-----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, BbPpjD6JGWl012DHTUskPLBZi++x7OeYBHNNJLMCw9RXG2/xypIpCu68/eOxBXVV sTt0eMtlwCpCI3k5I0SSNw== 0001017062-98-001603.txt : 19980727 0001017062-98-001603.hdr.sgml : 19980727 ACCESSION NUMBER: 0001017062-98-001603 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980724 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRIS GROUP INC CENTRAL INDEX KEY: 0000798085 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 330097221 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12099 FILM NUMBER: 98670920 BUSINESS ADDRESS: STREET 1: 650 TOWN CENTER DR STE 1600 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7145491600 MAIL ADDRESS: STREET 1: 650 TOWN CENTER DRIVE STREET 2: STE 1600 CITY: COSTA MESA STATE: CA ZIP: 92626-1925 FORMER COMPANY: FORMER CONFORMED NAME: US FACILITIES CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q DATED JUNE 30, 1998 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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: 001-12099 The Centris Group, Inc. ----------------------- (Exact name of Registrant as specified in its charter) DELAWARE 33-0097221 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 650 Town Center Drive, Suite 1600, Costa Mesa, CA 92626 -------------------------------------------------------- (Address of principal executive offices) (Zip code) (714) 549-1600 -------------- (Registrant's telephone number, including area code) Not applicable -------------- (Former name, former 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 [_] Number of shares outstanding of each class of the Registrant's Common Stock as of July 23, 1998: Common Stock, par value $.01 per share: 12,199,296 Common Stock Purchase Rights: 12,199,296 INDEX Part I FINANCIAL INFORMATION Item 1. FINANCIAL INFORMATION Condensed Consolidated Financial Statements: Balance Sheets as of June 30, 1998 and December 31, 1997...........................................3 Income Statements for the Quarters and Six Months Ended June 30, 1998 and 1997......................................4 Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997......................................5 Notes to Condensed Consolidated Financial Statements..........6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................7 Part II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........15 Item 6. EXHIBITS and REPORTS ON FORM 8-K.............................16 SIGNATURES...............................................................18 2 PART I FINANCIAL INFORMATION Item 1. FINANCIAL INFORMATION Condensed Consolidated Financial Statements: The Centris Group, Inc. Condensed Consolidated Balance Sheets (Dollars in Thousands) ASSETS
June 30, 1998 December 31,1997 ------------- ---------------- Investments, at market (amortized cost $224,979 at June 30,1998, $214,407 at December 31,1997) $234,445 $223,824 Cash and invested cash 5,537 11,122 Restricted cash and short term investments 29,099 27,947 Accrued investment income 3,489 3,196 Receivables: Reinsurance losses and reserves 34,116 26,932 Premiums 34,858 26,012 Prepaid reinsurance premiums 11,071 7,799 Deferred policy acquisition costs 4,113 4,495 Other assets 11,653 11,921 -------- -------- Total assets $368,381 $343,248 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Insurance liabilities: Amounts due insurance companies $ 47,632 $ 36,470 Losses and loss adjustment expenses 130,630 116,801 Unearned premiums 31,854 30,249 Note payable 29,850 32,500 Accounts payable and accrued expenses 2,461 9,638 -------- -------- Total liabilities 242,427 225,658 Stockholders' Equity 125,954 117,590 -------- -------- Total liabilities and stockholders' $368,381 $343,248 equity ======== ========
See accompanying notes to condensed consolidated financial statements. 3 The Centris Group, Inc. Condensed Consolidated Income Statements (Dollars in Thousands, except per share data)
Quarter Ended Six Months Ended June 30 June 30 -------------- -------------- 1998 1997 1998 1997 -------------- -------------- -------------- ------------- Revenues: Premiums earned $43,840 $38,103 $ 85,273 $77,386 Commissions and fees 9,139 8,140 17,833 16,182 Net investment income 3,259 2,712 6,408 5,403 Realized investment gains 1,955 78 2,596 255 ------- ------- -------- ------- 58,193 49,033 112,110 99,226 Total revenues ------- ------- -------- ------- Operating Expenses: Losses and loss adjustment expenses incurred 33,735 27,526 64,116 55,522 Policy acquisition expenses 11,881 11,083 24,047 22,992 General and administrative expenses 5,339 4,447 9,970 8,901 Interest 547 614 1,103 1,228 ------- ------- -------- ------- Total operating expenses 51,502 43,670 99,236 88,643 ------- ------- -------- ------- Income before income taxes 6,691 5,363 12,874 10,583 Income tax expense 2,190 1,615 4,139 3,175 ------- ------- -------- ------- Net income $ 4,501 $ 3,748 $ 8,735 $ 7,408 ======= ======= ======== ======= Basic earnings per share $ 0.37 $ 0.32 $ 0.72 $ 0.62 ======= ======= ======== ======= Diluted earnings per share $ 0.36 $ 0.31 $ 0.70 $ 0.61 ======= ======= ======== =======
See accompanying notes to condensed consolidated financial statements. 4 The Centris Group, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in Thousands)
Six Months Ended June 30, ------------------------- 1998 1997 --------- --------- Cash provided by operating activities $ 6,645 $ 4,659 -------- -------- Cash flows from investing activities: Purchases of fixed maturity investments (18,433) (16,983) Purchases of equity securities (5,546) (627) Proceeds from sales of investment securities 25,884 14,310 Net purchases of short term investments (10,613) (937) Purchases of property and equipment (471) (447) -------- -------- Cash used in investing activities (9,179) (4,684) -------- -------- Cash flows from financing activities: Payment on note payable (2,650) (1,250) Dividends paid (738) (716) Exercise of stock options 337 161 -------- -------- Cash (used in) provided by financing activities (3,051) (1,805) -------- -------- Net (decrease) increase in cash and invested cash (5,585) (1,830) Cash and invested cash at beginning of period 11,122 11,132 -------- -------- Cash and invested cash at end of period $ 5,537 $ 9,302 ======== ======== Supplemental disclosure of cash flow information: Interest paid $ 1,096 $ 1,160 ======== ======== Income taxes paid, net $ 4,123 $ 2,580 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 The Centris Group, Inc. Notes to Condensed Consolidated Financial Statements 1. General The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1997 included in the 1997 Annual Report to Stockholders of The Centris Group, Inc. (the "Company"). 2. Other SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" will be adopted by the Company for the year ended December 31, 1998. Historically, the Company has reported segment information which conforms to the requirements of SFAS 131. Accordingly, adoption of this standard is not expected to result in a significant change to the Company's financial disclosures. 3. Stock Split On February 3, 1998, the Company announced that its Board of Directors had authorized a two-for-one split of its common stock in the form of a 100% stock dividend to stockholders of record as of February 18, 1998. Certificates reflecting the stock split were issued February 27, 1998. All references in the financial statements to number of shares, per share amounts and market prices of the Company's common stock have been adjusted retroactively for all periods presented to reflect this change in capital structure. 6 4. Income Per Share Reconciliation of income and outstanding shares and related per share amounts adjusted to reflect the February 27, 1998 two-for-one stock split, is presented below (in thousands of dollars, except per share data):
