-----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, FowmcU0qFp8cOGYzCiIlpwnoPheJzbIKDK92EpM2I9pAz1NJDveKs1n2+5Ry+2L6 NNUm0mKLCtPWFdNazGtjvw== 0000780118-95-000005.txt : 19951130 0000780118-95-000005.hdr.sgml : 19951130 ACCESSION NUMBER: 0000780118-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMWEST INSURANCE GROUP INC CENTRAL INDEX KEY: 0000780118 STANDARD INDUSTRIAL CLASSIFICATION: 6351 IRS NUMBER: 952672141 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09580 FILM NUMBER: 95593799 BUSINESS ADDRESS: STREET 1: 6320 CANOGA AVE STE 300 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8187041111 MAIL ADDRESS: STREET 1: 6320 CANOGA AVENUE SUITE 300 STREET 2: PO BOX 4500 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 EX-27 1 FDS -- I
7 1,000 U.S. Dollars 3-MOS DEC-31-1995 JUL-1-1995 SEP-30-1995 1 82,165 15,473 0 7,439 0 0 106,469 5,028 1,846 14,393 150,761 10,207 34,431 0 0 12,500 24 0 0 41,978 150,761 16,937 880 620 0 5,482 8,555 2,917 1,483 442 1,041 0 0 0 1,041 .43 .43 8,900 13,629 2,310 9,879 4,754 10,207 0
10-Q 2 FORM 10-Q QUARTERLY FILING FOR AIG SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number: 1-9580 AMWEST INSURANCE GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 95-2672141 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6320 Canoga Avenue, Suite 300 Woodland Hills, California 91367 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 704-1111 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 . As of November 13, 1995, 2,360,464 shares of common stock, $.01 par value, were outstanding. THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 300(d) OF REGULATION S-T AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES INDEX Part I. FINANCIAL INFORMATION: Item 1 Consolidated Statements of Operations for the three months and nine months ended September 30, 1995 and 1994 3 Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 4 Consolidated Statements of Cash Flows for the three months and nine months ended September 30, 1995 and 1994 6 Notes to Interim Consolidated Financial Statements 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. OTHER INFORMATION: Item 1 Legal Proceedings 13 Item 2 Changes in Securities 13 Item 3 Defaults Upon Senior Securities 13 Item 4 Submission of Matters to a Vote of Security Holders 13 Item 5 Other Information 13 Item 6 Exhibits and Reports on Form 8-K 13 PART I - FINANCIAL INFORMATION Item 1 AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data)
Three months ended Nine months ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Underwriting revenues: Premiums written $ 18,826 $ 20,059 $ 54,302 $ 53,704 Premiums ceded (1,538) (305) (4,374) (2,197) --------- --------- --------- --------- Net premiums written 17,288 19,754 49,928 51,507 Change in unearned premiums: Direct (597) (3,262) (758) (6,802) Ceded 246 (656) 1,308 (631) --------- --------- --------- --------- Net premiums earned 16,937 15,836 50,479 44,074 --------- --------- --------- --------- Underwriting expenses: Losses and loss adjustment expenses 5,472 5,176 16,402 12,614 Reinsurance (recoveries) refunds 10 (789) 38 (1,591) ---------- --------- --------- --------- Net losses and loss adjustment expenses 5,482 4,387 16,440 11,023 Policy acquisition costs 8,555 8,946 25,302 23,120 General operating costs 2,917 2,833 8,927 9,452 --------- --------- --------- --------- Total underwriting expenses 16,954 16,166 50,668 43,595 --------- --------- --------- --------- Underwriting income (loss) (17) (330) (190) 479 Net investment income 1,564 1,477 4,787 4,104 Net realized investment gains (losses) 620 35 1,229 (214) Interest expense (257) (224) (805) (597) Collateral interest expense (427) (520) (1,305) (1,507) --------- --------- --------- --------- Income before income taxes 1,483 438 3,717 2,265 Provision (benefit) for income taxes: Current 338 (462) 868 (336) Deferred 103 524 (90) 767 --------- --------- --------- --------- Total provision for income taxes 442 62 777 431 --------- --------- --------- --------- Net income $ 1,041 $ 376 $ 2,940 $ 1,834 ========= ========= ========= ========= Earnings per common share: Net income $ 0.43 $ 0.16 $ 1.22 $ 0.76 ========= ========= ========= ========= Weighted average number of common shares outstanding 2,404 2,408 2,402 2,411
