 139.5%, in first-year premiums assumed by NFL from FLICA, $2.5 million in first-year Medical expense premiums, and $343,000 of first-year Medicare Supplement premiums written in NFI and AICT which were not present in the prior year period, and $1.8 million, or 33.4%, in first-year Medical Expense premiums generated by LMG. Offsetting these increases was a decrease of $303,000, or 26.3%, in first-year premium for Cancer and Specified Disease Products written directly by NFL. The increase in renewal premiums (excluding renewal premiums on policies acquired in acquisitions) for the third quarter of 1995 when compared to the third quarter of 1994 was primarily due to an increase of $878,000 in renewal Medicare Supple-ment premiums generated by SBL, an increase of $204,000, or 8.8%, in Medical Expense renewal premiums generated by LMG, and an increase of $313,000, or 32.0%, in renewal premiums assumed by NFL from FLICA. These increases were offset, in part, by a decrease of $238,000, or 7.1%, in renewal premiums for Cancer and Specified Disease Products written directly by NFL. The increase in renewal premiums (excluding renewal premiums on policies acquired in acquisitions) for the first nine months of 1995 when compared to the first nine months of 1994 were due primarily to $1.5 million in renewal premiums for Medicare Supplement Products produced for NFL by SBL, $775,000, or 11.3%, in renewal Medical Expense premiums generated by LMG, and $520,000, or 17.8%, in renewal premiums assumed by NFL from FLICA. These increases were offset, in part, by a decrease of $580,000, or 27.8%, in renewal premiums for Pre-1987 Medical Expense Products, $464,000, or 4.3%, in renewal premiums for Cancer and Specified Disease Products written directly by NFL, and $355,000, or 16.2% in renewal premiums for Pre-1987 Medicare Supplement Products. Net Investment Income. Net investment income increased $112,000, or 7.0%, in the quarter ended September 30, 1995, compared to the same period in 1994. This increase was due primarily to the acquired invested assets of NFIC and AICT being held in lower yielding short-term investments during a portion of the 1994 third quarter. Net investment income increased $1.4 million, or 34.6%, in the nine months ended September 30, 1995, when compared to the nine months of 1994 due primarily to investment income earned on invested assets acquired in the Acquisition of NFI and AICT in the second quarter of 1994. Fee and Service Income. Fee and service income increased $221,000, or 33.2%, and $287,000, or 22.6%, respectively, in the three and nine month periods ended September 30, 1995, compared to the same periods in 1994. These increases resulted primarily from increased commissions received by LMG from non-affiliated insurers, and sales of telemarketing services to independent insurance agencies. Benefits and Claims. Benefit and claim expense increased $2.0 million, or 13.4%, in the third quarter of 1995 when compared to the third quarter of 1994. This increase principally resulted from $3.0 million, or 674.4%, in benefit and claim expense for Medicare Supplement Products produced by SBL, $1.4 million, or 309.2%, for Cancer and Specified Disease Products assumed from FLICA, $475,000, or 21.3%, for LMG Medical Expense Products and $502,000, or 24.9%, for Acquired Medicare Supplement Products. Also contributing to the increase was $1.7 million of benefit and claim expense relating principally to Medical Expense policies written in NFI and AICT during 1995. Offsetting these increases was a decrease of $4.9 million, or 73.7%, in acquired products for NFI and AICT. This decrease is principally the result of a reduction in claim reserves on the acquired disability income policies due to rigorous case management and settlement work relating to the block of policies in benefit status. Benefit and claim expense increased $12.4 million, or 32.6%, in the first nine months of 1995 when compared to the first nine months of 1994. Of this increase, $1.0 million was due to the acquisition of NFI and AICT in April, 1994. The 1995 period included the operations of NFI and AICT for a full nine months, while the prior year period included the operations from April 12, 1994. The effect of this increase was lessened by the third quarter 1995 reduction in claim reserves on the acquired disability income policies, as explained above. Benefit and claim expenses increased an additional $1.4 million relating principally to Medical Expense policies written in NFI and AICT during 1995. Benefit and claim expenses for NFL increased $10.0 million, or 39.8%, in the first nine months of 1995 compared to the same period in 1994. This resulted from an increase of $7.6 million, or 1048.8%, for Medicare Supplement Products produced by SBL, $3.0 million, or 262.8%, for Cancer and Specified Disease Products assumed from FLICA, and $785,000, or 13.3%, for LMG products. Offsetting these increases were decreases of $1.1 million, or 26.4%, for Direct Cancer and Specified Disease Products, and $388,000, or 64.0%, in Cancer and Specified Disease Products assumed by NFL from Paramount. Amortization of DPAC. Amortization of deferred policy acquisition costs decreased $302,000, or 9.8%, in the third quarter of 1995 when compared to the third quarter of 1994. Of this decrease, $537,000 related to the Acquired business of NFI and AICT, which was offset, in part, by an increase of $235,000 related to NFL. The decrease related to the Acquired