-----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, UI2Op5F8816R2DQNRvMddDrEXJWGz4LXi+j0/OEk/i4w/Nmh7777JtyvpkjF5wjF hUuhjDc4BrQCYSiBA8wosQ== 0000818155-96-000017.txt : 19961118 0000818155-96-000017.hdr.sgml : 19961118 ACCESSION NUMBER: 0000818155-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961114 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: 1934 Act SEC FILE NUMBER: 000-16267 FILM NUMBER: 96666394 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: September 30, 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 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 October 31, 1996: Common stock - $.01 Par Value 4,226,739 shares WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES INDEX PAGE NUMBER Part I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995. . . . . . . . . . . 2 Consolidated Statements of Income for the three months ended September 30, 1996 and 1995 (unaudited). . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Income for the nine months months ended September 30, 1996 and 1995 (unaudited) . 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited) . 6 Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . 7 Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 8 Part II OTHER INFORMATION . . . . . . . . . . . . . . . . . . 10 Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 10 Item 2. Changes in Securities . . . . . . . . . . . . . . . . 10 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . 10 Item 4. Submission of Matters to Vote of Security Holders. . . 10 Item 5. Other Information . . . . . . . . . . . . . . . . . . 10 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data) September 30, December 31, Assets 1996 1995 (Unaudited) Investments: Held to maturity: Fixed maturities (fair value $17,036 and $15,712) . . . . . . . . . . . . . . . . $ 16,999 $ 15,217 Available for sale: Fixed maturities (cost $32,067 and $27,007) . . . . . . . . . . . . . . . . 31,927 27,215 Equity securities (cost $9,607 and $8,189). . . . . . . . . . . . . . . . . 9,846 8,720 Short-term investments . . . . . . . . . . . . 7,934 5,191 Other investments. . . . . . . . . . . . . . . 2,084 1,867 Total investments . . . . . . . . . . . . . 68,790 58,210 Cash. . . . . . . . . . . . . . . . . . . . . . . 415 99 Accrued investment income receivable. . . . . . . 916 864 Amounts receivable from reinsurers. . . . . . . . 2,317 3,315 Amounts receivable from reinsured company . . . . 632 595 Agents balances (net of allowance for doubtful accounts of $120 and $100) . . . . . . . . . . 7,704 5,501 Installment premiums receivable . . . . . . . . . 6,876 5,965 Agents balances and installment premiums receivable from related parties. . . . . . . . 3,496 3,694 Premium finance receivables (net of unearned finance charges and allowance for credit losses of $124 and $135) . . . . . . . . . . . 5,372 6,534 Reinsurance receivable. . . . . . . . . . . . . . 19,623 8,615 Deferred acquisition costs. . . . . . . . . . . . 4,943 4,831 Property and equipment, (net of accumulated depreciation of $1,688 and $1,284) . . . . . . 4,129 3,270 Other assets. . . . . . . . . . . . . . . . . . . 1,121 134 Total assets. . . . . . . . . . . . . . . . $126,334 $101,627 See accompanying notes to consolidated financial statements. 2 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets, Continued (In thousands, except per share data) September 30, December 31, Liabilities and Shareholders Equity 1996 1995 (Unaudited) Liabilities: Unpaid claims and claim settlement expenses. $ 33,741 $ 20,153 Unearned premiums. . . . . . . . . . . . . . 31,769 27,555 Short-term notes payable . . . . . . . . . . 6,323 2,250 Long-term notes payable. . . . . . . . . . . 1,206 1,481 Deposits by insureds . . . . . . . . . . . . 1,891 1,488 Commissions payable to agents. . . . . . . . 1,374 1,049 Commissions payable to related parties . . . 341 473 Other liabilities. . . . . . . . . . . . . . _ 1,574 1,164 Total liabilities . . . . . . . . . . . . 78,219 55,613 Shareholders equity: Preferred stock, par value $.01 per share; 2,000 shares authorized; 142 shares issued; 129 and 138 shares outstanding. . 1 1 Common stock, par value $.01 per share; 10,000 shares authorized; 4,215 and 4,064 shares issued and outstanding . . . 42 41 Additional paid-in capital . . . . . . . . . 32,806 31,918 Unrealized gain on investments available for sale (net of deferred taxes of $34 and $181) . . . . . . . . . . . . . . . . 65 558 Retained earnings. . . . . . . . . . . . . . 15,201 13,496 Shareholders equity. . . . . . . . . . . 