10-Q 1 f10q0600.txt 6/30/2000 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 June 30, 2000 Commission File Number 1-8538 ASCENT ASSURANCE, INC. ---------------------- (Exact name of Registrant as specified in its Charter) DELAWARE 73-1165000 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 110 West Seventh Street, Suite 300, Fort Worth, Texas 76102 ----------------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) 817-878-3300 (Registrant's Telephone Number, including Area Code) N/A (Former Name, Address and Former Fiscal Year, if changed since Last Report) 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, by check mark whether the Registrant has filed all reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO Common Stock - Par Value $.01 6,500,000 Shares Outstanding at May 12, 2000 ASCENT ASSURANCE, INC. INDEX TO FORM 10-Q
PART 1 - FINANCIAL INFORMATION Page No. ------------------------------ -------- Item 1 - Financial Statements Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 2 Ascent Assurance, Inc. Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2000 and 1999 and the Six Months Ended June 30, 2000 3 Westbridge Capital Corp. Condensed Consolidated Statement of Income for the Three Months ended March 31, 1999 4 Ascent Assurance, Inc. Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2000 and 1999 and the Six Months Ended June 30, 2000 5 Westbridge Capital Corp. Consolidated Statement of Comprehensive Income for the Three Months Ended March 31, 1999 6 Ascent Assurance, Inc. Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2000 and 1999 and the Six Months Ended June 30, 2000 7 Westbridge Capital Corp. Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1999 8 Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2000 9 Notes to Condensed Consolidated Financial Statements 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations General 13 Business Overview 13 Operating Results 14 Financial Condition 16 Liquidity, Capital Resources and Statutory Capital and Surplus 18 Forward-Looking Statements 20 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 22 Item 6 - Exhibits and Reports on Form 8-K 23
ASCENT ASSURANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2000 1999 (Unaudited) (Audited) --------------- ---------------- Assets (in thousands, except per share data) ------ Investments: Fixed Maturities: Available-for-sale, at market value (amortized cost $106,166 and $103,436) $ 99,708 $ 97,563 Equity securities, at market (cost $1,365) 1,200 1,313 Other investments 430 413 Short-term investments 14,798 10,904 --------------- ---------------- Total Investments 116,136 110,193 Cash 3,665 5,110 Accrued investment income 2,023 2,030 Receivables from agents, net of allowance for doubtful accounts of $5,809 and $6,060 7,827 7,062 Deferred policy acquisition costs 23,331 19,393 Deferred tax asset, net 8,035 7,086 Property and equipment, net of accumulated depreciation of $2,010 and $1,546 6,604 6,272 Other assets 7,373 6,544 --------------- ---------------- Total Assets $ 174,994 $ 163,690 =============== ================ Liabilities, Preferred Stock and Stockholders' Equity Liabilities: Policy liabilities and accruals: Future policy benefits $ 61,064 $ 57,119 Claim reserves 44,809 38,776 --------------- ---------------- Total policy liabilities and accruals 105,873 95,895 Accounts payable and other liabilities 14,495 13,592 Notes payable 8,770 7,162 --------------- ---------------- Total liabilities 129,138 116,649 --------------- ---------------- Redeemable Convertible Preferred Stock 25,130 23,257 --------------- ---------------- Stockholders' Equity: Common stock ($.01 par value, 30,000,000 shares authorized; 6,500,000 shares issued) 65 65 Capital in excess of par value 27,538 27,338 Accumulated other comprehensive loss, net of tax (4,371) (3,851) Retained (deficit) earnings (2,506) 232 --------------- ---------------- Total Stockholders' Equity 20,726 23,784 --------------- ---------------- Total Liabilities, Preferred Stock and Stockholders'Equity $ 174,994 $ 163,690 =============== ================
See the Notes to the Condensed Consolidated Financial Statements. ASCENT ASSURANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Six Months Ended Ended June 30, June 30, --------------------------- ------------ 2000 1999 2000 ----------- ----------- ------------ (in thousands, except per share data) Revenues: Premiums: First-year $ 7,230 $ 3,903 $ 13,939 Renewal 21,998 25,671 44,294 ----------- ----------- ------------ 29,228 29,574 58,233 Net investment income 2,266 2,333 4,344 Fee and service income 5,294 4,196 10,190 Net realized loss on investments (254) (63) (237) ----------- ----------- ------------ 36,534 36,040 72,530 ----------- ----------- ------------ Benefits, claims and expenses: Benefits and claims 22,962 21,733 46,644 Amortization of deferred policy acquisition costs 641 392 1,221 Commissions 4,409 4,937 9,380 General and administrative expenses 7,775 5,945 14,521 Taxes, licenses and fees 1,513 1,293 2,704 Interest expense on notes payable 152 119 236 ----------- ----------- ------------ 37,452 34,419 74,706 (Loss) income before income taxes (918) 1,621 (2,176) Federal income tax benefit (expense) 312 (567) 740 ----------- ----------- ------------ Net (loss) income $ (606) $ 1,054 $ (1,436) =========== =========== ============ Preferred stock dividends 651 647 1,302 ----------- ----------- ------------ (Loss)income applicable to common stockholders $ (1,257) $ 407 $ (2,738) =========== =========== ============ Basic and diluted (loss) earnings per common share $ (.19) $ .06 $ (.42) =========== =========== ============ Weighted average shares outstanding: Basic 6,500 6,500 6,500 =========== =========== ============ Diluted 6,500 6,530 6,500 =========== =========== ============
See the Notes to the Condensed Consolidated Financial Statements. WESTBRIDGE CAPITAL CORP. (now, Ascent Assurance, Inc.) CONDENSED CONSOLIDATED STATEMENT OF INCOME (Audited)