See accompanying notes to interim consolidated financial statements. AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS
September 30, December 31, 1995 1994 (unaudited) Investments: Fixed maturities, at amortized cost (market value of $15,724 and $14,469 at September 30, 1995 and December 31, 1994, respectively) $ 15,473 $ 15,120 Fixed maturities, at market value (amortized cost of $81,548 and $88,056 at September 30, 1995 and December 31, 1994, respectively) 82,165 84,503 Common equity securities, at market value (cost of $3,995 and $4,814 at September 30, 1995 and December 31, 1994, respectively) 5,630 5,300 Preferred equity securities, at market value (cost of $1,788 and $1,500 at September 30, 1995 and December 31, 1994, respectively) 1,809 1,417 Other invested assets 333 - Short-term investments 1,059 25 --------- --------- Total investments 106,469 106,365 Cash and cash equivalents 5,028 3,948 Accrued investment income 1,267 1,450 Agents balances and premiums receivable (less allowance for doubtful accounts of $385 and $375 at September 30, 1995 and December 31, 1994, respectively) 9,311 7,000 Reinsurance recoverable: Paid loss and loss adjustment expenses 1,078 1,352 Unpaid loss and loss adjustment expenses 768 1,267 Ceded unearned premiums 2,959 1,666 Deferred policy acquisition costs 14,393 15,250 Current Federal income taxes 668 - Furniture, equipment and improvements, net 2,324 1,853 Other assets 6,496 6,562 --------- --------- Total assets $ 150,761 $ 146,713 ========= =========
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31, 1995 1994 (unaudited) Liabilities: Unpaid losses and loss adjustment expenses $ 10,207 $ 8,900 Unearned premiums 34,431 33,689 Funds held as collateral 41,435 46,926 Current Federal income taxes - 313 Deferred Federal income taxes 4,010 2,014 Bank indebtedness 12,500 12,500 Amounts due to reinsurers 345 183 Other liabilities 5,831 6,194 --------- --------- Total liabilities 108,759 110,719 Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; issued and outstanding: none - - Common stock, $.01 par value, 10,000,000 shares authorized, issued and outstanding: 2,360,464 at September 30, 1995 and 2,334,089 at December 31, 1994 24 24 Additional paid-in capital 9,358 9,221 Net unrealized appreciation (depreciation) of investments carried at market, net of income taxes 1,554 (2,080) Retained earnings 31,066 28,829 --------- --------- Total stockholders' equity 42,002 35,994 --------- --------- Total liabilities and stockholders' equity $ 150,761 $ 146,713 ========= =========
See accompanying notes to interim consolidated financial statements. AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands)
Three months ended Nine months ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Cash flows from operating activities: Net income $ 1,041 $ 376 $ 2,940 $ 1,834 Adjustments to reconcile net income to cash provided by operating activities: Change in agents' balances and premiums receivable and unearned premiums 869 2,666 (1,569) 3,633 Change in accrued investment income 18 98 183 348 Change in unpaid losses and loss adjustment expenses (718) 972 1,307 413 Change in reinsurance recoverable on paid and unpaid losses and loss adjustment expenses and ceded unearned premiums 416 1,331 (520) 1,743 Change in amounts due to reinsurers 36 85 162 197 Change in reinsurance funds held, net - (778) - (2,115) Change in other assets and other liabilities 2,918 1,086 (297) 1,882 Change in income taxes, net (439) (10) (857) (484) Change in deferred policy acquisition costs 416 (802) 857 (3,129) Net realized (gain) loss on sale of fixed maturities (226) (11) (758) 161 Net realized (gain) loss on sale of equity securities (394) - (571) 4 Net realized loss on sale of fixed assets - 1 4 1 Provision for depreciation and amortization 225 359 780 1,095 --------- --------- --------- --------- Net cash provided (used) by operating activities 4,162 5,373 1,661 5,583 Cash flows from investing activities: Cash received from investments sold, matured, called or repaid: Investments held-to-maturity 1,473 - 1,521 - Investments available-for-sale 22,042 9,460 64,550 55,943 Cash paid for investments acquired: Investments held-to-maturity (1,789) - (1,949) (1,527) Investments available-for-sale (23,557) (12,495) (56,638) (66,193) Amortization of discount on bonds 25 59 (753) 421 Capital expenditures, net (414) (245) (1,255) (559) --------- --------- --------- --------- Net cash provided (used) by investing activities (2,220) (3,221) 5,476 (11,915)
