-----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, St35HNgwGeV0Bw2zL/Kr4OQk8T8L6Uu4ig5CGrtHuJASSLsyJB+ysFZEwnZiH9d5 qZwJtVvL7/Nwo1C2ZCDQKQ== 0000818155-98-000010.txt : 19980515 0000818155-98-000010.hdr.sgml : 19980515 ACCESSION NUMBER: 0000818155-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALSHIRE ASSURANCE COMPANY CENTRAL INDEX KEY: 0000818155 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 232023240 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16267 FILM NUMBER: 98619488 BUSINESS ADDRESS: STREET 1: 3350 WHITEFORD RD STREET 2: PO BOX 3849 CITY: YORK STATE: PA ZIP: 17402 BUSINESS PHONE: 7177570000 MAIL ADDRESS: STREET 1: 3350 WHITEFORD RD STREET 2: PO BOX 3849 CITY: YORK STATE: PA ZIP: 174020138 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 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 0-16267 WALSHIRE ASSURANCE COMPANY (Exact name of registrant as specified in its charter) Pennsylvania 23-2023240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification Number) 3350 Whiteford Road, P. O. Box 3849, York, PA 17402-0138 (Address of principal executive offices) (Zip code) (717)757-0000 (Registrant s telephone number, including area code) (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 Indicate the number of shares outstanding of each of the issuer s classes of common stock, as of the latest practical date. Class: Outstanding at April 30, 1998: Common stock - $.01 Par Value 4,714,858 shares WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES INDEX PAGE NUMBER Part I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 . . . . . . . . . 2 Consolidated Statements of Income for the three months ended March 31, 1998 and 1997 (unaudited) . . 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997 (unaudited) . . 5 Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . 6 Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . 7 Part II OTHER INFORMATION . . . . . . . . . . . . . . . . . 8 Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 8 Item 2. Changes in Securities . . . . . . . . . . . . . . . 8 Item 3. Defaults Upon Senior Securities . . . . . . . . . . 8 Item 4. Submission of Matters to a Vote of Security Holders. 8 Item 5. Other Information . . . . . . . . . . . . . . . . . 8 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 8 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) March 31, December 31, Assets 1998 1997 (Unaudited) Investments: Held to maturity: Fixed maturities (fair value $16,499 and $17,754) . . . . . . . . . . . . . . . . $ 16,001 $ 17,228 Available for sale: Fixed maturities (cost $41,072 and $37,722) . . . . . . . . . . . . . . . . 41,518 38,182 Equity securities (cost $7,875 and $8,268). . . . . . . . . . . . . . . . . 8,445 8,205 Short-term investments . . . . . . . . . . . . 4,635 7,531 Other investments. . . . . . . . . . . . . . . 1,515 2,656 Total investments . . . . . . . . . . . . . 72,114 73,802 Cash. . . . . . . . . . . . . . . . . . . . . . . 539 254 Accrued investment income receivable. . . . . . . 804 800 Amounts receivable from reinsurers. . . . . . . . 3,360 3,698 Amounts receivable from reinsured company . . . . 573 542 Agents balances (net of allowance for doubtful accounts of $120). . . . . . . . . . . . . . . 7,088 7,411 Installment premiums receivable . . . . . . . . . 8,323 7,681 Agents balances and installment premiums receivable from related parties. . . . . . . . 1,486 1,897 Premium finance receivables (net of unearned finance charges and allowance for credit losses of $89 and $84) . . . . . . . . . . . . 4,046 4,283 Reinsurance receivable. . . . . . . . . . . . . . 25,030 24,370 Deferred acquisition costs. . . . . . . . . . . . 4,682 4,778 Property and equipment (net of accumulated depreciation of $2,325 and $2,194) . . . . . . 3,348 3,462 Other assets. . . . . . . . . . . . . . . . . . . 1,375 1,464 Total assets. . . . . . . . . . . . . . . . $132,768 $134,442 See accompanying notes to consolidated financial statements. 2 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets, Continued (In thousands, except per share data) March 31, December 31, Liabilities and Shareholders Equity 1998 1997 (Unaudited) Liabilities: Unpaid claims and claim settlement expenses. $ 49,530 $ 48,964 Unearned premiums. . . . . . . . . . . . . . 