-----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, UPsIImaNbztsei5O+T8bSvT+TXUToTFy7QNYYREoKTthH+Pc5E3tF/1SW5Z0oZJ+ 3ZOuolNEuiw3tGh2hMdw5Q== 0000936392-96-001245.txt : 19970102 0000936392-96-001245.hdr.sgml : 19970102 ACCESSION NUMBER: 0000936392-96-001245 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961120 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961230 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITATION INSURANCE GROUP CENTRAL INDEX KEY: 0000830122 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 942723335 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18786 FILM NUMBER: 96688346 BUSINESS ADDRESS: STREET 1: ONE ALMADEN BLVD STE 300 CITY: SAN JOSE STATE: CA ZIP: 95113-2213 BUSINESS PHONE: 4082920222 MAIL ADDRESS: STREET 1: ONE ALMADEN BLVD STREET 2: STE 300 CITY: SAN JOSE STATE: CA ZIP: 95113-2213 8-K/A 1 FORM 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 20, 1996 ----------------- PICO HOLDINGS, INC. ------------------- (Exact name of registrant as specified in charter) California 0-18786 94-2723335 ---------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.)
875 Prospect Street, Suite 301, La Jolla, California 92037 - ---------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (619) 456-2422 CITATION INSURANCE GROUP One Almaden Boulevard, Suite 300 San Jose, California 95113 --------------------------------- (Former name or former address, if changed since last report) 2 PICO Holdings, Inc., formerly Citation Insurance Group ("PICO" or the "Registrant") amends Item 7, FINANCIAL STATEMENTS AND EXHIBITS, to read in full as follows: ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of PICO. The financial statements of PICO, one of its subsidiaries and an affiliate and the related Notes and Reports of Independent or Chartered Accountants listed below (collectively, the "PICO Financial Statements") are incorporated herein by reference to pages F-1 through F-72 of the Registrant's Registration Statement on Form S-4 (File No. 333-06671). PICO Report of Independent Accountants Consolidated Balance Sheets as of December 31, 1995 and 1994 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 Notes to the Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 Consolidated Statements of Operations for the six months ended June 30, 1996 and 1995 (unaudited) Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) Notes to the Consolidated Financial Statements GLOBAL EQUITY CORPORATION (FORMERLY THE ONDAATJE CORPORATION) Report of Chartered Accountants Consolidated Statements of Financial Position for the Years Ended March 31, 1995 and 1994 Consolidated Statements of Operations for the Years Ended March 31, 1995, 1994 and 1993 Consolidated Statements of Deficit for the Years Ended March 31, 1995, 1994 and 1993 Consolidated Statements of Changes in Financial Position for the Years Ended March 31, 1995, 1994 and 1993 Notes to the Consolidated Financial Statements Consolidated Balance Sheets as of September 30, 1995 and 1994 Consolidated Statements of Operations for the six months ended September 30, 1995 and 1994 (unaudited) Consolidated Statements of Changes in Financial Position for the six months ended September 30, 1995 and 1994 (unaudited) Notes to the Consolidated Financial Statements (unaudited) SEQUOIA INSURANCE COMPANY Report of Independent Accountants Balance Sheets as of December 31, 1994 and 1993 Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992 Statements of Changes in Shareholder's Equity for the Years Ended 2 3 December 31, 1994, 1993 and 1992 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 Notes to Financial Statements Balance Sheets as of June 30, 1995 (unaudited) and December 31, 1994 Statements of Operations for the six months ended June 30, 1995 and 1994 (unaudited) Statements of Changes in Shareholder's Equity for the six months ended June 30, 1994 and 1995 (unaudited) Statements of Cash Flows for the six months ended June 30, 1995 and 1994 (unaudited) Notes to interim Financial Statements The Registrant includes in this filing financial statements of PICO for the nine month period ended and as of September 30, 1996. (b) Pro forma financial information. Pro forma financial information for the year ended December 31, 1995, the six months ended June 30, 1996 and as of June 30, 1996, are incorporated herein by reference to pages 54-59 of the Registrant's Registration Statement on Form S-4 (File No. 333-06671). The Registrant includes in this filing the pro forma financial information for the nine month period ended and as of September 30, 1996. (c) Exhibits.