Three Months Ended March 31, 1999 ------------------ (in thousands, except per share data) Revenues: Premiums: First-year $ 3,121 Renewal 26,827 ---------------- Total Premiums 29,948 Net investment income 2,562 Fee and service income 4,263 Net realized gain on investments 41 ---------------- 36,814 ---------------- Benefits, claims and expenses: Benefits and claims 21,799 Amortization of deferred policy acquisition costs 286 Commissions 6,134 General and administrative expenses 6,635 Taxes, licenses and fees 1,059 Interest expense on notes payable 119 Interest expense on retired/canceled debt 507 ---------------- 36,539 ---------------- Income before income taxes 275 Federal income tax expense (67) ---------------- Net income $ 208 ================ Basic and diluted earnings per common share $ .03 ================ Basic and diluted weighted average shares outstanding 7,032 ================
See the Notes to the Condensed Consolidated Financial Statements. ASCENT ASSURANCE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Six Months Ended Ended June 30, June 30, ----------------------- ----------- 2000 1999 2000 ---------- ---------- ----------- (in thousands, except per share data) Net (loss) income $ (606) $ 1,054 $ (1,436) Other comprehensive (loss) income: Unrealized holding loss arising during period, net of tax (841) (2,013) (677) Reclassification adjustment of loss on sales of investments included in net income, net of tax 168 41 157 ---------- ---------- ----------- Comprehensive loss $ (1,279) $ (918) $ (1,956) ========== ========== ===========
See the Notes to the Condensed Consolidated Financial Statements. WESTBRIDGE CAPITAL CORP. (now, Ascent Assurance, Inc.) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Audited)
Three Months Ended March 31, 1999 ------------------- (in thousands) Net income $ 208 Other comprehensive loss: Unrealized holding loss arising during period, net of tax (1,959) Reclassification adjustment of gain on sales of investments included in net income, net of tax (27) ------------------- Comprehensive loss $ (1,778) ===================
See the Notes to the Condensed Consolidated Financial Statements. ASCENT ASSURANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Six Months Ended Ended June 30, June 30, ------------------------- ----------- 2000 1999 2000 ---------- ---------- ----------- (in thousands, except per share data) Cash Flow From Operating Activities: Net (loss) income $ (606) $ 1,054 $ (1,436) Adjustments to reconcile net income to cash provided by (used for) operating activities (Increase) decrease in accrued investment income (138) 13 7 Amortization of deferred policy acquisition costs 641 864 1,221 (Increase) decrease in receivables from agents (1,138) 1,244 (765) Addition to deferred policy acquisition costs (2,870) (2,208) (5,159) Decrease (increase) in other assets 187 1,053 (829) Increase (decrease) in policy liabilities and accruals 7,193 (1,660) 9,978 Increase (decrease) in accounts payable and other liabilities 3,540 (2,552) 903 Increase in deferred income taxes, net (665) (1,027) (949) Other, net 449 1,405 2,001 ---------- ---------- ----------- Net Cash Provided By (Used For) Operating Activities 6,593 (1,814) 4,972 ---------- ---------- ----------- Cash Flow From Investing Activities: Proceeds from investments sold: Fixed maturities, called or matured 1,125 807 1,998 Fixed maturities, sold 2,808 6,563 3,714 Other investments, sold or matured - 58 3,041 Cost of investments acquired (12,977) (2,927) (15,958) Property and equipment purchased (285) (1,163) (820) ---------- ---------- ----------- Net Cash (Used For) Provided By Investing Activities (9,329) 3,338 (8,025) ---------- ---------- ----------- Cash Flow From Financing Activities: Issuance of notes payable 1,146 1,408 1,888 Repayment of notes payable (140) (2,987) (280) ---------- ---------- ----------- Net Cash Provided By Financing Activities 1,006 (1,579) 1,608 ---------- ---------- ----------- Decrease In Cash During Period (1,730) (55) (1,445) Cash At Beginning Of Period 5,395 2,210 5,110 ---------- ---------- ----------- Cash At End Of Period $ 3,665 $ 2,155 $ 3,665 ========== ========== ===========
See the Notes to the Condensed Consolidated Financial Statements. WESTBRIDGE CAPITAL CORP. (now, Ascent Assurance, Inc.) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Audited)
Three Months Ended March 31, 1999 ----------------- (in thousands) Cash Flow From Operating Activities: Net income $ 208 Adjustments to reconcile net income to cash provided by (used for)operating activities: Amortization of deferred policy acquisition costs 286 Decrease in receivables from agents 1,678 Addition to deferred policy acquisition costs (1,148) Increase in other assets (1,007) Decrease in policy liabilities and accruals (2,181) Increase in accounts payable and other liabilities 4,428 Increase in deferred income taxes, net (1,070) Other, net 1,308 ----------------- Net Cash Provided By Operating Activities 2,502 ----------------- Cash Flow From Investing Activities: Proceeds from investments sold: Fixed maturities, called or matured 2,215 Fixed maturities, sold 4,904 Other investments, sold or matured 139 Cost of investments acquired (5,851) Other (873) ----------------- Net Cash Provided By Investing Activities 534 ----------------- Cash Flow From Financing Activities: Retirement of senior subordinated debentures (15,167) Issuance of Preferred Stock 15,167 Issuance of notes payable 911 Repayment of notes payable (2,015) ----------------- Net Cash Used For Financing Activities (1,104) ----------------- Increase In Cash During Period 1,932 Cash At Beginning Of Period 278 ----------------- Cash At End Of Period $ 2,210 =================
See the Notes to the Condensed Consolidated Financial Statements. ASCENT ASSURANCE, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (in thousands, except per share data)
Accumulated Capital Other Retained Total Common Stock in Excess Comprehensive (Deficit) Stockholders' Shares Amount of Par Value Loss Earnings Equity Balance at December 31, 1999 6,500,000 $ 65 $ 27,338 $ (3,851) $ 232 $ 23,784 Net loss (1,436) (1,436) Preferred Stock dividend (1,302) (1,302) Other comprehensive loss, net of tax (520) (520) Amortization of unearned compensation 200 200 ----------- ------- ------------- -------------- ----------- ------------ Balance at June 30, 2000 6,500,000 $ 65 $ 27,538 $ (4,371) $ (2,506) $ 20,726 =========== ======= ============= ============== =========== ============