Quarter Ended Six months Ended June 30 June 30 1998 1997 1998 1997 ---- ---- ---- ---- Income(Numerator) Income available to Common Stockholders for Basic and Diluted income per share $4,501 $3,748 $8,735 $7,408 Weighted Average Shares (Denominator) Basic Shares 12,180 11,920 12,174 11,922 Effect of dilutive securities Common Stock Equivalents 377 240 318 244 --- --- --- --- Diluted Shares 12,557 12,160 12,492 12,166 ====== ====== ====== ====== Per Share Amounts Basic Income per Share $0.37 $0.32 $0.72 $0.62 Diluted Income per Share $0.36 $0.31 $0.70 $0.61 5. Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income" was adopted by the Company effective January 1, 1998. Comprehensive income represents a measure of all changes in equity of an enterprise that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. Comprehensive income for the quarterly periods ended June 30, 1998 and 1997 was $3,872,000 and $8,075,000, respectively. Comprehensive income for the six-month periods ended June 30, 1998 and 1997 was $8,767,000 and $9,596,000, respectively. The Company's Comprehensive Income is comprised of net income for the period plus the tax effected increase or decrease in unrealized gains occurring during the period. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results Of Operations - --------------------- Consolidated revenues of The Centris Group, Inc. (the "Company") increased 19% to $58,193,000 for the second quarter ended June 30, 1998 from $49,033,000 in the 1997 second quarter, and increased 13% to $112,110,000 for the first six months of 1998 from $99,226,000 for the 1997 six month period. Revenue improvements in the 1998 periods as compared to 1997 result from growth in the provider excess product line combined with the results of the east coast treaty branch, acquired from The Hanover Insurance Company in 1997. Net investment income reflects a 19% increase over the 1997 six month period as a result of higher levels of invested assets arising from higher production levels in each business segment. Changes in realized gains in the 1998 periods as compared to the 1997 periods arise from the continuous evaluation of the investment portfolio to enhance and maintain yields and total return consistent with the Company's investment guidelines. Insurance and reinsurance companies establish reserves for losses incurred, but not yet paid or reported, in order to match such losses with the related premiums earned. The process of establishing loss reserves is subject to uncertainties that are a normal, recurring aspect of the insurance business which requires the use of informed judgments and estimates. Loss and loss adjustment expense("LAE") reserve development is reviewed on a regular basis, incorporating analysis of current trends, market changes in the Company's business segments and historical experience to analyze the Company's actuarial assumptions. As additional experience and other data becomes available, the Company's actuarial estimates may be revised. Such revisions may impact earnings. Losses and LAE increased 15% to $64,116,000 in the 1998 six month period from $55,522,000 in the 1997 period and increased 23% to $33,735,000 in the second quarter of 1998 from $27,526,000 in the 1997 second quarter. These changes principally result from higher production levels and changes in claim cost experience in each business segment, combined with the impact of severe wind, hail and tornado activity during late winter and early spring of 1998 in the midwestern and southeastern regions of the United States which produced $1,300,000 and $1,600,000 of catastrophe losses during the second quarter and six-month periods of 1998, respectively. See segment information contained herein for additional disclosures. Policy acquisition expenses vary on the basis of market conditions and mix of business. Increases in general and administrative expenses between the periods presented reflect the additional expenses attributable to three acquisitions completed during 1997. General and administrative expenses remained at 9% of revenues in all periods presented, reflecting the Company's ongoing emphasis on productivity. 8 Consolidated net income increased 20% to $4,501,000 for the second quarter of 1998 from $3,748,000 in the second quarter of 1997, and increased 18% to $8,735,000 for the first six months of 1998 as compared to $7,408,000 in the 1997 six month period. Principal elements contributing to these results include increased production levels, offset by changes in claim cost experience within each segment and higher levels of realized gains from the investment portfolio. Income taxes as a percentage of pre-tax income fluctuate depending on the proportion of tax exempt investment income to total pre-tax income and the proportion of total income subject to state income taxes. The increase in the effective income tax rate in the 1998 period as compared to 1997 includes the tax effect of acquired companies. The statutory combined ratio is the traditional indicator of the potential underwriting profitability of an insurance company's business. The Company's statutory combined ratios were 101.7 and 98.4 for the six-month periods ended June 30, 1998 and 1997, respectively. Business Segments - ----------------- The Company conducts business in two segments: MEDICAL LINES includes medical stop-loss and provider excess coverages - ------------- underwritten by USBenefits Insurance Services, Inc. ("USBenefits") on behalf of The Continental Insurance Company ("Continental"), one of the CNA Insurance Companies, reinsurance of 50% of such business by USF RE INSURANCE COMPANY ("USF RE") and commissions from catastrophic accident and health risks underwritten and managed nationally and internationally by INTERRA Reinsurance Group, Inc. ("INTERRA"). USBenefits is the underwriting manager and marketing organization for medical lines coverages issued on behalf of Continental and for group life insurance coverage issued by an affiliate of Continental. Medical stop-loss coverage is a form of excess insurance that protects employers that self-fund their employee healthcare plans by capping their exposure from the risk of loss. Provider excess coverage limits the financial risks which healthcare providers face from medical plans that prepay the providers fixed amounts per plan participant (capitated fees) or provide specified rates for services. USBenefits