Exhibit No. Description ----------- ----------- 2.2 Agreement and Plan of Reorganization dated as of May 1, 1996 among the Registrant, Citation Holdings, Inc. and PICO and amendment thereto dated August 14, 1996, incorporated herein by reference to exhibit filed with Amendment No. 2 to Registration Statement on Form S-4 (File No. 333-06671). 2.3* Second Amendment to Agreement and Plan of Reorganization dated November 12, 1996. 3.1* Amended and Restated Articles of Incorporation of the Registrant. 4.1 Rights Agreement dated July 22, 1991 between Citation and Security Pacific National Bank ("Rights Agreement"), incorporated herein by reference to exhibit filed with Form 8-A on July 22, 1991. 4.2* First Amendment to Rights Agreement dated April 30, 1996. 4.3* Second Amendment to Rights Agreement dated November 20, 1996. 16.1* Letter regarding change in Certifying Accountant from Deloitte & Touche, LLP, independent auditors. 23.1* Consent of Coopers & Lybrand L.L.P. 23.2* Consent of KPMG Peat Marwick Thorne, Chartered Accountants. 99.1 PICO Financial Statements, incorporated herein by reference to pages F-1 through F-72 of Registrant's Registration Statement on Form S-4 (File No. 333-06671).
3 4 99.2 Unaudited financial statements of PICO for the nine month period ended as of September 30, 1996 and 1995. 99.3 Unaudited pro forma combined financial statements for the nine month period ended and as of September 30, 1996.
- --------------- * Filed with Registrant's Form 8-K on December 4, 1996. 4 5 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 hereunto duly authorized. PICO HOLDINGS, INC. Date: December 30, 1996 By: /s/ Gary W. Burchfield --------------------------------------------------------- Gary W. Burchfield, Chief Financial Officer and Treasurer
5 6 EXHIBIT INDEX
Exhibit No. Description ----------- ----------- 2.2 Agreement and Plan of Reorganization dated as of May 1, 1996 among the Registrant, Citation Holdings, Inc. and PICO and amendment thereto dated August 14, 1996, incorporated herein by reference to exhibit filed with Amendment No. 2 to Registration Statement on Form S-4 (File No. 333-06671). 2.3* Second Amendment to Agreement and Plan of Reorganization dated November 12, 1996. 3.1* Amended and Restated Articles of Incorporation of the Registrant. 4.1 Rights Agreement dated July 22, 1991 between Citation and Security Pacific National Bank ("Rights Agreement") incorporated herein by reference to exhibit filed with Form 8-A on July 22, 1991. 4.2* First Amendment to Rights Agreement dated April 30, 1996. 4.3* Second Amendment to Rights Agreement dated November 20, 1996. 16.1* Letter regarding change in Certifying Accountant from Deloitte & Touche, LLP, independent auditors. 23.1* Consent of Coopers & Lybrand L.L.P. 23.2* Consent of KPMG Peat Marwick Thorne, Chartered Accountants. 99.1 PICO Financial Statements, incorporated herein by reference to pages F-1 through F-72 of Registrant's Registration Statement on Form S-4 (File No. 333-06671). 99.2 Unaudited financial statements of PICO for the nine month period ended as of September 30, 1996 and 1995. 99.3 Unaudited pro forma combined financial statements for the nine month period ended and as of September 30, 1996. - ----------------
* Filed with Registrant's Form 8-K on December 4, 1996. 6 EX-99.2 2 EXHIBIT 99.2 1 EXHIBIT 99.2 PHYSICIANS INSURANCE COMPANY OF OHIO AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1996 1995 ------------- ------------- (Unaudited) ASSETS Investments: Available for sale: Fixed maturities, at fair value (amortized cost $94,784,167 and $81,326,490) $ 93,810,473 81,573,579 Equity securities, at fair value (cost $64,561,467 and $63,945,369) 105,167,535 99,857,295 Investment in affiliate, at equity 28,086,983 32,974,930 Short-term investments, at cost 11,168,338 9,162,925 Real estate 1,623,201 3,038,750 ------------- ------------- Total investments 239,856,530 226,607,479 Cash and cash equivalents 19,481,509 43,987,805 Premiums and other receivables, net 7,530,332 10,927,156 Reinsurance receivables 91,929,975 100,719,416 Prepaid deposits and reinsurance premiums 2,848,107 16,623,918 Accrued investment income 1,622,529 1,716,672 Property and equipment, net 5,422,442 5,538,348 Deferred policy acquisition costs 5,123,414 2,894,644 Other assets 5,212,208 6,439,127 Assets held in separate accounts 6,116,068 6,361,040 ------------- ------------- Total assets $ 385,143,114 $ 421,815,605 ============= ============= LIABILITIES Policy