-----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, FW+4N7VOJkPKGotwEdQ3IqTQp0mim5gvfsiECAFn0sCS0ZvFYKWg4iU0esV5wZXu O2E4Lq8jI8lP9CfIrPVu3w== 0000780118-96-000013.txt : 19960517 0000780118-96-000013.hdr.sgml : 19960517 ACCESSION NUMBER: 0000780118-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMWEST INSURANCE GROUP INC CENTRAL INDEX KEY: 0000780118 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [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: 96566147 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 -- WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 (Replace this text with the legend) 0000780118 1,000 U.S. Dollars 3-MOS DEC-31-1996 JAN-1-1996 MAR-31-1996 1 106,849 0 0 13,289 0 0 123,495 7,397 8,836 13,691 179,558 34,571 32,082 0 0 12,500 0 0 33 54,218 179,558 21,835 646 1,025 0 10,071 9,487 3,828 120 34 86 0 0 0 86 .03 .03 31,915 7,191 3,075 2,240 5,370 34,571 0
10-Q 2 FORM 10-Q QUARTERLY FILING FOR AIG UNITED STATES 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 March 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number: 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 May 13, 1996, 3,320,057 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 ended March 31, 1996 and 1995 3 Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1995 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 14 Item 5 Other Information 14 Item 6 Exhibits and Reports on Form 8-K 14
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 March 31, 1996 1995 Unerwriting revenues: Premiums written ................................... $ 23,208 $ 21,799 Premiums ceded ..................................... (2,743) (2,384) -------- -------- Net premiums written ............................ 20,465 19,415 Change in unearned premiums: Direct .......................................... 1,519 1,308 Ceded ........................................... (149) 510 -------- -------- Net premiums earned .......................... 21,835 21,233 -------- -------- Underwriting expenses: Losses and loss adjustment expenses ................ 10,463 9,160 Reinsurance (recoveries) refunds ................... (392) (1,026) -------- -------- Net losses and loss adjustment expenses ......... 10,071 8,134 Policy acquisition costs ........................... 9,487 9,115 General operating costs ............................ 3,828 4,139 -------- -------- Total underwriting expenses ..................... 23,386 21,388 -------- -------- Underwriting (loss) .......................... (1,551) (155) Interest expense ....................................... (238) (280) Collateral interest expense ............................ (356) (445) Merger expense ......................................... (710) -- Net investment income .................................. 1,807 1,997 Net unrealized gain on trading securities .............. -- 31 Net realized investment gains .......................... 1,025 20 Commissions and fees ................................... 143 181 -------- -------- Income before income taxes ......................... 120 1,349 Provision for income taxes: Current ............................................ 76 329 Deferred ........................................... (42) (239) -------- -------- Total provision for income taxes ................ 34 90 -------- -------- Net income ................................... $ 86 $ 1,259 ======== ======== Earnings per common share: ======== ======== Net income ......................................... $ 0.03 $ 0.38 ======== ======== Weighted average number of common shares outstanding 3,343 3,319
See accompanying notes to interim consolidated financial statements
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS March 31, December 31, 1996 1995 --------- ------------ (unaudited) Investments, available-for-sale: Fixedmaturities, at market value (amortized cost of $106,393 and $114,793 at March 31, 1996 and December 31, 1995, respectively) ....................................................... $106,849 $117,191 Common equity securities, at market value (cost of $7,933 and $7,268 at March 31, 1996 and December 31, 1995, respectively) ........................................................ 9,968 8,689 Preferred equity securities, at market value (cost of $3,129 and $2,847 at March 31, 1996 and December 31, 1995, respectively) 3,321 3,592 Other invested assets ($2,275 and $703 at March 31, 1996 and December 31, 1995, respectively) .................................... 2,402 797 Short-term investments .................................................... 955 745 -------- -------- Total investments ......................................................... 123,495 131,014 Cash and cash equivalents ................................................. 7,397 5,232 Accrued investment income ................................................. 1,520 1,573 Agents balances and premiums receivable (less allowance for doubtful accounts of $375 at March 31, 1996 and December 31, 1995) ................................................... 11,516 9,356 Reinsurance recoverable: Paid loss and loss adjustment expenses ............................... 955 865 Unpaid loss and loss adjustment expenses ............................. 7,881 7,669 Ceded unearned premiums ................................................... 2,804 2,941 Deferred policy acquisition costs ......................................... 13,691 13,885 Furniture, equipment and improvements, net ................................ 3,704 3,311 Current Federal income taxes .............................................. 513 7 Other assets .............................................................. 6,082 7,980 -------- -------- Total assets ..................................................... $179,558 $183,833 ======== ========
