-----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, U35KDhhSlyn+1R+TBFQZQ9gVQnZzP9LiN1KvDl6A3zwWmfBlGL0F7StusWCAtlfi wy2cgOf12B/x8ZHmkqMWiA== 0001006199-96-000120.txt : 19960814 0001006199-96-000120.hdr.sgml : 19960814 ACCESSION NUMBER: 0001006199-96-000120 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVEMCO CORP CENTRAL INDEX KEY: 0000008802 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 520733935 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06271 FILM NUMBER: 96610185 BUSINESS ADDRESS: STREET 1: 411 AVIATION WAY CITY: FREDERICK STATE: MD ZIP: 21701 BUSINESS PHONE: 3016945700 MAIL ADDRESS: STREET 1: 411 AVIATION WAY CITY: FREDERICK STATE: MD ZIP: 21701 10-Q 1 2ND QUARTER FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 June 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 1-6271 ------ AVEMCO CORPORATION ------------------ (Exact name of registrant as specified in its charter) DELAWARE 52-0733935 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 411 Aviation Way Frederick, Maryland 21701 ------------------- ----- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (301)694-5700 ------------- N/A - -------------------------------------------------------------------------------- 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 by Sections 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 practicable date: 8,348,870 shares of ------------------- common stock were outstanding as of June 30, 1996. - -------------------------------------------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Note 1) AVEMCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 1996, and December 31, 1995
June 30, December 31, 1996 1995 ---- ---- ASSETS: Investments........................................................ $ 141,278,000 $ 149,544,000 Cash............................................................... 4,509,000 3,466,000 Accounts receivable................................................ 31,993,000 24,637,000 Reinsurance recoverable............................................ 16,992,000 14,292,000 Deferred policy acquisition costs.................................. 6,031,000 5,511,000 Prepaid reinsurance premiums....................................... 5,987,000 5,178,000 Net property and equipment......................................... 8,189,000 8,051,000 Other assets....................................................... 3,107,000 3,123,000 ----------------- ----------------- ...........Total assets............................................ $ 218,086,000 $ 213,802,000 ================= ================= LIABILITIES: Unpaid losses and loss adjustment expenses......................... $ 43,654,000 $ 42,305,000 Unearned premiums.................................................. 38,519,000 32,363,000 Accounts payable and accrued expenses.............................. 19,418,000 17,361,000 Ceded reinsurance premiums payable................................. 5,911,000 5,047,000 Notes payable to banks............................................. 52,667,000 54,967,000 ----------------- ----------------- ...........Total liabilities....................................... 160,169,000 152,043,000 ----------------- ----------------- STOCKHOLDERS' EQUITY: Preferred stock, par value, $10.00 per share; 500,000 shares authorized; none issued.................................. -- -- Common stock, par value, $.10 per share; ....20,000,000 shares authorized; 11,565,811 issued in 1996 and 11,551,161 in 1995.................................. 1,157,000 1,155,000 Additional paid-in capital......................................... 19,140,000 18,293,000 Net unrealized appreciation on investments......................... 1,244,000 4,879,000 Foreign currency translation adjustments........................... (196,000) (182,000) Retained earnings.................................................. 91,930,000 88,184,000 ----------------- ----------------- 113,275,000 112,329,000 Treasury stock, at cost, 3,216,941 shares in 1996 and 2,901,741 in 1995................................... (55,358,000) (50,570,000) ----------------- ----------------- Total stockholders' equity.............................. 57,917,000 61,759,000 ----------------- ----------------- Contingent liabilities Total liabilities and stockholders' equity.............. $ 218,086,000 $ 213,802,000 ================= =================
See accompanying notes to condensed consolidated financial statements. AVEMCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended June 30, --------------------- 1996 1995 ---- ---- REVENUES: Premiums earned................................... $ 40,848,000 $ 39,497,000 Commissions....................................... 4,541,000 3,652,000 Net investment income............................. 4,190,000 4,195,000 Computer products and services.................... 4,722,000 4,764,000 Realized investment gains (losses)................ 3,209,000 (7,000) Other............................................. 4,014,000 3,762,000 ------------ ------------ Total revenues................................. 61,524,000 55,863,000 ------------ ------------ EXPENSES: Losses and loss adjustment expenses............... 27,290,000 25,003,000 Selling, general, and administrative expenses..... 18,338,000 17,840,000 Commissions....................................... 3,216,000 3,283,000 Cost of computer hardware sold.................... 763,000 799,000 Interest.......................................... 2,088,000 2,035,000 ------------ ------------ Total expenses................................. 51,695,000 48,960,000 ------------ ------------ Earnings before income taxes...................... 9,829,000 6,903,000 Federal and state income taxes.................... 2,440,000 1,420,000 ------------ ------------ Net earnings...................................... $ 7,389,000 $ 5,483,000 ============ ============ Net earnings per share............................ $ .86 $ .62 ============ ============ Weighted average number of common and common equivalent shares outstanding................... 8,612,073 8,913,400 ============ ============ Dividends per share............................... $ .24 $ .22 ============ ============