See the Notes to the Condensed Consolidated Financial Statements. ASCENT ASSURANCE, INC. (formerly, Westbridge Capital Corp.) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - DESCRIPTION OF BUSINESS Ascent Assurance, Inc. ("Ascent"), a Delaware company incorporated in 1982, is an insurance holding company engaged in the development, marketing, underwriting and administration of medical expense and supplemental health insurance products, primarily to self-employed individuals and small business owners. Ascent adopted its corporate name on March 24, 1999, the date its predecessor, Westbridge Capital Corp. ("Westbridge"), emerged from Chapter 11 reorganization proceedings (see Note 6). References herein to the "Company" shall mean for all periods on or prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on or after the close of business on March 31, 1999, Ascent and its subsidiaries. The Company's revenues result primarily from premiums and fees from the insurance products sold by its wholly owned subsidiaries National Foundation Life Insurance Company ("NFL"), Freedom Life Insurance Company of America ("FLICA"), National Financial Insurance Company ("NFIC") and American Insurance Company of Texas ("AICT", and together with NFL, NFIC and FLICA, collectively, the "Insurance Subsidiaries") and marketed by NationalCare(R) Marketing, Inc. ("NCM"), also a wholly owned subsidiary. To a lesser extent the Company derives revenue from (i) telemarketing services, (ii) printing services, and (iii) renewal commissions received by the Company for sales of insurance products underwritten primarily by unaffiliated managed care organizations (such sales have been significantly curtailed). NOTE 2 - ACCOUNTING PRINCIPLES Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and footnotes required by accounting principles generally accepted in the United States ("GAAP") for complete financial statements. Financial statements prepared in accordance with GAAP require the use of management estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to 1999 amounts in order to conform to the 2000 financial statement presentation. 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, 1999. Fresh Start Adjustments. In accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," Ascent adopted fresh start reporting effective March 31, 1999. Fresh start reporting requires the new reporting entity created on the reorganization effective date to determine a reorganization book value. The reorganization book value is allocated to the fair value of assets and liabilities similar to the purchase method of accounting under APB 16. As a result of the application of fresh start reporting, the consolidated financial statements of Ascent issued subsequent to the adoption of fresh start reporting will not be comparable with those of Westbridge prepared before adoption of fresh start reporting, including the historical consolidated financial statements of Westbridge in this quarterly report. NOTE 3 - EARNINGS PER SHARE ("EPS") Under GAAP there are two measures of Earnings Per Share: "Basic Earnings Per Share" and "Diluted Earnings Per Share". Basic EPS is computed by dividing income applicable to common shareholders by the weighted average number of common shares outstanding ("average shares") during the period. To obtain net income applicable to common shareholders for EPS computations, Preferred Stock dividends are deducted from net income. EPS for the three months ended March 31, 1999 is computed based upon the capital structure of Westbridge prior to the Effective Date of the Plan. As the accrual of Preferred Stock dividends was suspended on September 16, 1998, no Preferred Stock dividends were deducted in the computation of EPS for the three months ended March 31, 1999. Diluted EPS reflects the potential dilution of average shares that could occur if securities or other contracts to issue common stock were converted or exercised. For the periods shown below, the impact of common stock options and convertible notes were anti-dilutive and were not included in the calculation of EPS. The following table reflects the calculation of basic and diluted EPS:
Ascent Westbridge -------------------------------------- ------------ Three Months Six Months Three Months Ended Ended Ended June 30, June 30, March 31, ------------------------ ---------- ------------ (amounts in 000's, except per share 2000 1999 2000 1999 amounts) Net (loss) income $ (606) $ 1,054 $ (1,436) $ 208 Preferred Stock dividends (651) (647) (1,302) - ----------- ----------- ---------- ------------ (Loss)income applicable to common shareholders $ (1,257) $ 407 $ (2,738) $ 208 =========== =========== ========== ============ Weighted average shares outstanding: Basic 6,500 6,500 6,500 7,032 Diluted 6.500 6,530 6,500 7,032 Basic and diluted (loss) earnings per share $ (.19) $ .06 $ (.42) $ .03 =========== =========== ========== ============
NOTE 4 - PREFERRED STOCK Effective January 31, 2000, the Company declared and paid the contractual dividend of $1,873,965 on its Redeemable Convertible Preferred Stock ("Preferred Stock"), which was accrued at December 31, 1999. The dividend was paid through the issuance of 1,873 additional shares of Preferred Stock and a $965 distribution of cash. Dividends on the Company's Preferred Stock are payable in cash or through issuance of additional shares of Preferred Stock, at the Company's option. NOTE 5 - COMMITMENTS AND CONTINGENCIES In the normal course of its business operations, the Company is involved in various claims and other business related disputes. In the opinion of management, the Company is not a party to any pending litigation the disposition of which would have a material adverse effect on the Company's business, financial position or its results of operations.disposition of which would have a material adverse effect on the Company's business, financial position or its results of operations. NOTE 6 - REORGANIZATION