48,115 46,014 Total liabilities and shareholders equity . $126,334 $101,627 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 September 30,_____ 1996 1995 (Unaudited)(Unaudited) Revenues: Premiums earned . . . . . . . . . . . . . . . . . $14,622 $ 11,452 Premiums ceded. . . . . . . . . . . . . . . . . . ( 2,956) ( 2,669) Net premiums earned . . . . . . . . . . . . . . . 11,666 8,783 Net investment income . . . . . . . . . . . . . . 821 705 Net realized gains on investments . . . . . . . . 272 108 Other . . . . . . . . . . . . . . . . . . . . . . 166 183 Total revenues . . . . . . . . . . . . . . . . 12,925 9,779 Expenses: Claims and claim settlement expenses. . . . . . . 9,509 5,054 Reinsurance recoveries. . . . . . . . . . . . . . ( 1,773) ( 129) Net claims and claim settlement expenses. . . . . 7,736 4,925 Amortization of deferred acquisition costs. . . . 1,909 891 Underwriting, general and administrative expenses. . . . . . . . . . . . . . . . . . . . 2,055 1,953 Interest. . . . . . . . . . . . . . . . . . . . . 118 65 Total expenses . . . . . . . . . . . . . . . . 11,818 7,834 Income before income taxes . . . . . . . . . . . . . 1,107 1,945 Provision for income taxes . . . . . . . . . . . . . 172 411 Net income . . . . . . . . . . . . . . . . . . . . . 935 1,534 Less dividends on convertible preferred stock. . . . 104 115 Net income available for common stock. . . . . . . . $ 831 $ 1,419 Net income per common share and common equivalent share: Primary: Net income . . . . . . . . . . . . . . . . . . $ .19 $ .33 Weighted average shares outstanding. . . . . . 4,343 4,261 Fully diluted: Net income . . . . . . . . . . . . . . . . . . $ .19 $ .32 Weighted average shares outstanding. . . . . . 4,886 4,846 See accompanying notes to consolidated financial statements. 4 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share data) Nine Months Ended September 30, _ 1996 1995 (Unaudited)(Unaudited) Revenues: Premiums earned . . . . . . . . . . . . . . . . . $42,799 $ 33,348 Premiums ceded. . . . . . . . . . . . . . . . . . ( 9,015) ( 7,523) Net premiums earned . . . . . . . . . . . . . . . 33,784 25,825 Net investment income . . . . . . . . . . . . . . 2,294 2,040 Net realized gains on investments . . . . . . . . 1,041 247 Other . . . . . . . . . . . . . . . . . . . . . . 528 531 Total revenues . . . . . . . . . . . . . . . . 37,647 28,643 Expenses: Claims and claim settlement expenses. . . . . . . 26,276 16,040 Reinsurance recoveries. . . . . . . . . . . . . . ( 3,462) ( 1,359) Net claims and claim settlement expenses. . . . . 22,814 14,681 Amortization of deferred acquisition costs. . . . 5,295 3,399 Underwriting, general and administrative expenses. . . . . . . . . . . . . . . . . . . . 5,743 5,115 Dividends to policyholders. . . . . . . . . . . . 117 - Interest. . . . . . . . . . . . . . . . . . . . . 291 212 Total expenses . . . . . . . . . . . . . . . . 34,260 23,407 Income before income taxes . . . . . . . . . . . . . 3,387 5,236 Provision for income taxes . . . . . . . . . . . . . 554 1,100 Net income . . . . . . . . . . . . . . . . . . . . . 2,833 4,136 Less dividends on convertible preferred stock. . . . 320 345 Net income available for common stock. . . . . . . . $ 2,513 $ 3,791 Net income per common share and common equivalent share: Primary: Net income . . . . . . . . . . . . . . . . . . $ .58 $ .90 Weighted average shares outstanding. . . . . . 4,344 4,208 Fully diluted: Net income . . . . . . . . . . . . . . . . . . $ .58 $ .86 Weighted average shares outstanding. . . . . . 4,896 4,825 See accompanying notes to consolidated financial statements. 5 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) except per share data) Nine Months Ended September 30, ____ 1996 1995 (Unaudited) (Unaudited) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . $ 2,833 $ 4,136 Adjustments to reconcile net income to net cash provided by operating activities Net realized gains on investments. . . . . . . ( 1,041) ( 247) Decrease (increase) in assets: Accrued investment income receivable. . . . . ( 52) - Amounts receivable from reinsurers. . . . . . 998 ( 962) Amounts receivable from reinsured company . . ( 37) ( 143) Agents balances and installment premiums receivable . . . . . . . . . . . . . . . . . ( 2,203) ( 846) Agents balances and installment premiums receivable from related parties. . . . . . . ( 713) ( 971) Premium finance receivables . . . . . . . . . 1,162 ( 930) Reinsurance receivables . . . . . . . . . . . (11,008) ( 439) Deferred acquisition costs. . . . . . . . . . ( 112) ( 404) Other, net. . . . . . . . . . . . . . . . . . ( 554) 669 (Decrease) increase in liabilities: Unpaid claims, claim settlement expenses and claim drafts outstanding . . . . . . . . . . 13,588 3,756 Unearned premiums . . . . . . . . . . . . . . 