See accompanying notes to condensed consolidated financial statements. AVEMCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended June 30, --------------------- 1996 1995 ---- ---- REVENUES: Premiums earned.................................... $ 21,155,000 $20,774,000 Commissions........................................ 2,568,000 2,069,000 Net investment income.............................. 2,154,000 2,141,000 Computer products and services..................... 2,461,000 2,813,000 Realized investment gains (losses)................. 2,696,000 102,000 Other.............................................. 2,112,000 1,960,000 ------------ ----------- Total revenues.................................. 33,146,000 29,859,000 ------------ ----------- EXPENSES: Losses and loss adjustment expenses................ 14,293,000 14,481,000 Selling, general, and administrative expenses...... 9,215,000 8,948,000 Commissions........................................ 1,750,000 1,517,000 Cost of computer hardware sold..................... 348,000 557,000 Interest........................................... 1,120,000 914,000 ------------ ----------- Total expenses.................................. 26,726,000 26,417,000 ------------ ----------- Earnings before income taxes....................... 6,420,000 3,442,000 Federal and state income taxes..................... 1,718,000 773,000 ------------ ----------- Net earnings....................................... $ 4,702,000 $ 2,669,000 ============ =========== Net earnings per share............................. $ .55 $ .30 ============ =========== Weighted average number of common and common equivalent shares outstanding.................... 8,477,796 8,896,246 ============ =========== Dividends per share................................ $ .12 $ .11 ============= ============
See accompanying notes to condensed consolidated financial statements. AVEMCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, --------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES: Net earnings........................................$ 7,389,000 $ 5,483,000 Charges (credits) to operations not affecting cash.. (1,332,000) 3,238,000 ------------ ------------ Net cash flows provided from operations............. 6,057,000 8,721,000 ------------ ------------ INVESTMENT ACTIVITIES: Proceeds from sale or maturity of investments....... 33,232,000 22,449,000 Purchase of investments............................. (27,134,000) (29,368,000) Proceeds from sale of property and equipment........ 38,000 21,000 Purchase of property and equipment.................. (342,000) (1,497,000) ------------ ------------ Net cash flows provided from (used by) investment activities........................... 5,794,000 (8,395,000) ------------ ------------ FINANCING ACTIVITIES: Proceeds from borrowings............................ 12,000,000 5,800,000 Principal payments on debt.......................... (14,300,000) (4,500,000) Exercise of common stock options.................... 125,000 54,000 Dividends to stockholders........................... (2,036,000) (1,939,000) Repurchase of common stock.......................... (6,597,000) (1,380,000) ------------ ------------ Net cash flows provided from (used by) financing activities............................ (10,808,000) (1,965,000) ------------ ------------ Net increase (decrease) in cash..................... 1,043,000 (1,639,000) Cash, beginning of year............................. 3,466,000 5,191,000 ------------- ------------ Cash, end of period................................. $ 4,509,000 $ 3,552,000 =========== ============
See accompanying notes to condensed consolidated financial statements. AVEMCO CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and 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 of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. These statements should be read in conjunction with the financial statements and notes thereto included in the company's annual report to shareholders and Form 10-K for the year ended December 31, 1995. Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. ---------------------- Liquidity and Capital Resources ------------------------------- The company's primary sources of operating funds are insurance premiums, investment income, reinsurance recoveries on paid losses, computer product sales and other service revenues. Principal uses of operating funds include claim payments to insureds, commissions, and other operating expenses. Overall, these operating activities produced positive cash flow of $6.1 million for the first six months of 1996. Since the level of operating cash flow is highly affected by premium production, paid loss activity, the sale of investment securities, and reinsurance recoveries received, operating cash flow can vary significantly from period to period. In addition, the 1996 year-to-date operating cash flow was impacted by one-time refund payments of $2.4 million related to the settlement of California Proposition 103 matters. The company's insurance subsidiaries had fully provided for such amounts in prior years. The company follows investment guidelines, which, in addition to providing for an acceptable after-tax return on its investments, are structured to preserve capital, maintain sufficient liquidity to meet anticipated obligations, and retain an ample margin of capital and surplus to assure the unimpaired ability to write insurance. The company's fixed income portfolio holdings consist primarily of high investment grade securities. Currently, the largest single portion of the investment portfolio is invested in tax-advantaged securities. In developing its investment strategy, the company establishes a level of cash and highly liquid short and intermediate term securities which, when combined with expected cash flow, is believed adequate to meet anticipated