AMWEST INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 1996 1995 --------- ------------ (unaudited) Liabilities: Unpaid losses and loss adjustment expenses ............................. $ 34,571 $ 31,915 Unearned premiums ...................................................... 32,082 33,589 Funds held as collateral ............................................... 32,278 37,650 Bank indebtedness ...................................................... 12,500 12,500 Amounts due to reinsurers .............................................. 2,528 2,188 Deferred Federal income taxes .......................................... 1,822 2,497 Other liabilities ...................................................... 9,526 8,419 -------- -------- Total liabilities .................................................. 125,307 128,758 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: 3,320,057 at March 31, 1996 and 3,286,942 at December 31, 1995 33 33 Additional paid-in capital ............................................. 17,775 17,204 Net unrealized appreciation of investments carried at market, net of income taxes ................................................ 1,854 3,074 Retained earnings ...................................................... 34,589 34,764 -------- -------- Total stockholders' equity ......................................... 54,251 55,075 -------- -------- Total liabilities and stockholders' equity ................ $179,558 $183,833 ======== ========
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 March 31, 1996 1995 Cash flows from operating activities: Net income ................................................................................... $ 86 $ 1,259 Adjustments to reconcile net income to cash provided by operating activities: Change in agents' balances and premiums receivable and unearned premiums ..................................................................... (3,667) (2,615) Change in accrued investment income ........................................................... 53 135 Change in unpaid losses and loss adjustment expenses .......................................... 2,656 (4,020) Change in reinsurance recoverable on paid and unpaid losses and loss adjustment expenses and ceded unearned premiums (165) 1,725 Change in amounts due to reinsurers ........................................................... 340 110 Change in reinsurance funds held, net ......................................................... -- (809) Change in other assets and other liabilities .................................................. 3,005 (2,317) Change in income taxes, net ................................................................... (553) (185) Change in deferred policy acquisition costs ................................................... 194 531 Net realized (gain) on sale of fixed maturities ............................................... (596) (80) Net realized (gain) loss on sale of equity securities ......................................... (556) 60 Net realized loss on sale of fixed assets ..................................................... 1 4 Equity securities, trading Purchases ................................................................................... -- (2,106) Sales ....................................................................................... -- 1,875 Net unrealized (gains) on trading securities .................................................. -- (32) Provision for depreciation and amortization ................................................... 330 410 -------- -------- Net cash provided (used) by operating activities ........................................ 1,128 (6,055) Cash flows from investing activities: Cash received from investments sold, matured, called or repaid: Investments held-to-maturity ................................................................. -- 32 Investments available-for-sale ............................................................... 22,420 14,135 Cash paid for investments acquired: Investments available-for-sale ............................................................... (15,313) (7,896) Amortization of discount on bonds ................................................................ 37 (646) Capital expenditures, net ........................................................................ (720) (524) -------- -------- Net cash provided by investing activities .................................................... $ 6,424 $ 5,101 Cash flows from financing activities: Proceeds from issuance of common stock ........................................................... $ 246 $ 169 Change in funds held as collateral ............................................................... (5,372) (2,944) Dividends paid ................................................................................... (261) (232) -------- -------- Net cash (used) by financing activities ....................................................... (5,387) (3,007) -------- -------- Net increase (decrease) in cash and cash equivalents .................................................. 2,165 (3,961) Cash and cash equivalents at beginning of period ...................................................... 5,232 6,295 -------- -------- Cash and cash equivalents at end of period ............................................................ $ 7,397 $ 2,334 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest ..................................................... ................................ $ 594 $ 725 Income taxes ..................................................................................... 564 388 Cash received during the period on: Investments sold prior to maturity ............................................................... $ 22,120 $ 13,835 Investments held to maturity ..................................................................... 300 332
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, 1995. (2) Merger On March 14,1996, the Company completed its previously announced merger with Condor Services, Inc. ("Condor") The merger has been accounted for under the pooling of interests method. Accordingly, all financial information presented herein for all periods includes Condor. Additionally, share and per share data presented in these financial statements reflect the retroactive effects of the merger with Condor. The following table lists certain financial information for the three months ended March 31, 1996 and 1995 for both Amwest and Condor, as separate entities.
