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: September 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 November 8, 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 11
(This page intentionally left blank)
HOME BENEFICIAL CORPORATION
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet at
September 30, 1994 and December 31, 1993.......................... 4
Consolidated Condensed Statement of Income for the three months
and nine months ended September 30, 1994 and 1993................. 5
Consolidated Condensed Statement of Cash Flows
for the nine months ended September 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
September 30 December 31
1994 1993
ASSETS
Investments
Securities available-for-sale
at fair value (Note 3)
Fixed maturities $ 713,557,710 $ 0
Equities 26,024,597 27,281,131
Fixed maturities, at amortized cost 0 705,683,386
Mortgage loans on real estate 333,307,813 316,371,747
Policy loans 53,307,190 52,738,134
Short-term investments 26,529,762 35,506,190
Other 6,212,015 6,360,115
Total investments 1,158,939,087 1,143,940,703
Cash and cash equivalents 3,123,327 6,039,294
Receivables 21,988,663 21,754,025
Deferred policy acquisition costs 96,001,397 96,368,346
Other assets 13,118,066 12,131,530
$1,293,170,540 $1,280,233,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and accruals
Future policy benefits and claims $ 657,629,749 $ 649,964,396
Unearned premiums 26,714,282 25,934,028
Other policy claims and benefits payable 10,135,090 10,160,984
Total policy liabilities and accruals 694,479,121 686,059,408
Other policyholder funds 64,532,013 61,246,483
Other liabilities 57,326,920 59,665,615
Total liabilities 816,338,054 806,971,506
Stockholders' Equity
Capital stock
Class A common stock, voting, $.3125
par value, 12,800,000 shares authorized;
8,476,576 issued at September 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;
9,087,534 issued at September 30, 1994
and 9,462,482 issued at December 31, 1993 2,839,854 2,957,025
Total capital stock 5,488,784 5,605,955
Net unrealized gains on securities
held-for-sale less related deferred
income taxes (Note 3) 9,160,262 14,258,342
Retained earnings 462,183,440 453,398,095
Total stockholders' equity 476,832,486 473,262,392
$1,293,170,540 $1,280,233,898
See accompanying notes.
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Nine Months Ended
September 30
1994 1993
Revenues
Premiums $86,217,807 $86,728,944
Net investment income 63,300,802 64,922,630
Realized investment (losses)gains 7,729 9,319,592
Total revenues 149,526,338 160,971,166
Benefits, claims and expenses
Benefits and claims 68,182,133 71,848,449
Underwriting, acquisition and 40,311,097 40,003,215
insurance expenses 40,311,097 40,003,215
Total benefits, claims and expenses 108,493,230 111,851,664
Income before income taxes 41,033,108 49,119,502
Income taxes 14,100,000 16,475,000
Net income $26,933,108 $32,644,502
Net income per share of common stock
(Average shares outstanding:
1994-17,822,424; 1993-18,189,179) $1.51 $1.79
Dividends per share $0.595 $0.58
See accompanying notes.
HOME BENEFICIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30
1994 1993
OPERATING ACTIVITIES
Net income $ 26,933,108 $ 32,644,502
Adjustments to reconcile net income to
net cash provided by operating activities 8,589,722 170,848
Net cash provided by operating activities 35,522,830 32,815,350
INVESTING ACTIVITIES
Proceeds from sales or maturities of investments
Fixed maturities 186,004,181 108,288,864
Mortgage loans on real estate 38,062,081 91,911,646
Short-term investments -- net 8,976,428 0
Other 14,362,549 10,822,891
Total proceeds 247,405,239 211,023,401
Costs of investments acquired
Fixed maturities 201,653,079 120,573,276
Mortgage loans on real estate 54,716,700 40,724,724
Short-term investments -- net 0 51,827,288
Other 14,494,853 9,958,977
Total costs 270,864,632 223,084,265
Net cash used in investing activities (23,459,393) (12,060,864)
FINANCING ACTIVITIES
Dividends paid (10,589,750) (10,516,343)
Purchase of Class B Common Stock (7,675,184) (14,142,511)
Other 3,285,530 4,809,195
Net cash used in financing activities (14,979,404) (19,849,659)
Net (decrease) in cash and cash equivalents (2,915,967) 904,827
Cash and cash equivalents at beginning of year 6,039,294 3,345,413
Cash and cash equivalents at end of period $ 3,123,327 $ 4,250,240
Supplemental disclosure of cash flow information
Income tax payments $15,300,000 $17,800,000
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 September 30, 1994 and
December 31, 1993, and the results of operations and cash flows for the
three months and nine months ended September 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 374,948 shares of its Class B Common Stock at a
cost of $7.7 million during the first nine months of 1994. 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
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 nine month period ended September 30, 1994, a
$2.5 million net unrealized loss (net of adjustments to deferred income
taxes) was charged against stockholders' equity. 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 September 30, 1994
totaled $1.2 billion. The quality of the Corporation's investments remain
strong. At September 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
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 decreased stockholders' equity by $2.5 million (net of
deferred income taxes) at September 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. There was no effect on net income as a result of the adoption
of this Statement.
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 less than 1% at September 30, 1994 compared to an
increase of 12% for the first nine months of 1993. Premium growth for
1993 resulted from increased participation in a group reinsurance
contract. At September 30, 1994 total life insurance in force exceeded
$10.1 billion, increasing by 2.5% over the September 30, 1993 amount. Net
investment income, excluding realized investment gains, decreased 2.5%
compared to a 6% decrease for the 1993 period. Investment income growth
has been 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 $7,729 compared to $9.3 million for the first nine
months of 1993. 1993 realized investment gains resulted principally from
calls and maturities of fixed maturity investments.
Benefits and claims decreased from the 1993 period as a result of downward
adjustments in interest rates on certain insurance product lines in the
third quarter of 1993. 1993 benefits and claims increased 21% over 1992
as a result of increased participation in a group reinsurance contract.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a)EXHIBITS: Exhibit 27 - Financial Data Schedule is filed as a part of
this Quarterly Report on Page 11
(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: November 8, 1994 R. W. Wiltshire, Jr.
President and
Chief Executive Officer
Date: November 8, 1994 Hugh D. Garnett
Vice President and Controller