26,749 27,384 Short-term notes payable . . . . . . . . . . 4,187 5,015 Long-term notes payable. . . . . . . . . . . 400 558 Deposits by insureds . . . . . . . . . . . . 2,437 2,445 Commissions payable to agents. . . . . . . . 1,401 1,442 Commissions payable to related parties . . . 126 163 Other liabilities. . . . . . . . . . . . . . _ 847 980 Total liabilities . . . . . . . . . . . . 85,677 86,951 Shareholders equity: Preferred stock, par value $.01 per share; 2,000 shares authorized; 123 shares issued and outstanding. . . . . . . . . . 1 1 Common stock, par value $.01 per share; 10,000 shares authorized; 4,714 and 4,710 shares issued and outstanding . . . 47 47 Additional paid-in capital . . . . . . . . . 38,825 38,812 Unrealized gains on investments available for sale (net of deferred taxes of $345 and $135. . . . . . . . . . . . . . . . . 671 262 Retained earnings. . . . . . . . . . . . . . 7,547 8,369 Shareholders equity. . . . . . . . . . . 47,091 47,491 Total liabilities and shareholders equity . $132,768 $134,442 See accompanying notes to consolidated financial statements. 3 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share data) Three Months Ended March 31,_____ 1998 1997 (Unaudited)(Unaudited) Revenues: Premiums earned . . . . . . . . . . . . . . . . . $ 13,539 $ 15,646 Premiums ceded. . . . . . . . . . . . . . . . . . ( 2,347) ( 3,499) Net premiums earned . . . . . . . . . . . . . . . 11,192 12,147 Net investment income . . . . . . . . . . . . . . 1,066 982 Net realized gains on investments . . . . . . . . 227 636 Other . . . . . . . . . . . . . . . . . . . . . . 118 163 Total revenues . . . . . . . . . . . . . . . . 12,603 13,928 Expenses: Claims and claim settlement expenses. . . . . . . 11,562 10,813 Reinsurance recoveries. . . . . . . . . . . . . . ( 1,919) ( 1,720) Net claims and claim settlement expenses. . . . . 9,643 9,093 Amortization of deferred acquisition costs. . . . 2,018 1,600 Underwriting, general and administrative expenses. . . . . . . . . . . . . . . . . . . . 1,538 2,236 Interest. . . . . . . . . . . . . . . . . . . . . 96 190 Total expenses . . . . . . . . . . . . . . . . 13,295 13,119 Income (loss) before income taxes. . . . . . . . . . ( 692) 809 Provision for income taxes (benefit) . . . . . . . . ( 276) 142 Net income (loss). . . . . . . . . . . . . . . . . . ( 416) 667 Dividends on convertible preferred stock . . . . . . 100 104 Net income (loss) applicable for common stock. . . . $( 516) $ 563 Net income (loss) per common share: Basic and diluted: Net income (loss). . . . . . . . . . . . . . . $( .11) $ .12 Weighted average shares outstanding. . . . . . 4,711 4,656 See accompanying notes to consolidated financial statements. 4 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Three Months Ended March 31, _______ 1998 1997 (Unaudited) (Unaudited) Cash flows from operating activities: Net income (loss). . . . . . . . . . . . . . . . . $( 416) $ 667 Adjustments to reconcile net income (loss) to net cash provided by operating activities Net realized gains on investments. . . . . . . ( 227) ( 636) Decrease (increase) in assets: Accrued investment income receivable. . . . . ( 4) ( 58) Amounts receivable from reinsurers. . . . . . 338 ( 213) Amounts receivable from reinsured company . . ( 31) ( 15) Agents balances and installment premiums receivable . . . . . . . . . . . . . . . . . ( 319) 58 Agents balances and installment premiums receivable from related parties. . . . . . . 411 460 Premium finance receivables . . . . . . . . . 237 ( 235) Reinsurance receivables . . . . . . . . . . . ( 660) ( 695) Deferred acquisition costs. . . . . . . . . . 96 ( 256) Other, net. . . . . . . . . . . . . . . . . . 221 ( 278) (Decrease) increase in liabilities: Unpaid claims and claim settlement expenses . 566 3,699 Unearned premiums . . . . . . . . . . . . . . ( 635) ( 57) Deposits by insureds. . . . . . . . . . . . . ( 8) ( 107) Other, net. . . . . . . . . . . . . . . . . . ( 219) ( 530) Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . ( 650) 1,804 Cash flows from investing activities: Purchase of investments: Held to maturity . . . . . . . . . . . . . . . . - (2,334) Available for sale . . . . . . . . . . . . . . . (8,722) (3,773) Sale of investments: Available for sale . . . . . . . . . . . . . . . 