also markets other employee benefits related products. Medical lines products are marketed through a network of unaffiliated third party administrators, insurance agents, brokers and consultants. PROPERTY/CASUALTY reinsurance and insurance underwriting is conducted by USF RE - ----------------- and its wholly-owned subsidiary USF Insurance Company ("USFIC"). These subsidiaries both carry an A (Excellent) rating from A.M. Best Company and USF RE is assigned a claims paying ability rating of Aq (Good) by Standard & Poor's. Insurance companies purchase reinsurance in order to control and manage the risks they accept when they issue policies. USF RE assumes facultative and treaty reinsurance from unaffiliated insurance 9 companies, primarily through reinsurance intermediaries. Facultative is reinsurance of one risk at a time, while reinsurance treaties cover a portion of all policies written by another insurer in a particular risk category. USF RE concentrates its casualty writings in commercial auto liability, general liability and products liability. It also provides a broad range of coverages for most types of property exposures. USFIC writes surplus lines insurance on commercial property/casualty risks which are marketed through independent excess and surplus lines brokers. The tables set forth below present pre-tax operating information by business segment and holding company operations (including realized gains) for the quarters and six month periods ended June 30, 1998 and 1997, respectively. Medical lines - ------------- (Dollars in Thousands)
Quarter Ended Six Months Ended June 30 June 30 -------------------------------------- -------------------------------------- 1998 1997 %Change 1998 1997 %Change ---------- --------- ------------- ---------- ---------- ------------ Revenues: Premiums earned $27,279 $25,538 7% $53,119 $50,570 5% Commissions and fees 8,982 8,140 10% 17,520 16,182 8% Investment income 1,063 886 20% 2,060 1,751 18% ------- ------- ------- ------- Total revenues 37,324 34,564 8% 72,699 68,503 6% ------- ------- ------- ------- Expenses: Losses and loss adjustment 20,770 18,224 14% 38,994 36,110 8% Policy acquisition 9,081 8,963 1% 18,173 17,569 3% General and administrative 3,404 3,254 5% 6,679 6,593 1% ------- ------- ------- ------- Total expenses 33,255 30,441 9% 63,846 60,272 6% ------- ------- ------- ------- Income before income taxes $ 4,069 $ 4,123 (1)% $ 8,853 $ 8,231 8% ======= ======= ======= =======
In medical lines, total revenues in the 1998 periods advanced primarily as a result of increases in premiums earned, which reflects 1998 year-to-date growth of 4% in the Company's medical stop-loss business and of 71% in its provider excess line, offset by the planned runoff of certain business acquired as part of the Company's 1997 purchase of Global Excess Re. Increases in loss and LAE experience in the 1998 periods reflects the completion of the runoff of certain business acquired as part of the Company's 1997 purchase of Global 10 Excess Re plus increases in medical stop loss formula reserves consistent with current competitive market conditions. Policy acquisition expenses vary due to the level of production activity, mix of business and market conditions. Increases in general and administrative expenses in the 1998 quarter and year-to-date periods primarily result from the 1997 acquisition of INTERRA. Property/Casualty - ----------------- (Dollars in Thousands)
Quarter Ended Six Months Ended June 30 June 30 --------------------------------------- --------------------------------------- 1998 1997 % Change 1998 1997 % Change --------- ---------- -------------- ---------- ---------- ------------- Revenues: Premiums earned $16,562 $12,565 32% $32,155 $26,816 20% Commissions and fees 157 - 313 - Investment income 2,159 1,812 19% 4,287 3,626 18% ------- ------- ------- ------- Total revenues 18,878 14,377 31% 36,755 30,442 21% ------- ------- ------- ------- Expenses: Losses and loss adjustment 12,965 9,302 39% 25,122 19,412 29% Policy acquisition 2,800 2,120 32% 5,874 5,423 8% General and administrative 1,707 913 87% 2,802 1,811 55% ------- ------- ------- ------- Total expenses 17,472 12,335 42% 33,798 26,646 27% ------- ------- ------- ------- Income before income taxes $ 1,406 $ 2,042 (31)% $ 2,957 $ 3,796 (22)% ======= ======= ======= =======
Within the property/casualty sector, strong competition in treaty and facultative lines continues to impact pricing and contract terms. Increased revenues in the 1998 periods are primarily attributable to business from the east coast treaty branch (acquired from The Hanover Insurance Company in September 1997) which was renewed into USF RE. Changes in losses and LAE between periods reflect a change in the mix of business to a smaller proportion of property business, which carries a lower formula loss ratio than casualty business, combined with increased reserving in casualty lines. Losses and LAE in the 1998 periods also reflect the impact of severe wind, hail and tornado activity during late winter and early spring of 1998 in the midwestern and southeastern regions of the United States which produced $1,300,000 and $1,600,000 of catastrophe losses during the second quarter and six-month periods of 1998, respectively. There were no catastrophic losses experienced during the 1997 periods. Policy acquisition expenses in 1998 as compared to 1997 vary based upon the mix of business. 11 Holding Company - --------------- (Dollars in Thousands)
Quarter Ended Six Months Ended June 30 June 30 -------------------------- --------------------------- 1998 1997 % Change 1998 1997 % Change ------ ------ -------- ------ ------- -------- Revenues: Investment income $ 36 $ 14 157% $ 60 $ 26 131% Realized gains 1,955 78 -- 2,596 255 918% ------ ----- ------ ------- Total revenues 1,991 92 -- 2,656 281 845% ------ ----- ------ ------- Expenses: General and administrative 228 280 (19)% 489 497 (2)% Interest 547 614 (11)% 1,103 1,228 (10)% ------ ----- ------ ------- Total expenses 775 894 -- 1,592 1,725 (8)% ------ ----- ------ ------- Loss before income taxes $1,216 $(802) -- $1,064 $(1,444) -- ====== ===== ====== =======