4,214 2,207 Deposits by insureds. . . . . . . . . . . . . 403 505 Other, net. . . . . . . . . . . . . . . . . . 603 460 Net cash provided by operating activities. . . . . 8,081 6,791 Cash flows from investing activities: Purchase of investments: Held to maturity . . . . . . . . . . . . . . . . ( 3,713) (2,410) Available for sale . . . . . . . . . . . . . . . (12,755) (5,440) Sale of investments: Available for sale . . . . . . . . . . . . . . . 4,703 3,929 Maturity of investments. . . . . . . . . . . . . . 4,267 785 Net (purchase) sale of short term and other investments. . . . . . . . . . . . . . . . . . . ( 2,939) 1,042 Purchase of property and equipment . . . . . . . . ( 1,301) (1,176) Sale of property and equipment . . . . . . . . . . 9 136 Other, net . . . . . . . . . . . . . . . . . . . . 403 ( 436) Net cash used in investing activities. . . . . . (11,326) (3,570) Cash flows from financing activities: Cash dividends paid. . . . . . . . . . . . . . . . ( 1,128) (1,060) Issuance of common stock . . . . . . . . . . . . . 890 307 Proceeds from notes payable . . . . . . . . . . . 4,159 750 Payment of notes payable . . . . . . . . . . . . . ( 360) (3,275) Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . 3,561 (3,278) Net increase (decrease) in cash. . . . . . . . . . . 316 ( 57) Cash at beginning of the period. . . . . . . . . . . 99 184 Cash at end of the period. . . . . . . . . . . . . . $ 415 $ 127 Se e accompanying notes to consolidated financial statements. 6 WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The consolidated balance sheet as of September 30, 1996, the consolidated statements of income for the three and nine months ended September 30, 1996 and 1995, and the consolidated statements of cash flows for the nine 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 September 30, 1996 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 1995 Annual Report. The results of operations for the period ended September 30, 1996 are not necessarily indicative of the results of operations for the full year. 3.Net income per common share is computed after recognition of preferred stock dividend requirements and is based on the weighted average number of shares of common stock and common stock equivalents outstanding. The number of common shares was increased by the number of shares issuable on the exercise of options when the market price of the common stock exceeds the exercise price of the options. This increase in the number of common shares was reduced by the number of common shares that are assumed to have been purchased with the proceeds from the exercise of the options; these purchases were assumed to have been made at the average price of the common stock during that part of the year when the market price of the common stock exceeded the exercise price of the options. Fully diluted net income per share was determined on the assumption that the convertible preferred stock was converted and the outstanding stock options were exercised on January 1, 1996 and 1995. As to the preferred stock, net income was adjusted for dividends declared. As to the options, outstanding shares were increased as described above except that purchases of common stock are assumed to have been made at the higher of the period-end price or the average price of the common stock during that part of the year when the market price of the common stock exceeded the exercise price of the options. 4. On September 30, 1996, the Company acquired Yorktowne Mutual Insurance Company and changed its name to Yorktowne Insurance Company ("Yorktowne"). Yorktowne is a multi-line writer operating solely in Pennsylvania; direct premiums written in 1995 were $6.7 million. This transaction, accounted for by the purchase method of accounting, should not materially affect Walshire's financial results for 1996. 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, liabilities 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 7 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, 1995, 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, 1995. Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations Revenues for the three month period ended September 30, 1996 increased $3.1 million, or 32.2%, from revenues for the three month period ended September 30, 1995. This increase was primarily the result of increases in net premiums earned. Direct premiums written increased $2.6 million, or 25.0%, in the three month period ended September 30, 1996 when compared to the same period in 1995. The following table sets forth the direct premiums written by the Company for the three month periods ended September 30, 1996 and 1995 by line of business. (In thousands) Three months ended September 30, 1996 1995 %Change Auto liability $ 5,092 $ 4,532 12.4% Auto physical damage 4,980 4,458 11.7% Workers compensation 1,955 768 154.6% Inland marine 752 545 38.0% Other 437 269 62.5% Total $13,216 $10,572 25.0% Expenses for the three month period ended September 30, 1996 increased $4.0 million, or 50.9%, over expenses for the three month period ended September 30, 1995. The increase was primarily the result of increases in net claims and claim settlement expenses and amortization of deferred acquisition costs. The increase in net claims and claim settlement expenses was the result of an increase in earned premiums, as well as an increase in the statutory loss ratio from 57.7% in 1995 to 67.7% in 1996. The increase in the loss ratio was due primarily to increases in the loss ratio of the Company's auto liability and auto physical damage products. These increases were a result of increased loss severity during the third quarter of 1996 when compared to the same period in 1995. The increase in the amortization of deferred acquisition costs was primarily the result of the increase in net premiums earned and a decrease in ceding commission income. The statutory combined ratio for the three month period ended September 30, 1996 was 99.4%, an increase from 87.3% for the three month period ended September 30, 1995. The decrease in the effective tax rate from 21% in 1995 to 16% in 1996 is primarily the result of a greater portion of net income being attributable to tax exempt interest. Revenues for the nine month period ended September 30, 1996 increased $9.0 million, or 31.4%, from revenues for the nine month period ended September 30, 1995. This increase was primarily the result of increases in net premiums earned and net realized gains on investments. Direct premiums written increased $7.6 million, or 21.4%, in the nine month period ended September 30, 1996 when compared to the same period in 1995. The following table sets forth the direct premiums written by the Company for the nine month periods ended September 30, 1996 and 1995 by line of business. 8 (In thousands) Nine months ended September 30, 1996 1995 %Change Auto liability $18,211 $15,927 14.3% Auto physical damage 16,390 13,540 21.0% Workers compensation 5,066 3,316 52.8% Inland marine 2,491 1,912 30.3% Other 802 684 17.3% Total $42,960 $35,379 21.4% Expenses for the nine month period ended September 30, 1996 increased $10.9 million, or 46.4%, over expenses for the nine month period ended September 30, 1995. The increase was primarily the result of increases in net claims and claim settlement expenses, amortization of deferred acquisition costs and underwriting, general and administrative expenses. Increases in net claims and claim settlement expenses were the result of increases in earned premiums, and an increase in the statutory loss ratio from 59.3% in 1995 to 68.9% in 1996. First quarter 1996 claims were negatively impacted by the most severe winter weather conditions in recent history. Claims in the second and third quarters of 1996 were higher due to an increase in the auto physical damage and auto liability loss ratios. These increases were a result of increased loss severity when compared to the same periods in 1995. The increase in the amortization of deferred acquisition costs was primarily the result of the increase in net premiums earned. Increases in underwriting, general and administrative expenses were primarily the result of increases in premiums written. The statutory combined ratio for the nine month period ended September 30, 1996 was 98.4%, an increase from 87.1% for the nine month period ended September 30, 1995. The decrease in the effective tax rate from 21% in 1995 to 16% in 1996 is a result of a greater portion of net income being attributable to tax exempt interest. 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. 9 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 Matter to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Exhibits (a) Exhibit 27.1 Financial data schedule Reports on Form 8-K None 10 SIGNATURES 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: November 14, 1996 /s/ Kenneth R. Taylor Kenneth R. Taylor President and Chief Executive Officer DATE: November 14, 1996 /s/ Gary J. Orndorff Gary J. Orndorff Vice President/Treasurer and Chief Financial Officer 11 EX-27 2
7 9-MOS DEC-31-1996 SEP-30-1996 31,927 16,999 17,036 9,846 110 0 68,790 415 2,949 4,943 126,334 33,741 31,769 0 1,891 7,529 42 0 1 48,072 126,334 42,799 2,294 1,041 528 22,814 5,295 5,743 3,387 554 0 0 0 0 2,833 .58 .58 14,207 23,273 1,217 12,522 7,206 33,481 0
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