business of NFI and AICT resulted from lower deferred policy acquisition costs recorded effective April 1, 1995, (see Note 3 to the Consolidated Financial Statements). The increase in NFL is principally the result of higher production costs resulting from increased production in the 1995 period when compared to the 1994 period. Amortization of deferred policy acquisition costs increased $1.6 million, or 22.1%, in the first nine months of 1995 when compared to the first nine months of 1994. Of this increase, $136,000 related to the Acquired business of NFI and AICT, and $1.3 million related to NFL. The increase related to the Acquired business of NFI and AICT resulted from having a full nine months of amortization in the 1995 period, while the 1994 period including amortization from April 12, 1994. This increase was offset, in part, by lower amortization resulting from the decrease in deferred policy acquisition costs for the Acquired business of NFI and AICT which was recorded effective April 1, 1995, (see Note 3 to the Consolidated Financial Statements). Commissions. Commissions decreased $94,000, or 3.2%, in the third quarter of 1995 when compared to the third quarter of 1994. Before elimination of inter-company revenues and expenses in consolidation, commission expenses increased $415,000, or 15.8%, in NFL, and increased $411,000, or 46.6%, in LMG. An increase of $174,000, or 214.8%, in commissions paid to SBL from NFL and $647,000, or 47.0%, in commissions paid to LMG from NFL were eliminated in consolidation. Commissions increased $355,000, or 4.3%, for the first nine months of 1995 com-pared to the first nine months of 1994, due primarily to an increase of $528,000, or 31.9%, in commissions on policies acquired in the second quarter of 1994, which were not present in the first quarter of 1994, and offset by decreases of $173,000, or 2.6%, in other commissions. Before elimination of intercompany revenues and expenses in consolidation, commissions increased $501,000, or 6.1%, in NFL, and increased $556,000, or 20.6% in LMG. An increase of $442,000, or 292.7%, in commissions paid to SBL from NFL and $929,000, or 22.3%, increase in commissions paid to LMG from NFL were eliminated in consolidation. General and Administrative Expenses. General and administrative expenses increased $1.5 million, or 33.3%, for the quarter ended September 30, 1995, when compared to the same period in 1994. This increase related to costs associated with increased marketing operations. General and administrative expenses increased $3.4 million, or 27.5%, for the nine months ended September 30, 1995, compared to the first nine months of 1994. This increase resulted from expenses associated with increased marketing operations and the costs associated with the administration of policies acquired in the second quarter of 1994 from NFI and AICT, which were not present in the first quarter of 1994. Taxes, Licenses and Fees. Taxes, licenses and fees increased $164,000, or 19.8%, and $653,000, or 27.2%, respectively, in the three and nine month periods ended September 30, 1995, when compared to the same periods in 1994. Interest Expense. Interest expense decreased $229,000, or 28.7%, for the third quarter of 1995, compared to the third quarter of 1994, and $408,000, or 18.0%, for the first nine months of 1995 when compared to the first nine months of 1994. This was primarily due to the issuance of $20.0 million of 11% debt and the retirement of $25.0 million of 11.7% debt in the first quarter of 1995. Provision for Income Taxes. The consolidated income tax rate remained approximately the same for all periods presented. FINANCIAL CONDITION Liquidity and Capital Resources Westbridge Westbridge is a holding company which conducts its principal operations through its insurance subsidiaries. Westbridge's primary assets consist of the out-standing capital stock of NFL and NFI, of which it is the sole stockholder. NFL also owns a 40% interest in Freedom Holding Company. AICT is a wholly-owned subsidiary of NFI. Westbridge's primary sources of funds are dividends from its insurance subsidiaries, advances due from subsidiaries, principal and interest payments on a surplus certificate issued by NFL to Westbridge, lease payments on fixed assets and tax contributions under a tax sharing agreement among Westbridge and its subsidiaries. Westbridge's obligations consist primarily of interest payments on the Senior Subordinated Notes, dividends on the Series A Preferred Stock and taxes. The Senior Subordinated Notes mature in March 2002 and the Series A Preferred Stock is subject to mandatory redemption in April 2004. Dividend payments from Westbridge's principal insurance subsidiaries, NFL, NFI and AICT are regulated by the insurance laws of their domiciliary states. NFL is domiciled in Delaware. Under the Delaware Insurance Code, an insurer domiciled in Delaware may not declare or pay a dividend or other distribution from any source other than "earned surplus" without the state insurance commissioner's prior approval. NFI and AICT are domiciled in Texas. An insurer domiciled in Texas may pay dividends only out of "surplus profits arising from its business." Moreover, insurers domiciled in either Delaware or Texas may not pay "extra-ordinary dividends" without first providing the state insurance commissioner with 30-days prior notice, during which time such commissioner may disapprove the payment. In September 1994, NFL paid to Westbridge an