Changes in realized gains in the 1998 period as compared to the 1997 period arise from the continuous evaluation of the investment portfolio to enhance and maintain yields and total return consistent with the Company's investment guidelines. Declines in general and administrative expenses in the 1998 quarter reflect an emphasis on cost control. Declines in interest expense in the 1998 period reflect quarterly reductions in the outstanding balance of bank debt under the Company's Credit Agreement, principal payments on which commenced in March 1997, and changes in the variable interest rate charged on the outstanding balance. Inflation - --------- The healthcare marketplace has long been subject to the effects of increases in costs of services. Inflation in the costs of healthcare tends to generate increases in premiums for medical lines coverage, resulting in greater revenues. Inflation can also negatively impact insurance and reinsurance operations by causing higher claims settlements than may have originally been estimated, while not necessarily allowing an immediate increase in premiums to a level necessary to maintain profit margins. Historically the Company has made no explicit provisions for inflation, but economic trends are considered when setting underwriting terms and claim reserves. Such reserves are subjected to a continual internal and external review processes to assess their adequacy and are adjusted as deemed appropriate. Overall economic trends also affect interest rates, which in turn affect investment income and the market value of the Company's investment portfolio. 12 Liquidity and Capital Resources - ------------------------------- Primary sources of cash from operations include premium collections, investment income and commissions and fees. The principal uses of cash from operations are for premium payments to insurance companies, payments of claims under USF RE's and USFIC's reinsurance and insurance contracts, debt reduction, and operating expenses such as salaries, commissions, taxes and general overhead. The Company's Credit Agreement contains certain covenants, restrictions and dividend payment limitations with which the Company was in compliance at June 30, 1998. The Company anticipates that it will continue to generate sufficient cash flow from operations to cover its short-term (1-18 months) and long-term (18 months to 3 years) liquidity needs. While the Company currently has no immediate plans for significant capital outlays, from time to time it contemplates acquisition opportunities that complement its business operations. The Company's investment portfolio reflects a current allocation of approximately 94% in fixed-income investments, both taxable and tax free, with an "AA" average fixed income portfolio rating, and 6% in equities. All such securities are carried at quoted market values at the latest balance sheet date. The portfolio is not exposed to real estate investments, derivatives, high yield bonds, private placements or mortgage loans. Year 2000 - --------- As the year 2000 approaches, the Company recognizes the need to ensure that its operations will not be adversely affected by year 2000 computer software issues. The Company has a formal plan in place to evaluate and implement solutions to year 2000 computer software issues. The evaluation phase of the plan, which was completed in December 1997, included an analysis of the Company's software systems, identification of software enhancements required to address year 2000 issues and identification of those vendors and business partners that may impact Company operations. The Company's significant operational and financial software systems are provided by third party vendors who the Company has confirmed have also been focusing on addressing year 2000 issues. The Company is presently upgrading its software products and expects to complete this phase of its plan, including testing year 2000 changes, during 1998. The cost of the year 2000 remediation plan is not considered material to the Company's financial position. The Company will continue to make investments in its software systems to ensure year 2000 compliance for all its business processing systems. 13 Forward Looking Statements - -------------------------- Some of the statements included within this quarterly report on Form 10-Q, including but not limited to Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements and related notes thereto, which are not historical facts may be considered to be forward looking statements within the meaning of Section 29A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and therefore are subject to certain risks and uncertainties which could cause the actual results to differ materially from those suggested by such statements. Such risks and uncertainties include, but are not limited to the following: catastrophic losses or a material aggregation of such losses in the Company's insurance lines; changes in federal or state law affecting an employer's ability to self-insure or other adverse regulatory changes; the adequacy of the Company's reinsurance program; general economic conditions in this country or abroad; adverse developments in the securities markets and their impact on the Company's investment portfolio; the effects of competitive market pressures within the medical lines or property/casualty marketplaces; the effect of changes required by generally accepted accounting practices or statutory accounting practices; and other risks which are described from time to time in the company's filings with the Securities and Exchange Commission. The words "believes", "anticipates", "expects" and similar expressions are intended to identify forward looking statements. 14 PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's 1997 Annual Meeting of Stockholders ("Annual Meeting") was held on May 13, 1998 at the Company's offices in Costa Mesa, California. A total of 11,083,000 shares were voted at the Annual Meeting by proxy, representing 91.1% of the 12,166,796 shares of the Company's $.01 par value common stock issued, outstanding and eligible to vote on the record date, March 20, 1998. (b) The Company's board currently consists of seven directors, each serving for three years, who are divided into three classes. Two directors are elected at two Annual Meetings and three directors are elected at a third Annual Meeting. At this 1998 Annual Meeting, the Company's stockholders elected three of the Company's seven directors for a term of three years, expiring at the Annual Meeting of Stockholders in the year 2001. Management nominated long-term directors David L. Cargile, Charles L. Schultz and Howard S. Singer, and no individuals were nominated in opposition to management's slate of directors. Set forth below are the results of the voting for the director nominees as reported by the Inspector of Elections for the Company's Annual Meeting. There were no broker non-votes on this proposal. Name For Withhold - ------------------ ---------- -------- David L. Cargile 11,066,883 16,150 Charles L. Schultz 11,057,483 25,550 Howard S. Singer 11,066,883 16,150 The directors who are continuing in office are John F. Kooken, L. Steven Medgyesy, Bernard H. Ross and Roxani M. Gillespie. (c) The Company's stockholders were asked to consider two other matters as noted below. The affirmative vote of a majority of the shares of the Company's common stock present at the Annual Meeting in person or by proxy and entitled to vote was required for adoption of each such matter. The results of the vote on each of these proposals as reported by the Inspector of Elections are set forth below. (1) A stockholder proposal recommending the Board consider strategic options, including a sale of the Company. For Against Abstain Broker Non-Votes ---------- ------- ------- ---------------- 738,097 7,885,778 201,780 -0- 15 (2) Ratification of the selection by the Board of Directors of KPMG Peat Marwick LLP to continue to serve as the Company's independent auditors for the fiscal year ending December 31, 1997. For Against Abstain Broker Non-Votes ---------- ------- ------- ---------------- 10,076,269 995,174 11,590 -0- Item 6. EXHIBITS and REPORTS ON FORM 8-K. (a) The following is a list of exhibits required to be filed as part of this Form 10-Q by Item 601 of Regulation S-K: 3.1, 4.1 The Company's Restated Certificate of Incorporation, as amended, as presently in effect. Filed as Exhibits 3.1 and 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by this reference. 