Three months ended March 31, Type (Dollars in thousands) 1996 1995 Amwest: Total revenues $ 19,307 $ 18,377 Underwriting income (loss) (967) 3 Net income 286 927 Condor: Total revenues 5,503 5,085 Underwriting income (loss) (584) 158 Net income (loss) $ (200) $ 332
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Premiums written increased 6% from $21,799,000 for the three months ended March 31, 1995 to $23,208,000 for the three months ended March 31, 1996. The increase in premiums written is primarily attributable to increased premiums written by Condor Insurance Company. Net premiums earned increased 3% from $21,233,000 for the three months ended March 31, 1995 to $21,835,000 for the three months ended March 31, 1996. The Company generally earns premiums ratably over the assigned bond terms for the surety operations and the policy term for the specialty property and casualty operations. Net losses and loss adjustment expenses increased 24% from $8,134,000 for the three months ended March 31, 1995 to $10,071,000 for the three months ended March 31, 1996. The loss ratio for the surety operations increased to 38% for the three months ended March 31, 1996 from 32% for the corresponding 1995 period primarily due to a continuation of increased loss severity in the contract performance product line. The loss ratio for the property and casualty operations increased to 74% for the three months ended March 31, 1996 from 61% for the corresponding 1995 period primarily due to the results of the private passenger automobile operations in the state of Arizona. Policy acquisition costs remained stable as a percentage of net premiums earned at 43%, or $9,487,000 and $9,115,000 for the three months ended March 31, 1996 and 1995, respectively. General operating costs decreased as a percentage of net premiums earned from 19%, or $4,139,000 for the three months ended March 31, 1995 to 18%, or $3,828,000 for the three months ended March 31, 1996. The improvement in the general and administrative expense ratio is reflective of decreased bonus accruals during the first quarter of 1996 due to the significantly reduced earnings per share for the Company. Underwriting results were a loss of $155,000 for the three months ended March 31, 1995 and a loss of $1,551,000 for the three months ended March 31, 1996. The combined ratio was 101% for the three months ended March 31, 1995 as compared to 107% for the three months ended March 31, 1996, due to a combination of the factors cited above. Interest expense decreased 15% from $280,000 for the three months ended March 31, 1995 to $238,000 for the three months ended March 31, 1996. This decrease is attributable to a decrease in the interest rate on the bank indebtedness to an average of 7.5% for the three months ended March 31, 1996 from an average rate of 8.3% for the three months ended March 31, 1995. Collateral interest expense decreased 20% from $445,000 for the three months ended March 31, 1995 to $356,000 for the three months ended March 31, 1996. Average funds held as collateral decreased from $45,454,000 for the three months ended March 31, 1995 to $34,964,000 for the three months ended March 31, 1996. Collateral rates are adjusted at various times throughout the year in accordance with general market conditions. Net investment income decreased 9% from $1,997,000 for the three months ended March 31, 1995 to $1,807,000 for the three months ended March 31, 1996. The decrease is generally due to lower investment yields received due to general decreases in interest rates during 1995. Net realized investment gains increased from $51,000 for the three months ended March 31, 1995 to $1,025,000 for the three months ended March 31, 1996. The investments sold during the three months ended March 31, 1996 were primarily equity securities and certain fixed income investments including mortgage-backed and municipal bond securities. The Company incurred a total of $710,000 in expenses related to the merger with Condor Services, Inc. which was completed on March 14, 1996. The merger was accounted for as a pooling of interests and, accordingly, the costs associated with the merger have been expensed during the first quarter. They have been separately reported as "merger expense" to reflect their non-recurring nature on the Company's operations. Income before income taxes decreased from $1,349,000 for the three months ended March 31, 1995 to $120,000 for the three months ended March 31, 1996 due to the factors outlined above. The effective tax rate was 7% for the three months ended March 31, 1995 as compared to an effective rate of 28% for the three months ended March 31, 1996. The higher effective tax rate is reflective of the Company's best estimate of its effective tax rate for the year ended December 31, 1996. Net income decreased from $1,259,000 for the three months ended March 31, 1995 to $86,000 for the three months ended March 31, 1996 due to the factors outlined above. Liquidity and Capital Resources As of March 31, 1996, the Company held total cash and cash equivalents and invested assets of $130,892,000. This amount includes an aggregate of $32,278,000 in funds held as collateral which is shown as a liability on the Company's consolidated balance sheets. As of March 31, 1996, the Company's invested assets consisted of $106,849,000 in fixed maturities, held at market value, $9,968,000 in common equity securities, $3,321,000 in preferred