EFFECTIVE MARCH 24, 1999 On September 16, 1998, Westbridge commenced its reorganization by filing a voluntary petition for relief under Chapter 11, Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), along with a disclosure statement (as amended, the "Disclosure Statement") and a proposed plan of reorganization (as amended, the "Plan"). The filing of the Disclosure Statement and Plan culminated months of negotiations between Westbridge and an ad hoc committee (the "Creditors' Committee") of holders of its 11% Senior Subordinated Notes due 2002 (the "Senior Notes") and its 7-1/2% Convertible Subordinated Notes due 2004 (the "Convertible Notes"). The Disclosure Statement was approved by entry of an order by the Bankruptcy Court on October 30, 1998. Following the approval of the Plan by the holders of allowed claims and equity interests, the Bankruptcy Court confirmed the Plan on December 17, 1998. The Plan became effective March 24, 1999 (the "Effective Date"). On the Effective Date, Westbridge's certificate of incorporation and by-laws were amended and restated in their entirety and pursuant thereto, Westbridge changed its corporate name to "Ascent Assurance, Inc.". The Plan provided for the recapitalization of certain old debt and equity interests in Westbridge and the issuance of new equity securities and warrants. Additional information regarding the reorganization is disclosed in the Company's 1999 Report on Form 10-K. NOTE 7 - IMPLEMENTATION OF NEW ACCOUNTING PRONOUNCEMENTS In 1998, the National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles guidance, which will replace the current Accounting Practices and Procedures manual as the NAIC's primary guidance on statutory accounting. The Codification provides guidance for areas where statutory accounting has been silent and changes current statutory accounting in certain areas. The Insurance Departments of the States of Domicile of the Company's Insurance Subsidiaries have adopted the Codification effective January 1, 2001. The Company does not expect Codification guidance to materially impact statutory surplus. In June, 1998 the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement, as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement 133" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133," is effective for fiscal years beginning after June 15, 2000. The pronouncement established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. As the Company has not participated in derivative or hedging activities, the Company's financial statements are not affected by SFAS 133. ASCENT ASSURANCE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Ascent Assurance, Inc. ("Ascent"), adopted its corporate name on March 24, 1999, the date its predecessor, Westbridge Capital Corp. ("Westbridge") emerged from Chapter 11 reorganization proceedings. References herein to the "Company" shall mean for all periods on or prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on or after the close of business on March 31, 1999, Ascent and its subsidiaries. For additional information regarding the reorganization and adoption of fresh start accounting, see Notes 2 and 6 to the Condensed Consolidated Financial Statements included at Part 1, Item I. The following discussion provides management's assessment of financial condition at June 30, 2000 as compared to December 31, 1999 and results of operations for the three and six months ended June 30, 2000 as compared to the comparable 1999 periods for the Company. This discussion updates the "Management's Discussion and Analysis of Financial condition and Results of Operations" in the Company's 1999 Report on Form 10-K and should be read in conjunction therewith. Statements contained in this analysis and elsewhere in this document that are not based on historical information are forward-looking statements and are based on management's projections, estimates and assumptions. Management cautions readers regarding its forward-looking statements (see "Forward-Looking Statements"). BUSINESS OVERVIEW The Company's revenues result primarily from premiums and fees from the insurance products sold by its wholly owned subsidiaries National Foundation Life Insurance Company ("NFL"), Freedom Life Insurance Company of America ("FLICA"), National Financial Insurance Company ("NFIC") and American Insurance Company of Texas ("AICT", and together with NFL, NFIC and FLICA, collectively, the "Insurance Subsidiaries") and marketed by NationalCare(R) Marketing, Inc. ("NCM"), also a wholly owned subsidiary. To a lesser extent the Company derives revenue from (i) telemarketing services, (ii) printing services, and (iii) renewal commissions received by the Company for sales of insurance products underwritten primarily by unaffiliated managed care organizations (such sales have been significantly curtailed). The product lines currently marketed and underwritten by the Company's Insurance Subsidiaries are Medical Expense products and Specified Disease products. Medical Expense products are generally designed to reimburse insureds for eligible expenses incurred for hospital confinement, surgical expenses, physician services, outpatient services and the cost of medicines. Specified Disease products include indemnity policies for hospital confinement and convalescent care for treatment of specified diseases and "event specific" policies, which provide fixed benefits or lump sum payments upon diagnoses of certain types of internal cancer or other catastrophic diseases. Historically, the Company's Insurance Subsidiaries have also underwritten a significant amount of Medicare Supplement products. The underwriting of Medicare Supplement products was curtailed due to the relatively low margins for these products. OPERATING RESULTS Results of operations for Ascent are reported for the three months ended June 30, 2000 and 1999 and for the six months ended June 30, 2000. Results for the six months ended June 30, 1999 are reported on a pro forma basis as if Ascent and Westbridge adopted fresh start accounting on January 1, 1999 and operated as a single entity. (In thousands except insurance operating ratios.)