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: June 30, 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 August 5, 1994:
Class
Class A Common Stock
$.3125 Par Value 8,476,576 Shares
Class B Common Stock
$.3125 Par Value 9,087,534 Shares
Total number of pages 10
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HOME BENEFICIAL CORPORATION
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet at
June 30, 1994 and December 31, 1993................................... 4
Consolidated Condensed Statement of Income for the three months
and six months ended June 30, 1994 and 1993........................... 5
Consolidated Condensed Statement of Cash Flows
for the six months ended June 30, 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 6. Exhibits and Reports on Form 8-K .................................. 9
SIGNATURES ................................................................. 10
PART I. FINANCIAL INFORMATION
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
June 30 December 31
1994 1993
ASSETS
Investments
Securities available-for-sale at fair value (Note 3)
Fixed maturities $ 722,376,013 $ 0
Equities 24,276,129 27,281,131
Fixed maturities, at amortized cost 0 705,683,386
Mortgage loans on real estate 319,869,626 316,371,747
Policy loans 53,021,500 52,738,134
Short-term investments 38,606,670 35,506,190
Other 6,263,883 6,360,115
Total investments 1,164,413,821 1,143,940,703
Cash and cash equivalents 2,680,805 6,039,294
Receivables 21,867,726 21,754,025
Deferred policy acquisition costs 96,988,549 96,368,346
Other assets 14,299,846 12,131,530
$1,300,250,747 $1,280,233,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and accruals
Future policy benefits and claims $ 655,668,389 $ 649,964,396
Unearned premiums 26,597,750 25,934,028
Other policy claims and benefits payable 10,150,023 10,160,984
Total policy liabilities and accruals 692,416,162 686,059,408
Other policyholder funds 63,156,306 61,246,483
Income taxes - current and deferred 2,582,769 2,632,769
Other liabilities 59,437,009 57,032,846
Total liabilities 817,592,246 806,971,506
Stockholders' Equity
Capital stock
Class A common stock, voting, $.3125 par value,
12,800,000 shares authorized; 8,476,576 issued
at June 30, 1994 and December 31, 1993 2,648,930 2,648,930
Class B common stock, non-voting, $.3125 par value,
19,200,000 shares authorized; 9,417,482 issued
at June 30, 1994 and 9,462,482 issued at
December 31, 1993 2,942,963 2,957,025
Total capital stock 5,591,893 5,605,955
Net unrealized gains on securities held-for-sale
less related deferred income taxes (Note 3) 13,695,500 14,258,342
Retained earnings 463,371,108 453,398,095
Total stockholders' equity 482,658,501 473,262,392
$1,300,250,747 $1,280,233,898
See accompanying notes.
4
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Revenues
Premiums $28,360,063 $28,642,455 $57,172,320 $57,768,238
Net investment income 21,165,271 25,505,119 42,209,537 50,390,036
Total revenues 49,525,334 54,147,574 99,381,857 108,158,274
Benefits, claims and expenses
Benefits and claims 22,718,281 22,835,830 45,897,749 46,850,277
Underwriting, acquisition and
insurance expenses 12,418,806 13,637,813 25,586,979 26,604,575
Total benefits,claims & expenses 35,137,087 36,473,643 71,484,728 73,454,852
Income before income taxes 14,388,247 17,673,931 27,897,129 34,703,422
Income taxes 5,750,000 5,750,000 9,950,000 11,400,000
Net income $8,638,247 $11,923,931 $17,947,129 $23,303,422
Net income per share of common stock
(Average shares outstanding:
1994-17,920,909; 1993-18,526,896) $0.48 $0.66 $1.00 $1.27
Dividends per share $0.20 $0.195 $0.395 $0.385
See accompanying notes.
5
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Six Months Ended
June 30
1994 1993
OPERATING ACTIVITIES
Net income $ 17,947,129 $ 23,303,422
Adjustments to reconcile net income to net cash
provided by operating activities 6,105,379 3,366,935
Net cash provided by operating activities 24,052,508 26,670,357
INVESTING ACTIVITIES
Proceeds from sales or maturities of investments
Fixed maturities 121,411,115 68,402,553
Mortgage loans on real estate 29,831,765 59,419,528
Other 10,509,640 8,528,583
Total proceeds 161,752,520 136,350,664
Costs of investments acquired
Fixed maturities 135,487,016 62,173,722
Mortgage loans on real estate 33,120,028 31,879,361
Short-term investments -- net 3,100,480 44,780,705
Other 11,377,638 7,084,412
Total costs 183,085,162 145,918,200
Net cash used in investing activities (21,332,642) (9,567,536)
FINANCING ACTIVITIES
Dividends paid (7,076,928) (7,018,226)
Purchase of Class B Common Stock (911,250) (14,142,511)
Other 1,909,823 3,663,582
Net cash used in financing activitie (6,078,355) (17,497,155)
Net (decrease) in cash and cash equivalents (3,358,489) (394,334)
Cash and cash equivalents at beginning of year 6,039,294 3,345,413
Cash and cash equivalents at end of period $ 2,680,805 $ 2,951,079
Supplemental disclosure of cash flow information
Income tax payments $9,700,000 $10,300,000
See accompanying notes.
6
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited interim consoli-
dated condensed financial statements of the Corporation contain all ad-
justments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1994 and December 31,
1993, and the results of operations and cash flows for the three months
and six months ended June 30, 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 purchased 45,000 shares of its Class B Common Stock at a
cost of $911,250 during the first half of 1994. In July, 1994 the Corpora-
tion purchased an additional 329,948 shares of its Class B Common Stock at
a cost of $6,763,934. During 1993 the Corporation 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 State-
ment 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 six month period ended June 30, 1994, those
net unrealized gains decreased by $17 million (net of adjustments to
deferred income taxes). There was no effect on net 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 June 30, 1994 totaled
$1.2 billion. The quality of the Corporation's investments remain strong.
At June 30, 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.
The Corporation purchased 374,948 shares of its Class B Common Stock at
a cost of $7.7 million during the first seven months of 1994. During the
corresponding period in 1993, 587,838 shares of Class B Common Stock were
purchased at a cost of $14.1 million.
In May 1993, the Financial Accounting Standards Board (FASB) issued State-
ment 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 State-
ment 115 increased the carrying value of fixed maturities by $5 million
and stockholders' equity by $3.3 million at June 30, 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 antici-
pate this Statement to have any significant effect, as the Corporation is
not aware of any impaired loans.
Results of Operations
Premiums decreased 1% at June 30, 1994 compared to an increase of 12% for
the first six months of 1993. Premium growth for 1993 resulted from
increased participation in a group reinsurance contract. At June 30, 1994
total life insurance in force exceeded $10.1 billion for the first time in
the Corporation's history, increasing by 2.7% over the June 30, 1993
amount. Net investment income, excluding realized investment gains,
decreased 3.5% compared to a 6% decrease for the 1993 period. Investment
income growth has been affected by the downward trend experienced in port-
folio rates during 1992 and the early part of 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 $57,000 compared to $6.7
million for the first half of 1993. 1993 realized investment gains
resulted principally from calls and maturities of fixed maturity invest-
ments. Benefits and claims decreased 2% from the 1993 period. 1993 bene-
fits and claims increased 21% over 1992 as a result of increased partici-
pation in a group reinsurance contract. Individual mortality costs
contributed to the decrease in 1994 results.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS: None
(b) No reports on Form 8-K were filed during the period covered by
this report.
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: August 11, 1994 R. W. Wiltshire, Jr.
President and
Chief Executive Officer
Date: August 11, 1994 Hugh D. Garnett
Vice President and Controller