equity securities, $2,402,000 in other invested assets and $955,000 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 respective domicilary state of each of the insurance subsidiaries regulates, through the Office of the Insurance Commissioner, the amount of dividends which can be paid by a domestic insurance company utilizing various formula methodology. On August 6, 1993, the Company entered into a revolving credit agreement with Union Bank for $12,500,000. The bank loan has a variable rate based upon fluctuations in the London Interbank Offered Rate (LIBOR) with amortizing principal payments beginning July 15, 1995 and maturing July 15, 1999. The annual interest rate at March 31, 1996 was 7.4%. On April 24, 1995, the debt agreement was amended 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 March 31, 1996, $12,500,000 is available under the revolving line of credit, all of which is currently utilized. The next principal payment in the amount of $2,500,000 is due on July 15, 1996. Certain changes were also made to the interest rate calculation as well as various financial convenants of the debt agreement which are not currently significant, but could ultimately result in a decrease in the margin paid on the revolving line of credit. 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 1996 is approximately $1,408,000. 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 1996. The Company used $6,055,000 in cash from operating activities for the three months March 31, 1995 as compared to generating $1,128,000 for the three months ended March 31, 1996. The Company generated $5,101,000 in cash from investing activities for the three months ended March 31, 1995 as compared to $6,424,000 for the three months ended March 31, 1996. The Company used $3,007,000 in cash from financing activities for the three months ended March 31, 1995 as compared to $5,387,000 for the three months ended March 31, 1996. The table on the next page shows, for the periods indicated, the gross premiums written, net premiums earned, net losses and loss adjustment expenses and loss ratios for the Company's specialty property and casualty operations and surety operations. The surety operations are detailed by the Company's three 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 Year ended March 31, December 31, Type .................................... 1996 1995 1995 1994 - ----------------------------------------------------------------- ------- ------- ------- ------- Specialty Property and Casualty Operations Gross premiums written ..................................... $ 7,317 $ 5,590 $24,101 $23,736 Net premiums earned ........................................ 4,934 4,514 17,872 19,460 Net losses and loss adjustment expenses .................... 3,634 2,745 13,131 14,633 Loss ratio ................................................. 74% 61% 73% 75% Expense ratio .............................................. 38% 43% 41% 40% Combined ratio ............................................. 112% 104% 114% 115% Surety Operations Contract performance Gross premiums written ..................................... $11,600 $12,248 $54,039 $51,362 Net premiums earned ........................................ 12,042 12,556 49,736 43,353 Net losses and loss adjustment expenses .................... 5,639 4,913 20,044 11,250 Loss ratio ................................................. 47% 39% 40% 26% Court Gross premiums written ..................................... $ 2,584 $ 1,992 $ 8,571 $ 9,531 Net premiums earned ........................................ 2,677 1,984 8,749 9,183 Net losses and loss adjustment expenses .................... 549 19 467 1,114 Loss ratio ................................................. 21% 1% 5% 12% Commercial Surety Gross premiums written ..................................... $ 1,707 $ 1,969 $ 7,472 $ 9,592 Net premiums earned ........................................ 2,182 2,179 8,813 9,293 Net losses and loss adjustment expenses .................... 249 457 1,623 1,740 Loss ratio ................................................. 11% 21% 18% 19% Total Surety Gross premiums written ..................................... $15,891 $16,209 $70,082 $70,485 Net premiums earned ........................................ 16,901 16,719 67,298 61,829 Net losses and loss adjustment expenses .................... 6,437 5,389 22,134 14,104 Loss ratio ................................................. 38% 32% 33% 23% Expense ratio .............................................. 68% 68% 70% 72% Combined ratio ............................................. 106% 100% 103% 95%
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, 1990, 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, 1994, 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. On December 14, 1995, the California Supreme Court affirmed the decision of the Second District Court of Appeal. Accordingly, the surety insurance industry will no longer be exempted from the rate rollback and prior approval provisions contained in Proposition 103. The Company accrued $2,000,000 during the quarter ended December 31, 1995 representing the Company's best estimate of its rollback obligations pursuant to Proposition 103, the exact amount of which has not yet been determined. Such estimate was based on a variety of factors, including but not limited to. the profitability of the Company in California during 1989 (the rollback