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands)
Three months ended Nine months ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 Cash flows from financing activities: Proceeds from issuance of common stock 139 57 137 104 Change in funds held as collateral (1,077) 2,662 (5,491) 8,469 Dividends paid (237) (213) (703) (638) --------- --------- --------- --------- Net cash provided (used) by financing activities (1,175) 2,506 (6,057) 7,935 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 767 4,658 1,080 1,603 Cash and cash equivalents at beginning of period 4,261 3,668 3,948 6,723 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 5,028 $ 8,326 $ 5,028 $ 8,326 ========= ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 684 $ 744 $ 2,110 $ 2,104 Income taxes 880 423 1,848 942 Cash received during the period on: Investments sold prior to maturity $ 19,969 $ 8,760 $ 48,397 $ 54,416 Investments held to maturity 3,546 700 17,674 1,527
See accompanying notes to interim consolidated financial statements. AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements (unaudited) (1) Basis of Presentation The interim consolidated financial statements presented herein are unaudited and, in the opinion of management, reflect all adjustments necessary for a fair presentation of results for such periods. All such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. (2) Reclassifications Certain reclassifications have been made from amounts reported in prior years in order to be consistent with the current year's presentation. (3) Investments Proceeds from the sale of fixed maturities, held-to-maturity during three months ended September 30, 1995 were $420,244. The proceeds resulted from the sale of a municipal bond with an amortized cost of $412,505. The municipal bond was purchased by the Company as a special deposit to be held by the California Department of Insurance. The California Department of Insurance subsequently rejected the municipal bond and the Company liquidated the security. The Company purchased two new municipal bonds at $390,530 for the California Department of Insurance to hold as special deposits. Such rejection, which led to liquidation of the security, was not foreseeble by the Company. Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Premiums written decreased 6% from $20,059,000 for the three months ended September 30, 1994, to $18,826,000 for the three months ended September 30, 1995. This decrease is attributed to a reduction in premiums written in all major product lines. Premiums written increased 1% from $53,704,000 for the nine months ended September 30, 1994, to $54,302,000 for the nine months ended September 30, 1995. Despite a decrease in premiums written of 6% for the three months and an increase of only 1% for the nine months, net premiums earned increased 7% and 15% from $15,836,000 and $44,074,000 for the three months and nine months ended September 30, 1994, respectively, to $16,937,000 and $50,479,000 for the three months and nine months ended September 30, 1995, respectively. This increase in premiums earned is due to the significant increase in written premiums during the last six months of 1994. The Company generally earns premiums ratably over the assigned bond terms. Net losses and loss adjustment expenses increased 25% and 49% from $4,387,000 and $11,023,000 for the three months and nine months ended September 30, 1994, respectively, to $5,482,000 and $16,440,000 for the three months and nine months ended September 30, 1995, respectively. The loss ratio for the three months and nine months ended September 30, 1994, respectively, was 28% and 25%, compared to 32% and 33 % for the three months and nine months ended September 30, 1995, respectively. The increase in the loss ratio is primarily attributable to increased loss severity in the contract performance product line. Policy acquisition costs as a percentage of net premiums earned decreased from 57%, or $8,946,000, for the three months ended September 30, 1994, to 51%, or $8,555,000, for the three months ended September 30, 1995. Such decrease is primarily attributable to an increase in the amount of contingent commissions earned by the Company