3.2, 4.2 The Bylaws of the Company, as amended, as presently in effect. Filed as Exhibits 3.2 and 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by this reference. 4.3 Stock Certificate of the Company. Filed as Exhibit 4.3 to the Company's Quarterly report on Form 10-Q for the quarter ended June 30, 1997, and incorporated herein by this reference. 4.4 Rights Agreement. Filed as Exhibit 2 to the Company's Current Report on Form 8-K dated May 24, 1990, and incorporated herein by this reference. 4.5 First Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated January 16, 1992, and incorporated herein by this reference. 4.6 Second Amendment to Rights Agreement. Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 29, 1994, and incorporated herein by this reference. 4.7 Third Amendment to Rights Agreement. Filed as Exhibit 4 to the Company's Current Report on Form 8-K dated September 28, 1995, and incorporated herein by this reference. 4.8 Fourth Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated July 23, 1997, and incorporated herein by this reference. 16 4.9 Fifth Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated January 28, 1998, and incorporated herein by this reference. 10.1* Corrected Centris Group, Inc. Directors 1991 Stock Option plan, as Amended and Restated. 10.2* Corrected Centris Group, Inc. Directors Stock Option agreement. 11* The Centris Group, Inc. and Subsidiaries Computation of Earnings Per Share. 15* Independent Auditors' letter regarding unaudited interim financial information. 27* Financial Data Schedules (b) During the second quarter of 1998 the Company did not file any Current Reports on Form 8-K with the Securities and Exchange Commission. * Describes exhibits filed with this Quarterly Report on Form 10-Q. _____________ * Describes the exhibits filed with this Quarterly Report on Form 10-Q. 17 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. The Centris Group, Inc. Date: July 23, 1998 By: /s/ DAVID L. CARGILE ------------------------- DAVID L. CARGILE Chairman of the Board, President and Chief Executive Officer Date: July 23, 1998 By: /s/ CHARLES M. CAPORALE ------------------------- CHARLES M. CAPORALE Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 18 EX-10.1 2 CORRECTED CENTRIS GROUP, INC. DIRECTORS 1991 STOCK EXHIBIT 10.1 The Centris Group, Inc. 1991 Directors Stock Option Plan Amended and Restated As of July 26, 1995 and March 27, 1996 ________________________________ I. General Provisions 1.1 Purposes of the Plan. The Centris Group, Inc. has adopted this 1991 Directors Stock Option Plan, to enable the Company to attract and retain the services of experienced and knowledgeable Non-employee Directors and to align further their interests with those of the stockholders of the Company by providing for or increasing the proprietary interests of the Non-employee Directors in the Company. 1.2 Plan History. The Centris Group, Inc. 1991 Directors Stock Option Plan was originally adopted by the Board of Directors of the Company on March 6, 1991 and approved by the Company's stockholders on May 23, 1991. It was amended and restated by the Board of Directors of the Company on December 18, 1991 and was submitted to and approved by the Company's stockholders at the 1992 Annual Meeting of Stockholders held on May 27, 1992. The Plan was further amended and restated by the Board of Directors of the Company on July 26, 1995 and on March 27, 1996, and will, as so amended, be submitted to the Company's stockholders for approval at the Company's 1996 Annual Meeting of Stockholders. Further non- material amendments were adopted by the Board without stockholder action in January, 1998. 1.3 Definitions. The following terms, when used in this Plan, shall have the meanings set forth in this Section 1.3: (a) "Award" means an award of any Stock Option under the Plan. (b) "Board" or "Board of Directors" means the Board of Directors of the Company. (c) "Change in Control" means the following and shall be deemed to occur if any of the following events occur: (i) Any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding voting securities; (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall, for the purposes of this Plan, be considered as though such person were a member of the Incumbent Board; (iii) The stockholders of the Company approve a merger or consolidation with any other corporation, other than (A) A merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than 50% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such merger or consolidation, or (B) A merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquired 50% or more of the combined voting power of the Company's then outstanding voting securities; or (iv) The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or other disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the preceding provisions of this Section 1.3(c), a Change in Control shall not be deemed to have occurred (1) if the "person" described in the preceding provisions of this Section 1.3(c) is an underwriting or underwriting syndicate that has acquired the ownership of 50% or more of the combined voting power of the Company's then outstanding voting securities solely in connection with a public offering of the Company's securities; (2) if the "person" described in the preceding provisions of this Section 1.3(c) is an employee stock ownership plan or other employee benefit plan maintained by the Company (or any of its affiliated companies) that is qualified under the provisions of the Employee Retirement Security Act of 1974, as amended; or (3) if the person described in clause (i) of the preceding provisions of this subsection (c) would not otherwise be a beneficial owner of 25% or more of the combined voting power of the Company's then outstanding voting securities but for a reduction in the number of outstanding voting securities resulting from a stock repurchase program or other similar plan of the Company or from a self tender offer of the Company, which plan or tender offer commenced on or after the date hereof; provided, however, that the term "person" shall include such person from and after the first date upon which (A) such person, since the date of the commencement of such plan or tender offer, shall have acquired beneficial ownership of, in the aggregate, a number of voting securities of the Company equal to 1% or more of the voting securities of the Company then outstanding, and (B) such person, together with all affiliates and associates of such person, shall beneficially own 25% or more the voting securities of the Company then outstanding. (d) "Common Stock" means the common stock of the Company, par value $0.01 