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ -------------------------------- 2000 1999 2000 1999 ------------- ------------ -------------- --------------- Ascent Ascent Ascent Proforma Ascent Premiums $ 29,228 $ 29,574 $ 58,233 $ 59,522 Other 810 325 1,495 549 ------------- ------------ -------------- --------------- Total insurance operating revenue 30,038 29,899 59,728 60,071 Benefits and claims 22,962 21,733 46,644 43,532 Commissions 2,838 2,961 5,948 6,483 Amortization of deferred policy acquisition costs 641 392 1,221 678 General and administrative expense 5,843 4,662 10,965 10,141 Taxes licenses and fees 1,269 1,293 2,460 2,352 ------------- ------------ -------------- --------------- Total insurance operating expenses 33,553 31,041 67,238 63,186 ------------- ------------ -------------- --------------- Insurance operating results (3,515) (1,142) (7,510) (3,115) ------------- ------------ -------------- --------------- Fee and service income 4,484 3,871 8,695 7,910 Fee and service expenses (3,747) (3,259) (7,232) (7,027) ------------- ------------ -------------- --------------- Fee and service results 737 612 1,463 883 ------------- ------------ -------------- --------------- Net investment income 2,266 2,333 4,344 4,895 Net realized loss on investments (254) (63) (237) (22) Interest expense on notes payable (152) (119) (236) (238) ------------- ------------ -------------- --------------- (Loss) income before income taxes (918) 1,621 (2,176) 2,403 Income tax benefit (expense) 312 (567) 740 (841) ------------- ------------ -------------- --------------- Net (loss) income $ (606) $ 1,054 $ (1,436) $ 1,562 ============= ============ ============== =============== Insurance operating ratios* Benefits and claims 78.6% 73.5% 80.1% 73.1% Commissions 9.7% 10.0% 10.2% 10.9% Amortization of deferred policy acquisition costs 2.2% 1.3% 2.1% 1.1% General and administrative expense 19.5% 15.6% 18.4% 16.9% Taxes, licenses and fees 4.3% 4.4% 4.2% 4.0%
*Ratios are calculated as a percent of premium with the exception of the general and administrative expense ratio which is calculated as a percent of total insurance operating revenue. Overview. For the second quarter of 2000, the Company incurred a loss before income taxes of $0.9 million compared to $1.6 million of income before income taxes for the second quarter of 1999. The unfavorable trend in pre-tax income was principally attributable to the 5.1 percentage point increase in the benefits and claims ratio and a 3.9 percentage point increase in general and administrative expenses which reduced insurance operating results and pre-tax income by $1.5 million and $1.2 million, respectively. For the first six months of 2000, the pre-tax loss was $2.2 million, compared to $2.4 million of pre-tax income for the six months ended June 30, 1999. A 7.0 percentage point increase in the benefits and claims ratio was the principal contributor to the decline in pre-tax income. The following narratives discuss the principal components of insurance operating results and net investment income. Premiums. Premium revenue, in thousands, for each major product line is set forth below:
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Ascent Ascent Ascent Proforma Ascent Medical Expense: First-year $ 6,629 $ 3,566 $ 12,847 $ 6,363 Renewal 8,514 10,316 17,308 21,601 ---------- ---------- ---------- ---------- Subtotal 15,143 13,882 30,155 27,964 ---------- ---------- ---------- ---------- Specified Disease: First-year 352 340 726 637 Renewal 6,468 7,067 13,294 14,335 ---------- ---------- ---------- ---------- Subtotal 6,820 7,407 14,020 14,972 ---------- ---------- ---------- ---------- Medicare Supplement: First-year - - - 22 Renewal 6,574 8,152 13,074 16,291 ---------- ---------- ---------- ---------- Subtotal 6,574 8,152 13,074 16,313 ---------- ---------- ---------- ---------- Other 691 133 984 273 ---------- ---------- ---------- ---------- Total Premium Revenue $ 29,228 $ 29,574 $ 58,233 $ 59,522 ========== ========== ========== ==========
Total premiums decreased slightly by $0.3 million, or 1%, in the second quarter of 2000 as compared to the second quarter of 1999 as new business production almost fully offset the expected decline in renewal premiums from older, closed blocks of business. The Company is principally marketing medical expense products. No medicare supplement products are being marketed. Benefits and Claims. Benefits and claims are comprised of (1) claims paid, (2) changes in claim reserves for claims incurred (whether or not reported), and (3) changes in future policy benefit reserves. The increases in the ratio of benefits and claims to premiums for the second quarter of 2000 and the first six months of 2000 compared to the comparable 1999 periods were due primarily to unfavorable paid claims experience in the Medical Expense line of business for both first-year and renewal business. The Company continues to pursue initiatives to reduce its benefits and claims to premium ratio including increased production of profitable products and active premium rate increase management. General and Administrative expense. For the second quarter of 2000 and the six months ended June 30, 2000, general and administrative expenses increased over the comparable 1999 period due to expenses related to the implementation in May, 2000 of the Company's new policy administration and claims data processing systems and increased new business production. Net investment income. For the six months ended June 30, 2000, net investment income decreased $0.6 million, or 11%, as compared to the same period in 1999 primarily due to a 10% decrease in average invested assets. FINANCIAL CONDITION Investments. The following table summarizes the Company's fixed maturity securities, excluding short-term investments and certificates of deposit. All of the Company's fixed maturity securities are classified as available-for-sale and are carried at estimated market value. Estimated market value represents the closing sales prices of marketable securities. Investments in the debt securities of corporations are principally in publicly traded bonds.