liabilities and accruals: Unpaid losses and loss adjustment expenses, net of discount $ 213,293,973 $ 229,796,606 Future policy benefits and claims payable 12,321,044 15,576,716 Annuity and other policyholders' funds 31,711,044 31,976,176 Unearned premiums 21,261,524 30,858,612 Reinsurance balance payable 5,280,268 8,376,110 Deferred gain on retroactive reinsurance 3,270,070 3,500,544 Other liabilities 6,261,076 11,749,700 Deferred tax liability 6,378,610 4,174,461 Liabilities related to separate accounts 6,116,068 6,361,040 ------------- ------------- Total liabilities 305,893,677 342,369,965 ------------- ------------- Minority Interest (176,842) 96,295 ------------- ------------- SHAREHOLDERS' EQUITY Preferred stock, $1 par value, authorized 1,000,000 shares; none issued Common stock: Class A, $1 par value; authorized 8,000,000; issued 5,476,395 shares 5,476,395 5,476,395 Additional paid-in capital 12,007,240 11,933,320 Net unrealized appreciation on investments 26,658,979 23,827,817 Cumulative foreign currency translation adjustment 35,910 (14,792) Equity changes of investee company (588,814) (979,066) Retained earnings 42,461,621 39,906,703 ------------- ------------- 86,051,331 80,150,377 Less treasury stock, at cost (Class A shares 590,198 in 1996 272,498 shares in 1995) 6,625,052 (801,032) ------------- ------------- Total shareholders' equity 79,426,279 79,349,345 ------------- ------------- Total liabilities and shareholders equity $ 385,143,114 $ 421,815,605 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF OPERATIONS for the nine months ended September 30, 1996 and 1995
Three Months Ended September Nine Months Ended September 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) Revenues: Premium income $ 8,357,061 $ 5,330,979 $ 22,850,617 $ 15,100,278 Investment income, net 2,714,268 3,026,858 7,767,565 10,163,108 Realized gains on investments 2,251,067 4,074,484 3,096,198 4,773,383 Land sales 1,496,123 1,330,501 Commission income 74,344 38,834 406,588 92,143 Other income 320,359 6,157,988 912,435 6,512,664 ------------ ------------ ------------ ------------ Total revenues 13,717,099 18,629,143 36,529,526 37,972,077 ------------ ------------ ------------ ------------ Expenses: Loss and loss adjustment expenses 6,445,518 5,275,201 15,542,124 15,404,893 Benefits and claims 462,237 68,473 701,592 409,231 Interest credited to policyholders 573,572 613,135 1,737,346 1,819,218 Policy acquisition costs 38,292 125,905 74,742 Land sales 1,438 (31,260) 1,406,741 1,335,406 Insurance underwriting and other expenses 5,073,637 3,333,675 14,598,064 7,975,399 ------------ ------------ ------------ ------------ Total expenses 12,594,694 9,259,224 34,111,772 27,018,889 ------------ ------------ ------------ ------------ Equity in earnings of affiliate 577,104 923,537 27,018,889 ------------ ------------ ------------ ------------ Income before income taxes 1,699,509 9,369,919 3,341,291 10,953,188 Provision (benefit) for federal income 344,516 (5,507,417) 786,340 (5,468,698) ------------ ------------ ------------ ------------ taxes Net income $ 1,354,993 $ 14,877,336 $ 2,554,951 $ 16,421,886 ============ ============ ============ ============ Net income per common share and common equivalent share $ 0.27 $ 2.87 $ 0.49 $ 3.20 ============ ============ ============ ============ Weighted average shares outstanding 5,074,348 5,132,468 5,265,012 5,190,821 ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended September 30, 1996 and 1995 -------
1996 1995 ------------- ------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,554,951 $ 16,421,886 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes 745,672 (6,451,515) Depreciation and amortization 2,677,166 1,748,782 Realized gains on investments and property and equipment (3,184,701) (4,773,388) Equity in income of affiliate (632,893) Changes in assets and liabilities, net of effects from acquisitions of businesses: Premiums and other receivables 3,396,824 (5,041,067) Reinsurance recoverable and payable 19,469,410 (69,183,722) Accrued investment income 94,143 2,380,716 Deferred policy acquisition costs (4,109,648) (1,602,628) Unpaid losses and loss adjustment expenses (16,502,633) 47,799,001 Claims payable (1,577,789) (120,144) Unearned premiums (9,597,088) 10,430,777 Other (3,273,052) (1,000,348) ------------- ------------- Net cash (used in) operating activities (9,939,638) (9,391,650) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of investments: Available