SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1994
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: 0-5562
HOME BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0884714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3901 West Broad Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
804-358-8431
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the Registrant's classes of
Common Stock as of May 11, 1994:
Class
Class A Common Stock
$.3125 Par Value 8,476,576 Shares
Class B Common Stock
$.3125 Par Value 9,417,482 Shares
Total number of pages 11
(This page intentionally left blank)
HOME BENEFICIAL CORPORATION
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet at
March 31, 1994 and December 31, 1993............................. 4
Consolidated Condensed Statement of Income for the three months
ended March 31, 1994 and 1993..................................... 5
Consolidated Condensed Statement of Cash Flows
for the three months ended March 31, 1994 and 1993................ 6
Notes to Consolidated Condensed Financial Statements ................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 8
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders ........... 9
Item 6. Exhibits and Reports on Form 8-K .............................. 10
SIGNATURES ............................................................. 11
PART I. FINANCIAL INFORMATION
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
March 31 December 31
1994 1993
ASSETS
Investments
Securities available-for-sale at fair value (Note 3)
Fixed maturities $ 737,296,073 $ 0
Equities 25,649,010 27,281,131
Fixed maturities, at amortized cost 0 705,683,386
Mortgage loans on real estate 318,507,174 316,371,747
Policy loans 52,776,363 52,738,134
Short-term investments 32,714,728 35,506,190
Other 6,317,867 6,360,115
Total investments 1,173,261,215 1,143,940,703
Cash and cash equivalents 4,217,530 6,039,294
Receivables 21,908,383 21,754,025
Deferred policy acquisition costs 96,228,148 96,368,346
Other assets 13,658,867 12,131,530
$1,309,274,143 $1,280,233,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and accruals
Future policy benefits and claims $ 652,793,424 $ 649,964,396
Unearned premiums 26,463,076 25,934,028
Other policy claims and benefits payable 10,182,361 10,160,984
Total policy liabilities and accruals 689,438,861 686,059,408
Other policyholder funds 61,992,593 61,246,483
Income taxes - current and deferred 11,107,769 2,632,769
Other liabilities 58,548,430 57,032,846
Total liabilities 821,087,653 806,971,506
Stockholders' Equity
Capital stock
Class A common stock, voting, $.3125 par value,
12,800,000 shares authorized; 8,476,576 issued
at March 31, 1994 and December 31, 1993 2,648,930 2,648,930
Class B common stock, non-voting, $.3125 par value
par value, 19,200,000 shares authorized; 9,462,482
issued at March 31, 1994 and December 31, 1993 2,957,025 2,957,025
Total capital stock 5,605,955 5,605,955
Net unrealized gains on securities held-for-sale
less related deferred income taxes (Note 3) 23,371,674 14,258,342
Retained earnings 459,208,861 453,398,095
Total stockholders' equity 488,186,490 473,262,392
$1,309,274,143 $1,280,233,898
See accompanying notes.
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Three Months Ended
March 31
1994 1993
Revenues
Premiums $28,812,257 $29,125,783
Net investment income 21,044,266 24,884,917
Total revenues 49,856,523 54,010,700
Benefits, claims and expenses
Benefits and claims 23,179,468 24,014,447
Underwriting, acquisition and insurance expenses 13,168,173 12,966,762
Total benefits, claims and expenses 36,347,641 36,981,209
Income before income taxes and cumulative effect of
change in accounting principle 13,508,882 17,029,491
Income taxes 4,200,000 5,650,000
Net income $ 9,308,882 $11,379,491
Net income per share of common stock
(Average shares outstanding:
1994-17,939,058; 1993-18,526,896) $0.52 $0.61
Dividends per share $0.195 $0.19
See accompanying notes.