June 30, 2000 December 31, 1999 -------------------- -------------------- Market Market Fixed Maturity Securities Value % Value % --------------------------------------------- ---------- ------- ---------- ------- (in thousands) (in thousands) U.S. Government and governmental agencies and authorities (except mortgage-backed) $ 9,522 9.5 $ 10,688 11.0 Finance 23,321 23.4 23,950 24.5 Public utilities 6,353 6.4 9,128 9.4 Mortgage-backed 13,548 13.6 7,725 7.9 States, municipalities and political subdivisions 1,877 1.9 1,867 1.9 All other corporate bonds 45,087 45.2 44,205 45.3 ---------- ------- ---------- ------- Total fixed maturity securities $ 99,708 100.0 $ 97,563 100.0 ========== ======= ========== =======
The following table indicates by rating the composition of the Company's fixed maturity securities portfolio, excluding short-term investments and certificates of deposit. Ratings are the lower of those assigned by Standard & Poor's and Moody's, when available, and are shown in the table using the Standard & Poor's rating scale. Unrated securities are assigned ratings based on the applicable NAIC's designation or the rating assigned to comparable debt outstanding of the same issuer. NAIC 1 fixed maturity securities have been classified as "A" and NAIC 2 fixed maturity securities have been classified as "BBB".
June 30, 2000 December 31, 1999 -------------------- -------------------- Composition of Fixed Maturity Market Market Securities by Rating Value % Value % --------------------------------------------- ---------- ------- ---------- ------- (in thousands) (in thousands) Ratings ------- Investment grade: U.S. Government and agencies $ 23,070 23.1 $ 18,414 18.9 AAA 2,029 2.0 1,865 1.9 AA 9,090 9.1 10,277 10.5 A 36,319 36.5 35,823 36.7 BBB 27,883 28.0 29,732 30.5 Non-Investment grade: BB 1,006 1.0 1,133 1.2 B and below 311 0.3 319 0.3 ---------- ------- ---------- ------- Total fixed maturity securities $ 99,708 100.0 $ 97,563 100.0 ========== ======= ========== =======
The scheduled contractual maturities of the Company's fixed maturity securities, excluding short-term investments and certificates of deposit, at June 30, 2000 and December 31, 1999 are shown in the table below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
June 30, 2000 December 31, 1999 -------------------- -------------------- Composition of Fixed Maturity Market Market Securities by Maturity Value % Value % --------------------------------------------- ---------- ------- ---------- ------- (in thousands) (in thousands) Scheduled Maturity Due in one year or less $ 4,790 4.8 $ 4,012 4.1 Due after one year through five years 26,963 27.0 33,311 34.2 Due after five years through ten years 29,120 29.2 26,367 27.0 Due after ten years 25,287 25.4 26,148 26.8 Mortgage-backed securities 13,548 13.6 7,725 7.9 ---------- ------- ---------- ------- Total fixed maturity securities $ 99,708 100.0 $ 97,563 100.0 ========== ======= ========== =======
Claim Reserves. Claim reserves are established by the Company for benefit payments which have already been incurred by the policyholder but which have not been paid by the Company. Claim reserves totaled $44.8 million at June 30, 2000 as compared to $38.8 million at December 31, 1999. The process of estimating claim reserves involves the active participation of experienced actuarial consultants with input from the underwriting, claims, and finance departments. The inherent uncertainty in estimating claim reserves is increased when significant changes occur. Examples of such changes include: (1) changes in economic conditions; (2) changes in state or federal laws and regulations, particularly insurance reform measures; (3) changes in production sources for existing lines of business; (4) writings of significant blocks of new business and (5) significant changes in claims payment patterns. Because claim reserves are estimates, management monitors reserve adequacy over time, evaluating new information as it becomes available and adjusting claim reserves as necessary. Such adjustments are reflected in current operations. Management considers many factors when setting reserves including: (1) historical trends; (2) current legal interpretations of coverage and liability; (3) loss payments and pending levels of unpaid claims; and (4) product mix. Based on these considerations, management believes that adequate provision has been made for the Company's claim reserves. Actual claims paid may deviate, perhaps substantially, from such reserves. Future Policy Benefit Reserves. Future policy benefit reserves are established by the Company for benefit payments that have not been incurred but which are estimated to be incurred in the future. Future policy benefit reserves totaled $61.1 million at June 30, 2000 as compared to $57.1 million at December 31, 1999. Future policy benefit reserves are calculated according to the net level premium reserve method and are equal to the discounted present value of the Company's expected future policyholder benefits minus the discounted present value of its expected future net premiums. These present value determinations are based upon assumed fixed investment yields, the age of the insured(s) at the time of policy issuance, expected morbidity and persistency rates, and expected future policyholder benefits. In determining the morbidity, persistency rate, claim cost and other assumptions used in determining the Company's future policy benefit reserves, the Company relies primarily upon its own benefit payment history and upon information developed in conjunction with actuarial consultants and industry data. The Company's persistency rates have a direct impact upon its policy benefit reserves because the determinations for this reserve are, in part, a function of the number of policies in force and expected to remain in force to maturity. If persistency is higher or lower than expected, future policyholder benefits will also be higher or lower because of the different than expected number of policies in force, and the policy benefit reserves will be increased or decreased accordingly. In accordance with GAAP, the Company's actuarial assumptions are generally fixed, and absent materially adverse benefit experience, they are not generally adjusted. The Company monitors the adequacy of its policy benefit reserves on an ongoing basis by periodically analyzing the accuracy of its actuarial assumptions. The adequacy of the Company's policy benefit reserves may also be impacted by the development of new medicines and treatment procedures which may alter the incidence rates of illness and the treatment methods for illness and accident (such as out-patient versus in-patient care) or prolong life expectancy. Changes in coverage provided by major medical insurers or government plans may also affect the adequacy of the Company's reserves if, for example, such developments had the effect of increasing or decreasing the incidence rate and per claim costs of occurrences against which the