for sale: Fixed maturities 6,787,590 111,921,092 Equity securities 38,823,287 7,216,031 Proceeds from maturity of investments: Available for sale: Fixed maturities 9,345,393 14,418,792 Purchases of investments: Available for sale: Fixed maturities (30,061,188) (10,687,098) Equity securities (35,357,920) (57,331,124) Net (purchases) sales of short-term investments (2,005,413) 1,641,505 Net sales of real estate 1,457,389 1,193,311 Proceeds from sale of property and equipment 42,709 63,082 Purchases of property and equipment (222,903) (1,073,859) ------------- ------------- Net cash (used in) provided by investing activities (11,191,056) 67,361,732 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of bank and other borrowings (77,129) Net decrease in future policy benefits (3,255,672) (120,614) Net decrease in annuity and other policyholders' funds (265,132) 792,434 Issuance of treasury stock 94,500 350,000 ------------- ------------- Net cash (used in) provided by financing activities (3,426,304) 944,691 ------------- ------------- Effect of exchange rate changes on cash 50,702 ------------- ------------- Net (decrease) increase in cash and cash equivalents (24,506,296) 58,914,773 Cash and cash equivalents at beginning of year 43,987,805 21,058,769 ------------- ------------- Cash and cash equivalents at end of period $ 19,481,509 $ 79,973,542 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 4 PHYSICIANS INSURANCE COMPANY OF OHIO AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ----------------- 1. Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The interim financial statements include all adjustments (all of which are normal and recurring, in nature) which, in the opinion of management, are necessary in order to make the financial statements not misleading. For further information, refer to the consolidated financial statements and footnotes included in the Company's Form S-4 Registration Statement effective October 3, 1996. Certain reclassifications have been made to conform to the current presentation. 2. Subsequent Events On May 9, 1996, Physicians Insurance Company of Ohio ("PICO"), Guinness Peat Group plc ("GPG"), and the Ondaatje Corporation ("TOC") (TOC subsequently changed its name to Global Equity Corporation) entered into an agreement whereby GPG agreed to sell 850,000 Class A Shares of PICO common stock to TOC in two blocks, subject to regulatory approval at an average price of approximately US $18.00 per share. GPG agreed to sell the shares to TOC at a discount to market due to their status as restricted stock and in consideration of the quantity of shares to be purchased. On May 13, and June 4, 1996 TOC purchased the shares. Prior to these transactions, GPG owned approximately 40% of PICO common stock. Following these transactions, GPG and TOC own approximately 23% and 16% of PICO, respectively. The shares of PICO owned by TOC have been accounted for as treasury shares in the PICO consolidated financial statements. 3. Pending Business Transaction On March 4, 1996 the Company and The Citation Insurance Group ("CIG") announced that they had signed a letter of intent for a stock-for-stock merger, pursuant to which the Company will become a wholly owned subsidiary of CIG. As a result of the combination, the shareholders of the Company will own 80 percent of the combined company. The definitive agreement to merge the two companies was signed on May 3, 1996. On November 7, 1996, the shareholders of the Company and CIG voted for the approval of the merger. The closing date of the transaction was November 20, 1996. Upon consummation of the merger, CIG's name was changed to "PICO Holdings, Inc." EX-99.3 3 EXHIBIT 99.3 1 EXHIBIT 99.3 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined condensed balance sheet as of September 30, 1996 combines the historical consolidated balance sheets of Citation and PICO as if the pending Merger had been effective on September 30, 1996, after giving effect to the purchase accounting adjustments described in the accompanying notes. The unaudited pro forma combined condensed statements of operations present the combined results of operations of Citation and PICO for the nine months ended September 30, 1996, as if the acquisition had been effective on January 1, 1996, after giving effect to the purchase accounting adjustments described in the accompanying notes. Pursuant to the Merger Agreement between Citation and PICO, PICO acquired Citation in a reverse