payment obligations. The company's common stock repurchase program reflects continued efforts to effectively manage its capital base and enhance shareholder value. For the year-to-date through June 30, 1996, the company has repurchased 435,200 shares of its common stock. The Board of Directors' current authorization allows the company to repurchase an additional 289,317 shares. Results of Operations --------------------- Net earnings for the second quarter of 1996 were $4.7 million, or $.55 per share, compared to $2.7 million or $.30 per share for the same period of 1995. Second quarter 1996 net earnings included after-tax realized investment gains of $1.8 million or $.20 per share. Excluding the realized investment gains, 1996 net earnings were $2.9 million or $.35 per share increasing over 1995's $2.6 million or $.29 per share, principally as a result of an improved underwriting ratio. The underwriting ratio for the 1996 second quarter was 87.5 percent versus 90.3 percent for 1995. Gross premiums written for all lines of business during the 1996 second quarter were $33.2 million, compared to $31.7 million in 1995. Aviation gross premiums written in the second quarter were $24.4 million versus $23.8 million in the same period of 1995. 1995's second quarter and year-to-date aviation premiums included certain non-recurring premiums associated with the purchase of a book of aviation business. Excluding the nonrecurring premiums, the company's aviation premiums represented growth of about six percent. As to the company's other lines of business, lenders single interest insurance, principally automobile physical damage, continues to show excellent growth and profitability. For the quarter ended 6/30/96, lenders single interest premiums written were $5.8 million compared to $4.2 million for the same period of 1995. Year to date, lenders single interest premiums in 1996 were $10.9 million compared to $7.4 million in 1995, an increase of 47 percent. Pleasure marine premiums are also up for the year and are expected to continue at a respectable level of growth for the foreseeable future. Premiums written for short-term health programs were $1.4 million versus $2.2 million for 1995. The decline was principally the result of the company's decision to discontinue as a reinsurer of a trip-travel insurance program which represented $6 million of annualized premium in 1995, when the company was unable to negotiate satisfactory renewal terms. The company continues, however, to increase its participation in short-term health plans managed and underwritten by its International Group Services affiliate, and will also commence participation in the Hinchcliff International business (acquired in January of 1996) later in 1996. Year-to-date, net earnings for the period ending June 30, 1996, were $7.4 million or $.86 per share, compared to $5.5 million or $.62 per share for 1995. Net earnings for 1996 include after-tax realized investment gains of $2.1 million or $.25 per share. The realized gains arose principally as a result of the company's decision to sell its common equities and use the proceeds primarily to pay down on its bank line, as well as for other corporate purposes. As reported in a press release dated June 10, 1996, the company expects to close on the sale of its insurer, National Assurance Underwriters, Inc., during the third quarter of 1996. As part of the transaction, the company will retain all of the insurance business in that subsidiary, as well as rights to its name. This transaction, when completed, is expected to generate an after-tax gain of $2.2 million or $.26 per share. AVEMCO CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- None, except in the ordinary course of business in connection with the insurance subsidiaries' operations. Item 2. Changes in Securities --------------------- None Item 3. Defaults upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- At the Annual Meeting of Stockholders held on May 2, 1996, the Stockholders were asked: (1) to elect four directors, three of whom will serve for a term of three years each, expiring in 1999, and one of whom will serve for a term of two years, or until their successors are elected and have qualified; and (2) to consider and act upon a proposal to ratify the selection of KPMG Peat Marwick as independent auditors for the company for 1996. The results of the voting on each of these proposals were as follows: (1) Election of Directors: --------------------- Shares as to Which Director Nominee Shares Voted For Authority Was Withheld ---------------- ---------------- ---------------------- William P. Condon 6,878,509 39,744 Arnold H. Johnson 6,875,955 42,298 Thomas J. Schwab 6,878,530 39,723 Rachel B. Trinder 6,877,655 40,598 (2) Proposal to Ratify Selection of Independent Auditors: Shares Voted For: 6,891,161 Shares Voted Against: 15,774 Shares Abstaining: 11,318 Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- None SIGNATURE 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. AVEMCO CORPORATION (Registrant) Date: August 13, 1996 /s/ William P. Condon ----------------------- ------------------------- William P. Condon Chairman of the Board and Chief Executive Officer Date: August 13, 1996 /s/ John F. Shettle, Jr. ----------------------- ------------------------- John F. Shettle, Jr. President and Chief Operating Officer Date: August 13, 1996 /s/ John R. Yuska ----------------------- ------------------------- John R. Yuska Senior Vice President and Chief Financial Officer EX-27 2 FDS --
7 This schedule contains summary financial information extracted from the registrant's June 30, 1996 Form 10-Q financial statements and is qualified in its entirety by reference to such financial statements. 1,000 6-mos DEC-31-1996 JUN-30-1996 0 0 0 0 0 0 141,278 4,509 16,992 6,031 218,086 43,654 38,519 0 0 52,667 0 0 1,157 56,760 218,086 40,848 4,190 3,209 13,277 27,290 0 21,554 9,829 2,440 7,389 0 0 0 7,389 .86 .86 0 0 0 0 0 0 0
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