Company insures. An increase in either the incidence rate or the per claim costs of such occurrences could result in the Company needing to post additional reserves, which could have a material adverse effect upon its business, financial condition or results of operations. LIQUIDITY, CAPITAL RESOURCES AND STATUTORY CAPITAL AND SURPLUS Ascent. Ascent's principal assets consist of the capital stock of its operating subsidiaries and invested assets. Accordingly, Ascent's sources of funds are primarily comprised of dividends from its operating subsidiaries, advances and management fees from non-insurance subsidiaries, and tax payments under a tax sharing agreement among Ascent and its subsidiaries. The Company's principal uses of cash are for capital contributions to its Insurance Subsidiaries and general and administrative expenses. The Company funded capital contributions of $0.8 million in the second quarter of 2000 and $2.0 million in the first quarter of 2000 to its Insurance Subsidiaries. The Company expects to make additional contributions to its Insurance Subsidiaries to support planned growth in 2000 and 2001. Continued adverse paid claims experience in Medical Expense products could have a material adverse impact on the Company's ability to provide sufficient capital contributions to its Insurance Subsidiaries to support planned growth. As of June 30, 2000, Ascent held approximately $6.2 million in unrestricted cash and invested assets as compared to $8.7 million at December 31, 1999. Dividends on Ascent's Redeemable Convertible Preferred Stock ("Preferred Stock") may be paid in cash or by issuance of additional shares of Preferred Stock, at the Company's option. Preferred Stock dividends for 1999 were paid in January 2000 through the issuance of 1,873 additional shares of Preferred Stock and a $965 distribution of cash. Dividends paid by the Insurance Subsidiaries are determined by and subject to the regulations of the insurance laws and practices of the insurance departments of their respective state of domicile. NFL, a Delaware domestic company, is precluded from paying dividends in 2000 without the prior approval of the Delaware Insurance Commissioner, as its earned surplus is negative. Further, NFL has agreed to obtain prior approval for any future dividends. NFIC and AICT, Texas domestic companies, are also precluded from paying dividends during 2000 without the prior approval of the Texas Insurance Commissioner as both companies' earned surplus is negative. FLICA, a Mississippi domestic company, is precluded from paying dividends during 2000 without the prior approval of the Mississippi Insurance Commissioner as it recorded a net loss from operations for the year ended December 31, 1999. Insurance Subsidiaries. The primary sources of cash for the Insurance Subsidiaries are premiums and income on invested assets. Additional cash is periodically provided by capital contributions from the Company (see "Ascent" discussion above) and from the sale of short-term investments and could, if necessary, be provided through the sale of long-term investments and blocks of business. The Insurance Subsidiaries' primary uses for cash are benefits and claims, commissions, general and administrative expenses, and taxes, licenses and fees. Inflation will affect claim costs on the Company's Medicare Supplement and Medical Expense products. Costs associated with a hospital stay and the amounts reimbursed by the Medicare program are each determined, in part, based on the rate of inflation. If hospital and other medical costs that are reimbursed by the Medicare program increase, claim costs on the Medicare Supplement products will increase. Similarly, as the hospital and other medical costs increase, claim costs on the Medical Expense products will increase. The Company has somewhat mitigated its exposure to inflation in incorporating certain limitations on the maximum benefits which may be paid under its policies and by filing for premium rate increases as necessary. Consolidated. The Company's consolidated net cash provided by (used for) operations totaled $6.6 million and $(1.8) million for the second quarter of 2000 and 1999, respectively. The $8.4 million increase in cash flow from operations was primarily attributable to a decrease in the benefits and claims paid during the second quarter of 2000, which resulted primarily from: (1) a loss of five production days due to the March 28, 2000 tornado in downtown Fort Worth where the Company's administrative offices are located and (2) a decrease in claims paid per examiner due to the challenges inherent with the introduction of the new data processing system for claim payments. The Company expects to resume normal claims processing levels by the end of the third quarter of 2000. Net cash (used for) provided by investing activities for the second quarter of 2000 and 1999 totaled $(9.3) million and $3.3 million, respectively. The increase in net cash used for investment activities for 2000 was primarily for the purchase of fixed maturity and short-term investments. Net cash provided by (used for) financing activities totaled $1.0 million and $(1.6) million for the second quarter of 2000 and 1999, respectively. Financing activities during the second quarter of 2000 include $1.1 million in borrowings related to the Company's receivable financing program, and $0.1 million in repayments related to the term loan facility. Financing activities for the same period in 1999 relate primarily to $3.0 million of repayments and $1.4 million of new borrowings associated with the Company's receivables financing program. In the ordinary course of business, the Company advances commissions on policies written by its general agencies and their agents. The Company finances the majority of its obligations to make commission advances through Ascent Funding, Inc. ("AFI"), an indirect wholly owned subsidiary of Ascent which has entered into a Credit Agreement (the "Credit Agreement") with LaSalle Bank N. A. ("LaSalle"). This Credit Agreement, as amended, provides AFI with a $7.5 million three-year revolving loan facility which expires on June 5, 2001. The proceeds of this facility are used to purchase agent advance receivables from the Insurance Subsidiaries and certain affiliated marketing companies. At June 30, 2000, approximately $5.7 million was outstanding under the Credit Agreement. AFI's obligations under the Credit Agreement are secured by liens upon substantially all of AFI's assets. Furthermore, Ascent has guaranteed AFI's obligations under the Credit Agreement, and has pledged all of the issued and outstanding shares of the capital stock of AFI, NFL and NFIC as collateral for that guaranty (the "Guaranty Agreement"). As of August 14, 2000, there were no events of default under the Credit or Guaranty Agreements. In July 1999, Ascent Management, Inc. ("AMI") entered into a $3.3 million term loan facility with LaSalle, proceeds of which were used to fund system replacement costs. Advances under the term loan facility are secured by substantially all of AMI's assets and the Guaranty Agreement. Under the terms of the loan, principal is payable in 60 equal monthly installments beginning January 31, 2000. At June 30, 2000, approximately $3.0 million was outstanding under the term loan facility. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. The preceding statements and certain other statements contained in Part 1, Item 1 - Financial Statements and Part 1, Item 2 - Management's Discussion and Analysis of Results of Operation and Financial Condition, are forward-looking statements. These forward-looking statements are based on the intent, belief or current expectations of the Company and members of its senior management team. While the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Report include, but are not limited to: * the effect of economic and market conditions * further adverse developments with respect to the Company's liquidity position or operations of the Company's various businesses * actions that may be taken by insurance regulatory authorities * adverse developments in the timing or results of the Company's current strategic business plan * the difficulty in controlling health care costs and integrating new operations * the ability of the Company to realize anticipated general and administrative expense savings and overhead reductions from system replacement initiatives * the ability of management to return the Company's operations to profitability, and * the possible negative effects of prospective health care reform. Additional factors that would cause actual results to differ materially from those contemplated within this report can also be found in the Company's reports to the Securities and Exchange Commission ("SEC") on Form 10-K for the Year Ended December 31, 1999 and Form 10-Q for the Three Months Ended March 31, 2000. Subsequent written or oral statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this Report and those in the Company's reports previously filed with the SEC. Copies of these filings may be obtained by contacting the Company or the SEC. ASCENT ASSURANCE, INC. PART II ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 11, 2000, Ascent Assurance, Inc. held its annual meeting of shareholders. At the meeting, the shareholders elected two directors of the Company and ratified the selection of PricewaterhouseCoopers LLP as the Company's independent accountants. The shareholders elected Richard H. Hershman and Robert A. Peiser to serve on the Company's Board of Directors for a three year term expiring in 2003. The following table reflects the votes cast at the annual meeting: For Withheld ---------------- ---------------- Richard H. Hershman 6,293,376 15,347 Robert A. Peiser 6,293,376 15,347 Total Votes Cast 6,308,723 Directors whose terms continued and the years in which their term expires are as follows: Director Term Expiration ---------------------------- ---------------------- Patrick J. Mitchell 2001 James K. Steen 2001 Paul E. Suckow 2001 John H. Gutfreund 2002 Michael A. Kramer 2002 The Company's Board of Directors selected the firm of PricewaterhouseCoopers LLP as the independent accountants of the Company for 2000. At the annual meeting, the shareholders ratified the Board of Director's selection. Out of the total votes cast; 6,293,775 voted for; 14,776 voted against; and 172 abstained from voting. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed herewith. Exhibits incorporated by reference are indicated in the parentheses following the description. 2.1 First Amended Plan of Reorganization of Westbridge Capital Corp. Under Chapter 11 of the Bankruptcy Code, dated as of October 30, 1998 (incorporated by reference to Exhibit 2 to the Company's Form 8-K filed on September 21, 1998). 2.2 Amended Disclosure Schedule Accompanying the First Amended Plan of Reorganization of Westbridge Capital Corp. under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2 to the Company's Form 8-K filed on September 21, 1998). 2.3 Findings of Fact, Conclusions of Law, and Order confirming the First Amended Plan of Reorganization of Westbridge Capital Corp. dated October 30, 1998, as modified (incorporated by reference to Exhibit 2 to the Company's Form 8-K filed on December 29, 1998). 3.1 Second Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on March 24, 1999 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-A filed on March 25, 1999). 3.2 Amended and Restated By-Laws of the Company, effective as of March 24, 1999 (incorporated by reference to Exhibit 3.2 to the Company's Form 8-A filed on March 25, 1999). 3.3 Amendment to the By-Laws of the Company, effective as of April 5, 2000. 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Form 8-A filed on March 25, 1999). 4.2 Form of Warrant Certificate, included in the Form of Warrant Agreement (incorporated by reference to Exhibit 4.2 to the Company's Form 8-A filed on March 25, 1999). 4.3 Form of Warrant Agreement dated as of March 24, 1999, between the Company and LaSalle National Bank, as warrant agent (incorporated by reference to Exhibit 4.3 to the Company's Form 8-A filed on March 25, 1999). 4.4 Form of Preferred Stock Certificate (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998). 10.1 First Amendment to Guaranty Agreement dated as of March 24, 1999 between Westbridge Capital Corp. in favor of LaSalle National Bank (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998). 10.2 Registration Rights Agreement dated as of March 24, 1999 between the Company and Special Situations Holdings, Inc. - Westbridge (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998). 10.3 1999 Stock Option Plan dated as of March 24, 1999 (incorporated by reference to the Company's Schedule 14A filed with the Commission on April 30, 1999) 10.4 Installment Note Agreement dated July 20, 1999 between Ascent Management, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.5 Second Amendment to Credit Agreement dated August 12, 1999 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.6 Second Amendment to Guaranty Agreement dated July 20, 1999 between Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.7 Third Amendment to Guaranty Agreement dated April 17, 2000 between Ascent Assurance, Inc. and LaSalle Bank National Association. 10.8 Extension of Employment Agreement, dated as of September 15, 1998, by and among the Company, Westbridge Management Corp. and Mr. Patrick J. Mitchell. 10.9 Extension of Employment Agreement, dated as of September 15, 1998, by and among the Company, Westbridge Management Corp. and Mr. Patrick H. O'Neill. 27.1 Financial Data Schedule (included in electronic filing only). (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 2000. Form 10-Q 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. ASCENT ASSURANCE, INC. /s/ Cynthia B. Koenig ---------------------- Cynthia B. Koenig Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Dated at Fort Worth, Texas August 14, 2000