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended
March 31
1994 1993
OPERATING ACTIVITIES
Net income (loss) $ 9,308,882 $ 11,379,491
Adjustments to reconcile net income to net cash
provided by operating activities 7,945,393 7,943,220
Net cash provided by operating activities 17,254,275 19,322,711
INVESTING ACTIVITIES
Proceeds from sales or maturities of investments
Fixed maturities 41,263,909 23,851,570
Mortgage loans on real estate 17,700,077 23,706,805
Short-term investments - net 2,791,462 -
Other 4,305,686 4,780,315
Total proceeds 66,061,134 52,338,690
Costs of investments acquired
Fixed maturities 56,610,111 26,002,176
Mortgage loans on real estate 19,742,509 18,228,815
Short-term investments -- net - 22,302,246
Other 6,032,547 2,965,945
Total costs 82,385,167 69,499,182
Net cash used in investing activities (16,324,033) (17,160,492)
FINANCING ACTIVITIES
Dividends paid (3,498,116) (3,520,110)
Other 746,110 1,702,109
Net cash used in financing activities (2,752,006) (1,818,001)
Net (decrease) increase in cash and cash equivalent (1,821,764) 344,218
Cash and cash equivalents at beginning of year 6,039,294 3,345,413
Cash and cash equivalents at end of period $ 4,217,530 $ 3,689,631
Supplemental disclosure of cash flow information
Income tax payments $650,000 $300,000
See accompanying notes.
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of the Corporation contain
all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of March 31, 1994
and December 31, 1993, and the results of operations and cash flows for
the three months ended March 31, 1994 and 1993.
The consolidated condensed financial statements include the accounts of
the Corporation, its principal subsidiary, Home Beneficial Life
Insurance Company (the Life Company), and its other subsidiaries. All
significant intercompany accounts and transactions are eliminated.
The accompanying financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Corporation's 1993 Annual Report to Stockholders.
2. Capital Stock
The Corporation has purchased 45,000 shares of its Class B Common Stock
at a cost of $911,250 since March 31, 1994. During 1993 the Corpora-
tion purchased 587,838 shares of its Class B Common Stock at a cost of
$14.1 million.
3. Change in Accounting Principle
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards 115, "Accounting for
Certain Investments in Debt and Equity Securities". As of January 1,
1994 the Corporation adopted the provisions of that Standard for
investments held as of or acquired after that date. In accordance with
Statement 115, prior-period financial statements have not been restated
to reflect the change in accounting principle. The cumulative effect
as of January 1, 1994 of adopting Statement 115 increased stockholders'
equity by $21 million (net of deferred income taxes) to reflect the net
unrealized gains on securities previously carried at amortized cost.
Due to rising interest rates during the three month period ended March
31, 1994, those net unrealized gains decreased by $10.4 million (net of
adjustments to deferred income taxes). There was no effect on net
income as a result of the adoption of Statement 115.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Cash and invested assets continue to increase and at March 31, 1994
totaled $1.2 billion. The quality of the Corporation's investments
remain strong. At March 31, 1994 there were no principal or interest
payments past due on fixed maturities, and over 99% of the mortgage
loans on real estate were current for both principal and interest. The
Corporation is not aware of any potential problem loans, and there are
no mortgage loans whose terms have been restructured. Liquidity is
adequate to provide for investment commitments and policyholder
requirements.
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement 115, "Accounting for Certain Investments in Debt and Equity
Securities". Under Statement 115, debt securities are classified as
either held-to-maturity (carried at amortized cost), available-for-sale
(carried at fair value with unrealized gains or losses reported as a
separate component of stockholders' equity) or trading (carried at fair
value with unrealized gains or losses reported in net income). The
Corporation adopted Statement 115 as of January 1, 1994 and classified
its entire debt security portfolio (fixed maturities) as securities
held-for-sale and adjusted the carrying value to fair value. The
effect of adopting Statement 115 increased the carrying value of fixed
maturities by $16,400,000 and stockholders' equity by $10,600,000 at
March 31, 1994. In accordance with Statement 115, the Corporation's
prior year financial statements have not been restated to reflect the
change in accounting principle.
In May 1993, the FASB issued Statement 114, "Accounting by Creditors
for Impairment of a Loan." Statement 114 requires that impaired loans
be valued at the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical expedient, at
the loan's observable market price, or the fair market value of the
collateral if the loan is collateral dependent. The Corporation will
be required to comply with Statement 114 beginning in 1995. Management
does not anticipate this Statement to have any significant effect, as
the Corporation is not aware of any impaired loans.