extraordinary dividend in the amount of $2.0 million. The Company does not believe that receipt of this dividend is an indication of, and the Company is not in a position to assess, the likelihood of obtaining approval for the payment of extraordinary dividends in the future. As of December 31, 1994, NFL had negative earned surplus as a result of historical losses. Regardless of this negative earned surplus, for the fore-seeable future, NFL must seek the approval of the Delaware insurance commissioner prior to making any dividend payments. As of December 31, 1994, AICT had the ability to pay to NFI, without prior regulatory approval, $641,000 in dividends during 1995, none of which has been paid. As of December 31, 1994, NFI has the ability to pay Westbridge, without prior regulatory approval, $1.1 million in 1995, none of which has been paid. Westbridge believes that its near-term cash requirements, including interest payments on the Senior Subordinated Notes and dividend payments on the Series A Preferred Stock will be met through operating cash flows, repayments of advances due from subsidiaries, payments relating to the surplus certificate and dividends received from the Insurance Subsidiaries. Insurance Subsidiaries The primary sources of cash for the insurance subsidiaries are premiums, income on investment assets and fee and service income. Additional cash is periodically provided from the sale of short- term investment assets and could, if necessary, be provided through the sale of long-term investment assets. The insurance subsidiaries' primary uses for cash are benefits and claims, commissions, general and administrative expenses and taxes. Consolidated A significant portion of the Company's premiums for the nine months ended September 30, 1995 related to policies obtained through closed blocks of insurance policies and through the Acquisition. Renewal premiums from these closed blocks of business will decline over time due to policy run-off resulting from lapses and cancellations. In order to offset such run-off, the Company must issue new policies through its existing general agency networks or through new agency networks, or acquire additional policies. Net cash used for operations aggregated $15.0 million in the first nine months of 1995 compared to $6.9 million for the first nine months of 1994. This increase was primarily a result of increases to deferred policy acquisition costs and receivables from agents resulting from higher levels of new business production compared to the same period in the prior year. Net cash provided by investing activities for the nine months ended September 30, 1995, totaled $8.1 million, compared to net cash used for investing activities of $16.7 million in the same 1994 period. This difference was primarily attri-butable to the investing activity associated with the purchase NFI and AICT in the 1994 period. Net cash provided by financing activities was $4.2 million for the nine months ended September 30, 1995, compared to $24.9 million for the prior year period. In 1995, a total of $29.1 million of cash was provided by the issuance of 1,500,000 shares of Common Stock, and $20.0 million principal amount of Senior Subordinated Notes, due 2002. Also in 1995, $25.0 million of cash was used to retire, prior to maturity, the 11.7% Senior Subordinated Debentures due 1996. In the 1994 first nine months, $20.0 million of cash was provided by the issuance of redeemable preferred stock, and $5.0 million of cash was provided from the sale by NFL, to a non- affiliated party, of $5.0 million principal amount of Senior Subordinated Debentures, which had previously been held by NFL in its investment portfolio. The Company believes that its near-term cash requirements will be met through a combination of operating and investing cash flows. The Company anticipates that its longer-term cash requirements for the operation of the business will also be met through a combination of operating and investing cash flows. The Company is pursuing the establishment of an agent balance financing facility which will be used to finance additional marketing growth. Additional capital may be necessary to consummate future growth through acquisitions. There can be no assurance that future opportunities for acquisitions will arise or that additional capital to consummate such acquisitions will be available. The Company had no significant high-yield, unrated or less than investment grade corporate debt securities in its investment portfolio as of September 30, 1995 and it is the Company's policy not to invest more than 5% of its holdings in such assets. Changes in interest rates may affect the market value of the Company's investment portfolio. Such changes should not impact the Company's ability to meet its future policyholder benefit obligations. PART II ITEM 1 - Legal Proceedings. (See Part I - Note 2 to the Consolidated Financial Statements) ITEM 6 - Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 27 - Financial Data Schedule, (included in electronic filing only). (b) Reports on Form 8-K No Form 8-K was required to be filed during the period. Form 10-Q Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTBRIDGE CAPITAL CORP. /s/ Patrick J. Mitchell Patrick J. Mitchell Vice President, Chief Financial Officer and Treasurer (On Behalf of the Registrant and as Principal Financial and Accounting Officer) Dated at Fort Worth, Texas November 14, 1995 -----END PRIVACY-ENHANCED MESSAGE-----