under its reinsurance treaties during the quarter. The policy acquisition cost ratio declined slightly from 52%, or $23,120,000 for the nine months ended September 30, 1994, as compared to 50%, or $25,302,000 for the nine months ended September 30, 1995. General operating costs as a percentage of net premiums earned decreased slightly from 18%, or $2,833,000, and 21%, or $9,452,000, for the three months and nine months ended September 30, 1994, respectively, as compared to 17%, or $2,917,000, and 18%, or $8,927,000, for the three months and nine months ended September 30, 1995, respectively. This improvement in the general operating cost ratio is a continuation of the Company's ability to service increased writings without corresponding increases in home office expenses. The Company's underwriting loss decreased from $330,000 for the three months ended September 30, 1994, to $17,000 for the three months ended September 30, 1995. The combined ratio decreased slightly from 102% for the three months ended September 30, 1994 to 100% for the three months ended September 30, 1995. Underwriting income decreased from income of $479,000 for the nine months ended September 30, 1994, to a loss of $190,000 for the nine months ended September 30, 1995. The combined ratio increased from 99% for the nine months ended September 30, 1994 to 100% for the nine months ended September 30, 1995. Interest expense increased 15% and 35% from $224,000 and $597,000 for the three months and nine months ended September 30, 1994, respectively, to $257,000 and $805,000 for the three months and nine months ended September 30, 1995, respectively due to an increase in the interest rate on bank indebtedness. The average interest rate on bank indebtedness for the nine months ended September 30, 1994 and 1995 was 6.3% and 8.1%, respectively. Collateral interest expense decreased from $520,000 and $1,507,000 for the three months and nine months ended September 30, 1994, respectively, to $427,000 and $1,305,000 for the three months and nine months ended September 30, 1995, respectively. This decrease is attributed to an overall reduction in average funds held as collateral from $51,528,000 and $48,625,000 for the three months and nine months ended September 30, 1994, respectively, to $41,974,000 and $44,181,000 for the three months and nine months ended September 30, 1995, respectively. Rates paid on collateral balances are adjusted at various times throughout the year in accordance with general market conditions. Net investment income increased 6% and 17% from $1,477,000 and $4,104,000 for the three months and nine months ended September 30, 1994, respectively, to $1,564,000 and $4,787,000 for the three months and nine months ended September 30, 1995, respectively. The increases are primarily attributed to higher investment yields received due to general increases in interest rates during 1994 which benefit has a greater impact on 1995 yields. Net realized investment gains/losses also increased from a realized gain of $35,000 and a realized loss of $214,000 for the three months and nine months ended September 30, 1994, respectively, to realized gains of $620,000 and $1,229,000 for the three months and nine months ended September 30, 1995, respectively. The investment portfolio experienced significant market value gains during 1995 due to a decline in interest rates during 1995 and market value gains in common stocks. The Company has realized some of the gains on fixed income and common equity securities. Income before income taxes increased from $438,000 and $2,265,000 for the three months and nine months ended September 30, 1994, respectively, to $1,483,000 and $3,717,000 for the three months and nine months ended September 30, 1995, respectively, due to the factors outlined above. The effective tax rate was 14% and 19% for the three months and nine months ended September 30, 1994 as compared to effective tax rates of 30% and 21% for the three months and nine months ended September 30, 1995. The higher effective tax rate for the three months ended September 30 is primarily due to less tax advantaged investment income as a percentage of total income for the 1995 third quarter as compared to the corresponding 1994 period. Net income increased from $376,000, or $.16 per share and $1,834,000, or $.76 per share for the