Results of Operations
Premiums decreased 1% for the current quarter compared to an increase
of 12% for the first three months of 1993. Premium growth for 1993
resulted from increased participation in a group reinsurance contract.
Individual premiums for the 1994 period were adversely affected by the
severe weather conditions experienced in the Corporation's operating
territory. At March 31, 1994 total life insurance in force exceeded
$10 billion for the first time in the Corporation's history, increasing
by 2.3% over the March 31, 1993 amount. Net investment income,
excluding realized investment gains, decreased 5% compared to a 6%
decrease for the 1993 period. Investment income continues to be
affected by the downward trend experienced in portfolio rates during
1992 and 1993. In addition, the Corporation used $14 million of
internally generated funds to repurchase 587,838 shares of its common
stock during the second quarter of 1993. Realized investment gains for
1994 amounted to $59,000 compared to $2.8 million for the first quarter
of 1993. 1993 realized investment gains resulted principally from
calls and maturities of fixed maturity investments. Benefits and
claims decreased 3.5% from first quarter 1993 results. First quarter
1993 increased 17% and resulted from increased participation in a group
reinsurance contract. Individual mortality costs contributed to the
decrease in 1994 results.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) During the three months ended March 31, 1994, and during the
period from that date to the date of this report, no matters
other than those considered at the Corporation's Annual Meeting
of stockholders held on April 5, 1994 (the "1994 Annual
Meeting"), were submitted to a vote of security holders, through
the solicitation of proxies or otherwise. At the 1994 Annual
Meeting a total of 7,730,252 shares of the Corpora-tion's
outstanding Class A Common Stock were present in person or by
proxy and entitled to vote.
(b) At the 1994 Annual Meeting Dianne N. Collins, H. D. Garnett, C.
M. Glenn, Jr., W. G. Hancock, G. T. Richardson, L. W. Richardson,
J. M. Wiltshire, Jr., R. W. Wiltshire, R. W. Wiltshire, Jr and W.
B. Wiltshire were elected as directors to serve until the next
annual meeting of stockholders and until their successors are
duly elected and qualified.
(c) At the 1994 Annual Meeting the following matters were voted upon
and received the vote set forth below:
(1) Election of Directors Each nominiee of the Corporation's
Board of Directors for election as a director at the 1994 Annual
Meeting was elected, having received the following vote of the
holders of the Corporation's Class A Common Stock:
Nominee For Withheld
Diannne N. Collins 7,730,252 -0-
H. D. Garnett 7,730,252 -0-
C. M. Glenn, Jr. 7,730,252 -0-
W. G. Hancock 7,730,252 -0-
G. T. Richardson 7,730,252 -0-
L. W. Richardson 7,730,252 -0-
J. M. Wiltshire, Jr. 7,730,252 -0-
R. W. Wiltshire 7,730,252 -0-
R. W. Wiltshire, Jr. 7,730,252 -0-
W. B. Wiltshire 7,730,252 -0-
(2) Ratification of Designation of Auditors Designation by the
Corporation's Board of Directors of Ernst & Young as
independent public accountants to audit the books of the
Corporation and its subsidiaries for the year ending
December 31, 1994 was ratified at the 1994 Annual Meeting
by the following vote of the holders of the Corporation's
Class A Common Stock:
FOR: 7,730,252
AGAINST: -0-
ABSTAIN: -0-
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS: None
(b) The Corporation filed a Report on Form 8-K dated January 4, 1994
with the Securities and Exchange Commission reporting on Item 1
(Changes in Control of Registrant) to reflect the resignation of
W. V. Collins as a voting trustee and the appointment of Dianne
N. Collins to serve as his successor as one of the five voting
trustees who hold 5,401,024 of the Corporation's Class A shares,
constituting approximately 63.7% of the total Class A shares
outstanding, under a voting trust agreement dated as of May 1,
1984, as extended by a voting trust extension agreement dated as
of May 1, 1987.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Home Beneficial Corporation
(Registrant)
Date: May 11, 1994 /s/ R. W. Wiltshire, Jr.
R. W. Wiltshire, Jr.
President and
Chief Executive Officer
Date: May 11, 1994 /s/ Hugh D. Garnett
Hugh D. Garnett
Vice President and Controller