merger whereby each holder of a share of PICO Stock received a number of shares of Citation Common Stock equal to the Exchange Ratio. The Exchange Ratio was equal to the PICO Share Value divided by $5.03, and the PICO Share Value was the average of the closing price of one share of PICO Stock on the Nasdaq National Market for the 20 consecutive trading days ending with the trading day immediately prior to the Determination Date of November 17, 1996. The unaudited pro forma combined financial statements are prepared based on the PICO average trading price at the minimum level of $25.20. The unaudited pro forma combined condensed financial statements and accompanying notes reflect the application of the purchase method of accounting. Under this method of accounting, the purchase price will be allocated to Citation's assets acquired and liabilities assumed based on their estimated fair values at the time of the acquisition. As described in the accompanying notes, preliminary estimates of the fair values of assets and liabilities have been combined with the recorded values of the assets and liabilities of PICO. Changes to the adjustments included in the unaudited pro forma combined condensed financial statements are expected to be made as evaluations of assets and liabilities are completed and as additional information becomes available. Accordingly, the final combined amounts will differ from those set forth in the accompanying unaudited pro forma combined condensed financial statements. The unaudited pro forma combined condensed financial statements are intended for informational purposes only and are not necessarily indicative of the future financial position or future results of operations of the combined company or of the financial position or the results of operations of the combined company that would have actually occurred had the acquisition been in effect as of the date or for the periods presented. These unaudited pro forma combined condensed financial statements and the accompanying notes should be read in conjunction with the consolidated financial statements, including the accompanying notes, of Citation and PICO incorporated by reference in this Form 8-K. 2 PRO FORMA COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1996 (in thousands)
PHYSICIANS INSURANCE COMPANY PRO FORMA OF OHIO AND ADJUSTMENTS SUBSIDIARIES CITATION FOR MERGER WITH CONSOLIDATED INSURANCE GROUP CITATION (AS REPORTED) (AS REPORTED) INSURANCE GROUP (1) PRO FORMA ---------------- --------------- ------------------- --------- ASSETS Cash, cash equivalents, and other invested assets $30,650 $480 $31,130 Marketable securities 227,065 120,215 347,280 Land held for development 1,623 1,623 -------- -------- ------- -------- Total Investments 259,338 120,695 380,033 -------- -------- ------- -------- Premiums due and other receivables 7,530 8,837 16,367 Reinsurance receivables 91,930 11,882 103,812 Prepaid deposits and reinsurance premiums 2,848 2,814 5,662 Accrued investment income 1,623 2,159 3,782 Property and equipment, net 5,423 818 ($818)(d) 5,423 Deferred policy acquisition costs 5,123 2,487 7,610 Assets held in separate accounts 6,116 6,116 Other 5,212 8,650 618 (e) 14,480 -------- -------- ------- -------- TOTAL ASSETS $385,143 $158,342 ($200) $543,285 ======== ======== ======= ======== LIABILITIES Unpaid losses and loss adjustment expense, net of discount $213,294 $100,294 $313,588 Future policy benefits and claims payable 44,812 44,812 Unearned premiums 21,262 19,498 40,760 Reinsurance balances payable 5,280 1,721 7,001 Accrued expenses and other liabilities 5,480 1,566 $2,203 (g) 11,228 1,000 (f) 979 (b) Deferred tax liability 6,379 6,379 Deferred gain on retroactive reinsurance 3,270 3,270 Liabilities related to separate accounts 6,116 6,116 -------- -------- ------- -------- TOTAL LIABILITIES 305,893 123,079 4,182 433,154 -------- -------- ------- -------- Minority interest (177) (177) -------- -------- SHAREHOLDERS' EQUITY Common stock and additional paid in capital 17,483 45,902 (13,021)(h) 50,364 Net unrealized appreciation on investments 26,659 638 (638)(h) 26,659 Cumulative foreign currency translation adjustment 36 36 Retained earnings(deficit) 42,462 (9,277) 9,277 (h) 42,462 Equity changes of investee company (589) (589) Less common stock in treasury (6,625) (2,000) (8,625) -------- -------- ------- -------- Total Shareholders' Equity 79,426 35,263 (4,382) 110,307 -------- -------- ------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $385,142 $158,342 ($200) $543,284 ======== ======== ======= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION 3 PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (in thousands, except share and per share data) MINIMUM PICO SHARE PRICE OF $25.20