per share. (e) "Company" means The Centris Group, Inc., a Delaware corporation, or any successor thereto. (f) "Fair Market Value" of shares of stock shall be calculated on the basis of the closing price of stock of that class on the day in question (or, if such day is not a trading day in the U.S. securities markets, on the nearest preceding trading day), as reported with respect to the principal market (or the composite of the markets, if more than one) in which such shares are then traded; or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or national quotation system on which such shares are then quoted; or, if not so quoted, as furnished by a professional securities dealer making a market in such shares selected by the Board or a committee of the Board; or if no such dealer is available, then the Fair Market Value shall be determined in good faith by the Board. (g) "Nonemployee Director" means any member of the Board of Directors who is not an employee of the Company or of any parent corporation (as defined in Section 424 of the Internal Revenue Code of 1986, as amended) with respect to the Company. (h) "Participant" means any Nonemployee Director who receives an Award pursuant to the terms of the Plan. (i) "Plan" means The Centris Group, Inc. 1991 Directors Stock Option Plan, as set forth herein, as amended from time to time. (j) "Stock Option" means a right to purchase Common Stock which is the subject of an Award under this Plan. 1.4 Common Shares Subject to Plan. (a) Subject to the provisions of Section 1.4(c) and 4.1, the maximum number of shares of Common Stock which may be issued pursuant to Awards under this Plan shall not exceed 300,000 (as adjusted for the February, 1998 100% stock split) shares. (b) The shares of Common Stock to be delivered under the Plan shall be made available, at the discretion of the Board of Directors, either from authorized but unissued shares of Common Stock, or from previously issued shares of Common Stock reacquired by the Company, including shares purchased in the open market. (c) Shares of Common Stock, subject to the unexercised portion of any Stock Option granted under this Plan that expires, terminates or is canceled, will again become available for grant of further Awards under this Plan. II. Awards of Stock Options 2.1 Award Grants. (a) Each Nonemployee Director who is serving as a member of the Board of Directors as of July 26, 1995 shall automatically be granted, effective as of July 26, 1995, an Award consisting of Stock Options covering 6,000 (as adjusted) shares of Common Stock. (b) Each Nonemployee Director who is serving as a member of the Board of Directors on the third business day following the 1996 Annual Meeting of Stockholders shall automatically be granted an Award consisting of Stock Options covering 6,000 (as adjusted) shares of Common Stock, effective as of the date of such grant. (c) Each Nonemployee Director who is serving as a member of the Board of Directors on the third business day following the Annual Meeting of Stockholders of every calendar year commencing with the 1997 Annual Meeting of Stockholders shall automatically be granted an Award, effective as of the date of such grant, consisting of Stock Options covering between 6,000 and 9,000 (as adjusted) shares of Common Stock, the exact number of Stock Options to be determined based on the following formula: (i) if the Company's Return On Equity is 15% or less, the grant shall be for options representing 6,000 (as adjusted) shares; (ii) if the Return On Equity is more than 15% but less than 18%, the grant shall be for options representing 8,000 (as adjusted) shares; and (iii) if the Return On Equity is greater than 18%, the grant shall be for options representing 9,000 (as adjusted) shares. (d) Each Nonemployee Director who is newly appointed or elected as such after the third business day following the Annual Meeting of Stockholders of any calendar year, but prior to the Annual Meeting of Stockholders of the next calendar year, shall, upon the date of such appointment or election, automatically be granted an Award consisting of Stock Options covering that number of shares of Common Stock (exclusive of fractional shares) equal to the product of 6,000 multiplied by a fraction the numerator of which is the number of days until the next Annual Meeting of Stockholders and the denominator of which is 365. 2.2 Return on Equity. For purposes of this Article II, "Return On Equity" for any fiscal year shall mean net income for such fiscal year as determined by generally accepted accounting principles, divided by stockholders' equity as of December 31 of the prior fiscal year as reported in the Company's audited consolidated financial statements. 2.3 Award Procedures. All Nonemployee Directors shall receive Awards under this Plan, which Awards shall be granted automatically as provided in this Article II. A Nonemployee Director to whom an Award has been made shall be notified of the Award, and the Company shall promptly cause to be prepared and executed a written agreement evidencing the Stock Options which are the subject of such Award. 2.4 Securities Law Requirements. Shares of Common Stock shall not be offered or issued under this Plan unless the offer, issuance and delivery of such shares shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the California Corporate Securities Law of 1968, as amended, and the requirements of any stock exchange upon which the Common Stock may then be listed. As a condition precedent to the issuance of shares of Common Stock pursuant to an Award, the Company may require the Participant to take any reasonable action to comply with such requirements. III. Stock Options 3.1 Purchase Price. The purchase price of Common Stock issuable upon exercise of each Stock Option shall be the Fair Market Value, as of the date of grant of the Stock Option, of the Common Stock subject to such Stock Option. 3.2 Stock Option Term. Unless earlier exercised or terminated pursuant to the provisions of Sections 3.3 or 3.4 of this Article III, each Stock Option shall expire and no longer be exercisable on a date which is ten years after the date of grant. 