three months and nine months ended September 30, 1994, respectively, to $1,041,000, or $.43 per share and $2,940,000, or $1.22 per share for the three months and nine months ended September 30, 1995, respectively, due to the factors outlined above. Liquidity and Capital Resources As of September 30, 1995, the Company held total cash and cash equivalents and invested assets of $111,497,000. This amount includes an aggregate of $41,435,000 in funds held as collateral which is shown as a liability on the Company's consolidated balance sheets. As of September 30, 1995, the Company's invested assets consisted of $15,473,000 in fixed maturities, held at amortized cost, $82,165,000 in fixed maturities, held at market value, $5,630,000 in common equity securities, $1,809,000 in preferred equity securities, $333,000 in other invested assets and $1,059,000 in short-term investments, including certificates of deposit with original maturities less than one year. Because the Company depends primarily on dividends from its insurance subsidiaries for its net cash flow requirements, absent other sources of cash flow, the Company cannot pay dividends materially in excess of the amount of dividends that could be paid by the insurance subsidiaries to the Company. The Company's insurance subsidiaries are subject to state regulations which restrict the amount of stockholder dividends which may be paid within any one year without the approval of the California Department of Insurance. The California Insurance Code provides that amounts may be paid as dividends on an annual noncumulative basis without prior approval up to a maximum of the greater of (1) statutory net income for the preceding year or (2) 10% of statutory surplus as regards policyholders as of the preceding December 31. On August 6, 1993, the Company entered into a revolving credit agreement with Union Bank for $12,500,000. The debt agreement was amended on April 24, 1995 to increase the amount available under the revolving line of credit from $12,500,000 to $15,000,000. The amounts available are reduced by $2,500,000 each year beginning on July 15, 1995 and ending on July 15, 2000. Accordingly at September 30, 1995, $12,500,000 is available under the revolving line of credit, all of which is currently utilized. The bank loan has a variable rate based upon fluctuations in the London Interbank Offered Rate (LIBOR) with amortizing principal payments. The annual interest rate at September 30, 1995 was 7.9%. The Company is a party to a lease with Trillium/Woodland Hills regarding its corporate headquarters. Such lease contains provisions for scheduled lease charges and escalations in base rent over the lease term. The Company's minimum lease commitment for the remainder of 1995 and 1996 is approximately $2,346,000. This lease expires in July 1998. Other than the Company's obligations with respect to funds held as collateral and the Company's obligation to pay claims as they arise, the Company's commitments to pay principal and interest on the bank debt and the payment of lease expenses as noted above, the Company has no significant cash commitments. The Company believes that its cash flows from operations and other present sources of capital are sufficient to sustain its needs for at least the remainder of 1995 and through 1996. The Company generated $5,373,000 and $5,583,000 in cash from operating activities for the three months and nine months ended September 30, 1994 as compared to generating $4,162,000 and $1,661,000 for the three months and nine months ended September 30, 1995. The Company used $3,221,000 and $11,915,000 in cash for investing activities for the three months and nine months ended September 30, 1994 as compared to using $2,220,000 and generating $5,476,000 for the three months and nine months ended September 30, 1995. The Company generated $2,506,000 and $7,935,000 in cash from financing activities for the three months and nine months ended September 30, 1994 as compared to using $1,175,000 and $6,057,000 for the three months and nine months ended September 30, 1995. The table on the next page shows, for the periods indicated, the net premiums written, net premiums earned, net losses and loss adjustment expenses and loss ratios for the Company's five major types of bonds: TABLE 1 AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES SUMMARY OF PREMIUMS AND LOSSES BY PRODUCT LINE (Dollars in thousands)