PHYSICIANS INSURANCE COMPANY PRO FORMA OF OHIO AND SUBSIDIARIES CITATION INSURANCE ADJUSTMENTS CONSOLIDATED GROUP FOR FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED PURCHASE OF SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 CITATION (AS REPORTED) (AS REPORTED) INSURANCE GROUP (1) PRO FORMA ------------------------- ------------------------- ------------------- --------- OPERATING DATA: Premium income $ 22,851 $ 38,002 $ 60,853 Net investment income 10,864 6,683 17,547 Land Sales and other 2,815 110 $165 j 3,090 -------- -------- --------- -------- Total revenues 36,530 44,795 165 81,490 -------- -------- --------- -------- Net losses and lost adjustment expenses 15,542 32,810 48,352 Insurance underwriting and other expenses 14,597 14,159 (286)i 28,470 Land Sales and other 3,973 651 4,624 -------- -------- --------- -------- Total expenses 34,112 47,620 (286) 81,446 -------- -------- --------- -------- Equity in earnings of affiliate 923 923 -------- -------- Income (loss) from continuing operations before income taxes 3,341 (2,825) 451 967 Income taxes 786 5,390 97 l 6,273 -------- -------- --------- -------- Income (loss) from continuing operations $ 2,555 ($ 8,215) $ 354 ($ 5,306) ======== ======== ========= ======== Per common share: Income (loss) from continuing operations $ 0.49 ($ 0.16) Weighted average shares outstanding 5,265 32,466 k
The accompanying notes are an integral part of this pro forma financial information 4 NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (1) The Merger will be accounted for under the purchase method of accounting as a reverse merger since the PICO shareholders will control 80% of the newly issued shares of the newly combined corporation. The final allocation of the purchase price has not yet been determined, and accordingly, the amounts shown below may differ from the amounts ultimately determined. The allocation of the purchase price is determined as follows (in thousands): Purchase Price Value of Citation shares to be exchanged (a) $30,654 Acquisition costs (b) 979 Value of Citation options assumed (c) 227 ------- 31,860 Allocation of Purchase Price Historic Citation Shareholders' Equity 35,263 Adjust assets and liabilities: Property and equipment (d) (818) Deferred income taxes (e) 618 Integration liability (f) (1,000) Negative goodwill (g) (2,203) ------- 31,860
- ---------- (a) Represents the currently issued and outstanding shares of Citation Common Stock as of September 30, 1996 valued at $5.03, the implied share price of Citation Common Stock. (b) Represents management's estimate of PICO's expenses and fees related to the Merger, including expenses and fees for legal counsel, investment advisors, printing and distribution, and accountants. (c) Represents an adjustment to reflect the fair value of Citation stock options. (d) Represents an adjustment to writeoff property and equipment due to negative goodwill. (e) Represents an adjustment to deferred income taxes related to the write-off of property and equipment and integration liability. (f) Represents management's estimate of integration costs as a result of the Merger. (g) Represents negative goodwill related to the excess of Citation's fair value of net assets in excess of the purchase price. (h) Represents the elimination of Citation retained earnings and unrealized appreciation of investments and the adjustment of equity accounts for the combined corporation. Citation's pro forma adjustments to its results of operations for the nine months ended September 30, 1996 for the acquisition are as follows: (i) Represents adjustment related to the add-back of depreciation expense related to the nine months ended September 30, 1996. 5 NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED) (j) Represents adjustment related to the straight line amortization of negative goodwill over a 10-year period. (k) For the nine months ended September 30, 1996, reflects Citation's weighted average shares of 6,088,251 plus PICO's historic weighted average shares at the exchange rate of 5.03. (l) Represents the tax effect of (other than negative goodwill) pro forma adjustments at an effective tax rate of 34%. -----END PRIVACY-ENHANCED MESSAGE-----