3.3 Exercise of Stock Options. (a) Options covering 25% of the shares of Common Stock subject to a grant of Stock Options shall become exercisable upon the expiration of each full year of service as a Nonemployee Director of the Company following the date of grant of such Stock Options, and such Stock Options may thereafter be exercisable until all of the Stock Options of such grant are exercised or expire as provided in this Article III. (b) At the time of the exercise of a Stock Option, the purchase price shall be paid in full in cash, or in shares of Common Stock valued at their Fair Market Value as of the exercise date. No fractional shares will be issued pursuant to the exercise of a Stock Option, nor will any cash payment be made in lieu of fractional shares. Holders of Stock Options may purchase fewer than the total number of shares of Common Stock granted in a Stock Option, provided that a partial exercise of a Stock Option may not be for less than 100 shares, unless fewer than 100 shares remain unexercised in an Award in which case the entire remaining Stock Option must be exercised at one time. 3.4 Termination of Director Status. In the event that the holder of Stock Options ceases to be a director of the Company as a result of death, disability or retirement ("Termination"), and provided that such holder has been a director of the Company for at least one year at the time of Termination, all Stock Options granted to a Director, whether or not exercisable on the effective date of such Termination, shall not expire at that time, but shall thereafter continue to be exercisable by the Option holder (or, in the event of the death of the Option holder, by the transferee holder pursuant to a will or in accordance with the laws of descent and distribution) until expiration of the applicable option term. In the event the option holder dies within one year of initial election or appointment to the Board, the options will continue to be exercisable by will or according to the laws of descent and distribution for a period of three years following the date of death. If for any reason other than death an optionee ceases to be a Director within one year of the Director's initial election or appointment to the Board, any options granted under the Director Plan and held by such Director shall be canceled as of the date of such termination. 3.5 Rights With Respect to Common Stock. No Participant and no beneficiary or other person claiming under or through such Participant will have any right, title or interest in or to any shares of Common Stock subject to any Stock Option unless and until such Stock Option is duly exercised pursuant to the terms of this Plan. IV. Adjustment Provisions 4.1 Changes in Outstanding Securities. Subject to Section 4.2 below, (i) if the outstanding shares of Common Stock of the Company are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company, or if additional shares or different shares or other securities of the Company are distributed in respect of such shares of Common Stock (or any stock or securities received with respect to such Common Stock), through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off or other distribution with respect to such shares of Common Stock (or any stock or securities received with respect to such Common Stock), or (ii) of the value of the outstanding shares of Common Stock of the Company is reduced by reason of an extraordinary cash dividend, an appropriate or proportionate adjustment may be made in (x) the maximum number and kind of shares provided in Section 1.4 of Article I, and (y) the number and kind of shares or other securities subject to then outstanding Stock Options, and (z) the purchase or exercise price for each share of Common Stock subject to an outstanding Stock Option. 4.2 Change of Control. In addition to the adjustments permitted by Section 4.1 above, upon the occurrence of a Change in Control any outstanding Stock Options not theretofore exercisable shall immediately become exercisable in their entirety, notwithstanding any of the other provisions of the Plan. 4.3 Termination of Independent Corporate Status. Upon the dissolution or liquidation of the Company or upon a reorganization, merger or consolidation of the Company with one or more corporations, as a result of which the Company goes out of existence or becomes a subsidiary of another corporation, or upon a sale of substantially all of the property of the Company to another corporation (in each of such cases a "Corporate Termination Event"), this Plan shall terminate. Any Stock Option theretofore granted under the Plan and not exercised on or prior to the Corporate Termination Event shall expire and terminate, unless provision be made in writing in connection with such Corporate Termination Event for the assumption of the Stock Option or the substitution for such Stock Option of a new option covering the stock of a successor corporation, or a parent or subsidiary thereof or of the Company, with appropriate adjustments as to number and kind of shares and prices, in which event such Stock Option shall continue in the manner and under the terms so provided. 4.4 Other Adjustments. Adjustments under this Article IV will be made by the Board, whose determination as to what adjustments will be made and the extent thereof will be final, binding and conclusive. No fractional interests will be issued under the Plan resulting from any such adjustments. V. Miscellaneous Provisions 5.1 Amendment, Suspension, Termination or Interpretation of the Plan. (a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such action shall: (i) increase the maximum number of shares specified in Section 1.4(a) of Article I, unless approved by the stockholders of the Company; (ii) alter, terminate or impair in any manner which is materially adverse to a Participant any Award previously granted; (iii) change the nondiscretionary manner in which Awards are made under Article II; or (iv) change, more than once in any six-month period, provisions of the Plan dealing with the amount of any Award, the purchase price of the Common Stock which is the subject of any Award, the timing of the grant of any Awards, or the exercisability features of Awards. (b) Questions of interpretation of any of the provisions of the Plan shall be resolved by competent legal counsel for the Company selected by the Chief Executive Officer of the Company. 5.2 Effective Date and Duration of Plan. This Plan has been approved by the Board and shall become effective as of March 27, 1996, subject to its approval by the holders of a majority of the outstanding shares of Common Stock present in person or by proxy and entitled to vote at the first meeting of the stockholders of the Company occurring after March 27, 1996. This Plan shall terminate at such time as the Board, in its discretion, shall determine. No Award may be granted under the Plan after the date of such termination, but such termination shall not affect any Award theretofore granted and any shares of Common Stock subject thereto. 5.3 Director Status. Nothing in this Plan or in any instrument executed pursuant hereto shall confer upon any Nonemployee Director any right to continue as a member of the Board of Directors of the Company or any subsidiary thereof. 5.4 No Entitlement to Shares. No Nonemployee Director (individually or as a member of a group) and no beneficiary or other person claiming under or through such Nonemployee Director shall have any right, title or interest in or to any shares of Common Stock allocated or reserved for the purpose of the Plan or subject to any Award except as to such shares of Common Stock, if any, as shall have been issued to such Nonemployee Director. A Nonemployee Director's rights to any shares of Common Stock issued to the name of such Nonemployee Director pursuant to an Award under this Plan shall be subject to such limitations and restrictions as are set forth in or imposed pursuant to this Plan. 5.5 Withholding of Taxes. The Company may make such provisions as it deems appropriate for the withholding by the Company pursuant to federal or state income tax laws of such amounts as the Company determines it is required to withhold in connection with any Award. The Company may require a Participant to satisfy any relevant tax requirements before authorizing any issuance of Common Stock to such Participant or payment of any other benefit hereunder to such Participant. Any such settlement shall be made in the form of cash, a certified or bank cashier's check or such other form of consideration as is satisfactory to the Board. 