4,684 6,766 Maturity of investments. . . . . . . . . . . . . . 2,446 805 Net sale (purchase) of short term and other investments . . . . . . . . . . . . . . . . . . . 4,120 (4,212) Purchase of property and equipment . . . . . . . . ( 18) ( 147) Sale of property and equipment . . . . . . . . . . - 13 Other, net . . . . . . . . . . . . . . . . . . . . ( 194) 288 Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . 2,316 (2,594) Cash flows from financing activities: Cash dividends paid. . . . . . . . . . . . . . . . ( 406) ( 407) Issuance of common stock . . . . . . . . . . . . . 12 78 Proceeds from notes payable . . . . . . . . . . . - 844 Payment of notes payable . . . . . . . . . . . . . ( 987) ( 130) Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . . (1,381) 385 Net increase (decrease) in cash. . . . . . . . . . . 285 ( 405) Cash at beginning of the period. . . . . . . . . . . 254 637 Cash at end of the period. . . . . . . . . . . . . . $ 539 $ 232 Se e accompanying notes to consolidated financial statements. 5 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The consolidated balance sheet as of March 31, 1998, the consolidated statements of income for the three months ended March 31, 1998 and 1997 and the consolidated statements of cash flows for the three months then ended have been prepared by Walshire Assurance Company ( the Company ) without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 1998 and for all periods presented, have been made. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company s 1997 Annual Report. The results of operations for the period ended March 31, 1998 are not necessarily indicative of the results of operations for the full year. 3. Basic net income per share is computed by dividing net income applicable for common stock by the weighted average number of common shares outstanding during the year. Diluted earnings per share includes the additional shares that would have been outstanding had the 6 1/2% Convertible Preferred Stock been converted to common, if dilutive, as well as the diluted effect of the Company's stock option and stock purchase plans. 4. Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", was issued by the Financial Accounting Standards Board (FASB) in 1997. As defined in SFAS 130, comprehensive income is composed of net income, as well as other revenues, expenses, gains and losses that are currently excluded from net income, but are accounted for separately in the shareholders' equity section of the balance sheet. SFAS 130 requires that all items of comprehensive income be reported in a financial statement. Total comprehensive income (loss) is as follows: (In thousands) Three Months Ended March 31, _______ 1998 1997 (Unaudited) (Unaudited) Net income (loss) . . . . . . . . . . . . . . . . . $(416) $ 667 Other comprehensive income (loss): Unrealized gain (loss) on securities, net of tax: Unrealized holding gains (losses) arising during period . . . . . . . . . . . . . . . . 559 (106) Less: reclassification adjustment for gains realized in net income. . . . . . . . . . . . 150 420 Net unrealized gain (loss). . . . . . . . . . . 409 (526) Other comprehensive income (loss) . . . . . . . . . 409 (526) Total comprehensive income (loss) . . . . . . . . . $( 7) $ 141 6 5. Forward Looking Statements. The information contained in this Quarterly Report contains forward looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder), including without limitation, statements as to the allowances for doubtful accounts and credit losses, reserves for unpaid claims and claim settlement expenses, the classification of the Company's investment portfolio and other statements as to management's beliefs, expectations or opinions. Such forward looking statements are subject to risks and uncertainties and may be affected by various factors which may cause actual results to differ materially from those in the forward looking statements. Certain of these risks, uncertainties and other factors are discussed in this Quarterly Report or in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, a copy of which may be obtained from the Company upon request and without charge (except for the exhibits thereto). 