Three months ended Nine months ended Year ended September 30, September 30, December 31, Type of Bond 1995 1994 1995 1994 1994 1993 ------------ ---- ---- ---- ---- ---- ---- Contract performance Net premiums written $ 12,817 $ 14,160 $ 36,994 $ 35,949 $ 46,638 $ 35,503 Net premiums earned 12,158 10,770 36,413 29,305 41,937 31,744 Net losses and loss adjustment expenses 5,084 3,760 14,831 8,885 11,098 9,397 Loss ratio 42% 35% 41% 30% 27% 30% Court Net premiums written $ 2,333 $ 2,716 $ 6,396 $ 7,069 $ 9,531 $ 7,930 Net premiums earned 2,327 2,407 6,461 6,686 9,183 7,387 Net losses and loss adjustment expenses 231 242 338 828 1,114 218 Loss ratio 10% 10% 5% 12% 12% 3% Contractor's license Net premiums written $ 370 $ $ 1,180 $ 1,667 $ 2,154 $ 1,722 489 Net premiums earned 469 453 1,443 1,358 1,833 1,680 Net losses and loss adjustment expenses 57 72 403 301 477 364 Loss ratio 12% 16% 28% 22% 26% 22% SBA Net premiums written $ 284 $ $ 802 $ $ 1,213 $ 1,796 371 902 Net premiums earned 297 346 915 1,097 1,416 1,938 Net losses and loss adjustment expenses (55) (11) 196 49 145 614 Loss ratio (19%) (3%) 21% 4% 10% 32% Miscellaneous Net premiums written $ 1,485 $ 2,018 $ 4,556 $ 5,920 $ 7,439 $ 7,380 Net premiums earned 1,686 1,860 5,247 5,628 7,460 7,341 Net losses and loss adjustment expenses 165 324 672 960 1,261 1,316 Loss ratio 10% 17% 13% 17% 17% 18%
PART II - OTHER INFORMATION AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES Item 1: LEGAL PROCEEDINGS California voters passed Proposition 103, an insurance initiative which required a rollback in insurance rates for policies (and bonds) written or renewed during the twelve month period beginning November 8, 1988 and provided that changes in insurance premiums after November 8, 1988 must be submitted for approval of the California Insurance Commissioner prior to implementation. While the Proposition has the most significant impact on automobile insurance, its provisions, as written, also apply to other property and casualty insurers including surety insurers. On August 26, 1991, The State of California enacted Insurance Code Section 1861.135 ("Section 1861.135") exempting surety insurance from the rate rollback and prior approval provisions of Proposition 103. Section 1861.135 does not affect Proposition 103's prohibition against excessive, inadequate or discriminatory rates. Due to the enactment of Section 1861.135, the Company terminated a previously established reserve for potential premium rebates. Subsequently, the Department of Insurance ("Department") and Voter Revolt brought a motion for writ of mandate challenging the validity of Section 1861.135. On March 21, 1992, the Los Angeles Superior Court concluded that Section 1861.135 did not violate the California Constitution or the provisions of Proposition 103. The Department and Voter Revolt appealed. On December 7, 1993, the Second District Court of Appeal overturned Section 1861.135 by a 2-1 vote. On February 24, 1994, the California Supreme Court agreed to hear the Company's petition for review, thereby staying the Court of Appeals opinion. Such hearing has been scheduled for December 5, 1995. The outcome of this appeal cannot be predicted; however, if this appeal is not successful, it could have a significant impact on the Company's earnings but is not expected to have a material adverse impact on the Company's financial position. Items 2-5: CHANGE IN SECURITIES, DEFAULTS UPON SENIOR SECURITIES, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS, OTHER INFORMATION None Item 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits ee the Exhibit Index on page 15. (b) Reports on Form 8-K There were no reports filed on Form 8-K during the three months ended September 30, 1995. SIGNATURES 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. AMWEST INSURANCE GROUP, INC. Date: November 14, 1995 by: /s/ JOHN E. SAVAGE -------------------------- John E. Savage President, Co-Chief Executive Officer and Chief Operating Officer (Principal Executive Officer) by: /s/ STEVEN R. KAY ---------------------------- Steven R. Kay Senior Vice-President, Chief Financial Officer, Treasurer and Director (Principal Financial and Principal Accounting Officer) AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description