5.6 Transferability. No Award granted under this Plan shall be assignable or transferable except (i) by will or by the laws of descent and distribution, or (ii) subject to the final sentence of this Section 5.6, upon dissolution of marriage pursuant to a qualified domestic relations order or, in the discretion of the Committee and under circumstances that would not adversely affect the interest of the Company, pursuant to a nominal transfer that does not result in a change in beneficial ownership. During the lifetime of a Participant, an Award granted to such person shall be exercisable only by the Participant (or the Participant's permitted transferee) or such person's guardian or legal representative. Notwithstanding the foregoing, no Award may be assigned or transferred in any manner inconsistent with Rule 16b-3. 5.7 Other Plans. Nothing in this Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to directors generally, which the Company now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan. 5.8 Singular, Plural; Gender. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender, as the context may require. 5.9 Applicable Law. This Plan shall be governed by, interpreted under and construed and enforced in accordance with the internal laws of the State of Delaware. 5.10 Successors. The Plan and any agreement with respect to an Award shall be binding upon the successors and assigns of the Company and upon each Participant and such Participant's heirs, executors, administrators, personal representatives, permitted assignees and successors in interest. EX-10.2 3 CORRECTED CENTRIS GROUP, INC. AND SUBSIDIARIES EXHIBIT 10.2 THE CENTRIS GROUP, INC. The Centris Group, Inc. 1991 Directors Stock Option Plan, Amended and Restated as of July 26, 1995 and March 27, 1996 STOCK OPTION AGREEMENT This Stock Option Agreement (the "Agreement") is made effective as of May 18, 1998, by and between THE CENTRIS GROUP, INC. (the "Company") and Full Name (the --------- "Optionee"), pursuant to that certain The Centris Group, Inc. 1991 Directors Stock Option Plan Amended and Restated as of July 25, 1995 and March 27, 1996 (the "Plan"). 1. Stock Option Granted. Subject to the limitations set forth herein and in -------------------- the Plan, Optionee may purchase all or any part of an aggregate of 6,000 shares of Common Stock of the Company (the "Shares") at an exercise price of $13.69 per share, payable in cash or in Common Stock of the Company as set forth in the Plan. 2. Exercise Features. Stock Options granted by this Agreement shall be ----------------- exercisable pursuant to the terms and conditions of the Plan, which include but are not limited to the following: A. Options covering 25% of the shares of Common Stock subject to the grant of Options under this Agreement shall become exercisable upon the expiration of each full year of service as a Nonemployee Director of the Company following the date of grant as set forth above, and except as noted in paragraph "B" below, these Stock Options shall remain exercisable under the Plan until all of such Stock Options are exercised or ten (10) years from the date of this grant, whichever first occurs. B. In the event the Option Holder dies within one (1) year of his/her initial election or appointment to the Board of Directors, the Options granted under this Agreement will continue to be exercisable by will or according to the laws of descent and distribution for a period of three (3) years following the date of death; if, however, for any reason other than death the Option Holder ceases to be a Nonemployee Director of the Company within one (1) year of his/her initial election or appointment, any Options granted under this Agreement shall be cancelled as of the date of such termination. 3. General. This Agreement shall be governed by and construed in accordance ------- with the internal laws of the State of Delaware, shall be binding upon the successors and assigns of the parties hereto and shall be subject to all of the terms and provisions of the Plan, a copy of which has been delivered to Optionee, receipt of which is acknowledged by the Optionee's execution hereof. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. OPTIONEE: THE CENTRIS GROUP, INC. Full Name - --------- David L. Cargile, Chairman of the Board, President and Chief Executive Officer EX-11 4 THE CENTRIS GROUP, INC. COMPUTATION OF EARNINGS EXHIBIT 11 The Centris Group, Inc. Computation of Earnings Per Share The computation of per share income is based upon the weighted average number of common and common equivalent shares outstanding during each of the quarters and six-month periods ended June 30 as follows: (Dollars in Thousands)
Quarter Ended Six Months Ended June 30 June 30 ------------------------ ------------------------ 1998 1997 1998 1997 ---------- ----------- ---------- ----------- Net Income $ 4,501 $ 3,748 $ 8,735 $ 7,408 ======= ======= ======= ======= Weighted average shares outstanding during the period (Basic Shares) 12,180 11,920 12,174 11,922 Common stock equivalent shares 377 240 318 244 ------- ------- ------- ------- Common and common stock equivalent shares outstanding for purposes of calculating diluted income per share 12,557 12,160 12,492 12,166 Basic income per share $ 0.37 $ 0.32 $ 0.72 $ 0.62 ------- ------- ------- ------- Diluted income per share $ 0.36 $ 0.31 $ 0.70 $ 0.61 ======= ======= ======= =======
EX-15 5 INDEPENDENT AUDITORS' LETTER EXHIBIT 15 Independent Auditors' Review Report ----------------------------------- The Board of Directors and Shareholders The Centris Group, Inc.: We have reviewed the condensed consolidated balance sheet of The Centris Group, Inc. and subsidiaries as of June 30, 1998, and the related condensed consolidated income statements for the quarters and six-month periods ended June 30, 1998 and 1997, and condensed consolidated statements of cash flows for the six-month periods ended June 30, 1998 and 1997. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Centris Group, Inc. and subsidiaries as of December 31, 1997, and the related consolidated income statement, statements of stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 3, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG PEAT MARWICK LLP Los Angeles, California July 17, 1998 EX-27 6 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 0 0 0 0 0 0 234,445 34,636 34,116 4,113 368,381 130,630 31,854 0 0 29,850 0 0 0 0 368,381 85,273 6,408 2,596 17,833 64,116 24,047 11,073 12,874 4,139 0 0 0 0 8,735 0.72 0.70 0 0 0 0 0 0 0
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