6. Investment Considerations. In analyzing whether to make, or to continue, an investment in the Company, investors should consider, among other factors, certain investment considerations more particularly described in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations Revenues for the three month period ended March 31, 1998 decreased $1.3 million, or 9.5%, from revenues for the three month period ended March 31, 1997. This decrease was primarily the result of a decrease in net premiums earned, a direct result of a decrease in direct premiums written over the past twelve months, and a decrease in net realized gains on investments. Direct premiums written decreased 21.3% in the three month period ended March 31, 1998 when compared to the same period in 1997. This decrease is a result of continued price competition within the property and casualty insurance industry. The following table sets forth the direct premiums written by the Company for the three month periods ended March 31, 1998 and 1997 by line of business. (In thousands) Three months ended March 31, 1998 1997 %Change Auto liability $ 6,375 $ 7,626 (16.4)% Auto physical damage 3,448 4,898 (29.6)% Inland marine 804 1,024 (21.5)% Workers compensation 580 1,178 (50.8)% Homeowners 500 590 (15.3) Other 1,191 1,064 11.9 % Total $12,898 $16,380 (21.3)% Expenses for the three month period ended March 31, 1998 increased $.2 million, or 1.3%, over expenses for the three month period ended March 31, 1997. The increase was primarily the result of increases in net claims and claim settlement expenses, offset, in part by a decrease in underwriting, general and administrative expenses. Increases in net claims and claim settlement expenses were the result of an increase in the statutory loss ratio from 76.4% in 1997 to 87.2% in 1998. The increase in the statutory loss ratio was primarily the result of a higher loss ratio in the company's commercial auto liability business. The increase in the loss ratio is the result of the continued price competition within the industry, resulting in less premium per insured unit. Decreases in underwriting, general and administrative expenses 7 were primarily the result of a reduction in staffing and other related expenses during the third quarter of 1997. The statutory combined ratio for the three month period ended March 31, 1998 was 117.7%, an increase from 107.8% for the three month period ended March 31, 1997. Liquidity and Capital Resources Historically, the Company has generated funds sufficient to support its operations and has maintained a high degree of liquidity in its investment portfolio. The primary sources of funds to meet the demands of claim settlements and operating expenses are premiums, ceding commissions, investment income and existing lines of credit. The Company s funds generally are invested in securities with maturities intended to provide adequate funds to pay claims and expenses without the forced sale of investments. The Company believes that its current cash and short term investments, together with funds generated from operations, will be sufficient to meet its operating and capital requirements for the foreseeable future. Part II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K None 8 SIGNA TURES Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WALSHIRE ASSURANCE COMPANY (Registrant) DATE: May 11, 1998 /s/ Kenneth R. Taylor Kenneth R. Taylor President and Chief Executive Officer DATE: May 11, 1998 /s/ Gary J. Orndorff Gary J. Orndorff Vice President/Treasurer and Chief Financial Officer 9 EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 03-MOS DEC-31-1998 MAR-31-1998 41,518 16,001 16,499 8,445 95 0 72,114 539 3,933 4,682 132,768 49,780 26,749 0 2,437 4,587 47 0 1 46,878 132,768 11,192 1,066 227 118 9,893 2,018 1,538 (942) (361) 0 0 0 0 (581) (.14) (.14) 48,964 9,185 707 1,936 5,688 48,940 0
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