Location 2 Plan of acquisition, reorganization, arrangement, liquidation or succession None 4 Instruments defining the rights of securityholders, including indentures Not required 11 Statement re computation of per share earnings Page 16 15 Letter re unaudited interim financial information None 18 Letter re change in accounting principles None 19 Previously unfiled documents None 20 Report furnished to security holders None 23 Published report regarding matters submitted to vote of security holders None 24 Consents of experts and counsel None 25 Power of attorney None 28 Additional exhibits None EX-11 3 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Primary (2) Fully diluted (3) earnings per share earnings per share 1995 1994 1995 1994 Average shares outstanding for the nine month period ending September 30, 2,350,290 2,362,004 2,350,290 2,362,004 Incremental shares resulting from conversion of common stock equivalents: Options to purchase shares of common stock at an exercise price of $5.37- $15.675 (261,950 and 314,325 options at September 30, 1994 and 1995, respectively) (1) 51,320 48,912 54,452 48,912 --------- --------- --------- --------- Total incremental shares resulting from conversion of common stock equivalents at September 30, 51,320 48,912 54,452 48,912 --------- --------- --------- --------- Total shares and incremental shares resulting from conversion of common stock equivalents at September 30, 2,401,610 2,410,916 2,404,742 2,410,916 ========= ========= ========= ========= Percentage of incremental shares resulting from conversion of common stock equivalents at September 30, 2.14% 2.03% 2.26% 2.03% ========= ========= ========= =========
EXHIBIT 11 (continued) AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Primary (2) Fully diluted (3) earnings per share earnings per share 1995 1994 1995 1994 Average shares outstanding for the three month period ending September 30, 2,354,203 2,366,643 2,354,203 2,366,643 Incremental shares resulting from conversion of common stock equivalents: Options to purchase shares of common stock at an exercise price of $5.37- $15.675 (261,950 and 314,325 options at September 30, 1994 and 1995, respectively) (1) 49,677 41,379 52,638 41,379 --------- --------- --------- --------- Total incremental shares resulting from conversion of common stock equivalents at September 30, 49,677 41,379 52,638 41,379 --------- --------- --------- --------- Total shares and incremental shares resulting from conversion of common stock equivalents at September 30, 2,403,880 2,408,022 2,406,841 2,408,022 --------- --------- --------- --------- Percentage of incremental shares resulting from conversion of common stock equivalents at September 30, 2.07% 1.72% 2.19% 1.72% ========= ========= ========= =========
EXHIBIT 11, (continued) AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1) Outstanding options and warrants to purchase common stock. Options to purchase shares of common stock as of September 30, 1995 and 1994, respectively: September 30, September 30, 1995 1994 Grant price: $5.37 - 11,000 Grant price: $9.875 10,500 11,250 Grant price: $10.625 12,750 14,250 Grant price: $11.125 13,000 16,250 Grant price: $9.375 - 10,125 Grant price: $11.375 7,500 7,500 Grant price: $14.25 12,750 15,000 Grant price: $15.675 8,500 8,500 Grant price: $8.375 15,625 22,000 Grant price: $9.213 8,500 8,500 Grant price: $8.375 17,625 18,750 Grant price: $10.75 27,000 35,625 Grant price: $11.825 10,000 10,000 Grant price: $10.375 3,000 3,000 Grant price: $13.875 69,075 70,200 Grant price: $14.25 98,500 - ------- ------- 314,325 261,950 ======= ======= (2) Calculation of incremental shares resulting from conversion of common stock equivalents, using the Treasury Stock Method for calculating primary earnings per share, is based on the average of the closing prices, for the three months and nine months ended September 30, 1995 and 1994, as reported on the American Stock Exchange. (3) Calculation of incremental shares resulting from conversion of common stock equivalents, using the Treasury Stock Method for calculating fully diluted earnings per share, is based on the greater of the average ending ask price or the closing ask price on September 30, 1995 and 1994, as reported on the American Stock Exchange. -----END PRIVACY-ENHANCED MESSAGE-----