period), a review of the various regulations promulgated by the Department, and a review of rollback obligations of other insurance companies, including a surety company. Pursuant to the provisions of Proposition 103, the rollback amount will ultimately be determined by complex Department formulas but is statutorily limited to a maximum of 20% of California written premiums during 1989, plus accrued interest thereon. In the event that the Company's rollback obligation was eventually determined to be the statutory maximum, it could approximate $7,500,000 which is $5,500,000 in excess of the Company's best estimate of its ultimate rollback liability. While the current accrual represents management's best estimate of the Company's Proposition 103 rollback obligations, no assurance can be given that a final settlement with the Department will not result in a rollback amount which could have a significant adverse impact on the Company's future earnings, although it is not anticipated that such result would materially adversely impact the Company's financial position. Until a final settlement is reached with the Department, no assurances can be given as to the ultimate amount of premiums to be refunded to policyholders. Items 2-3: CHANGE IN SECURITIES, DEFAULTS UPON SENIOR SECURITIES None Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) A Special Meeting of Stockholders was held on March 14, 1996. (b) A proposal to approve and adopt an Agreement and Plan of Merger between the Company and Condor Services, Inc. pursuant to which each outstanding share of Condor common stock, $.01 par value per share will be converted into the right to receive 0.5 of a share of the Company's common stock, $.01 par value per share, subject to certain adjustment, including the corresponding percentage of rights to purchase the Company's Series A Junior Participating Preferred Stock was approved and adopted by a vote of 1,830,382 for, 61,933 against and 670 abstain. (c) A proposal to amend and ratify the Company's Stock Option Plan regarding the permitted exercise price of Non-Incentive Options under the plan was approved and ratified by a vote of 1,966,435 for, 142,480 against and 1,980 abstain. Item 5: OTHER INFORMATION None Item 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits See the Exhibit Index on page 16. (b) Reports on Form 8-K The Company filed three Form 8-K reports during the three months ended March 31, 1996: The report dated January 30, 1996 included an Item 7 matter in which the Company, pursuant to the merger announcement, were required to file certain financial statements of Condor pursuant to Regulation 3.05(b) of Regulation S-X. The report dated March 12, 1996 included an Item 5 matter and Press Release announcing an agreement to purchase 100% of the stock of Southern California Bonding Services, Inc. The report dated March 19, 1996 included an Item 5 matter and Press Release announcing the completion of the merger of Condor Services, Inc. into the Company, following approval of the terms of the transaction by the stockholders of each of the two companies. 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: May 13, 1996 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 security holders, including indentures Not required 11 Statement re computation of per share earnings Page 17 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 STATEMENT RE 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 1996 1995 1996 1995 Average shares outstanding for the three month period ending March 31, 3,297,521 3,264,745 3,297,521 3,264,745 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 (268,280 and 358,880 options at March 31, 1995 and 1996, respectively) (1) 45,897 53,877 45,897 60,870 Total incremental shares resulting from conversion of common stock equivalents at March 31, 45,897 53,877 45,897 60,870 Total shares and incremental shares resulting from conversion of common stock equivalents at March 31, 3,343,418 3,318,622 3,343,418 3,325,615 ========= ========= ========= ========= Percentage of incremental shares resulting from conversion of common stock equivalents at March 31, 1.37% 1.62% 1.37% 1.83% ========= ========= ========= =========
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 March 31, 1996 and 1995, respectively:
March 31, 1996 March 31, 1995 -------------- -------------- Grant price: $ 5.37 - 11,000 Grant price: $ 6.14 3,025 3,025 Grant price: $ 6.82 1,650 1,650 Grant price: $ 8.375 32,250 39,250 Grant price: $ 9.00 6,450 - Grant price: $ 9.10 5,005 5,005 Grant price: $ 9.213 8,500 8,500 Grant price: $ 9.375 - 1,125 Grant price: $ 9.875 10,500 10,750 Grant price: $ 9.90 1,650 - Grant price: $ 10.375 3,000 3,000 Grant price: $ 10.50 5,850 5,850 Grant price: $ 10.625 12,750 13,250 Grant price: $ 10.75 27,000 34,875 Grant price: $ 11.125 13,000 14,750 Grant price: $ 11.375 - 7,500 Grant price: $ 11.55 1,650 1,650 Grant price: $ 14.825 10,000 10,000 Grant price: $ 12.75 4,000 4,000 Grant price: $ 13.875 68,700 70,200 Grant price: $ 14.02 1,650 1,650 Grant price: $ 14.25 126,250 12,750 Grant price: $ 14.875 7,500 - Grant price: $ 15.675 8,500 8,500 ------- ------ 358,880 268,280 ======= =======
(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 ended March 31, 1996 and 1995, 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 March 31, 1996 and 1995, as reported on the American Stock Exchange. -----END PRIVACY-ENHANCED MESSAGE-----