UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1995
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 0-16267
WALSHIRE ASSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2023240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
3350 Whiteford Road, York, PA 17402
(Address of principal executive offices) (Zip code)
(717)757-0000
(Registrant s telephone number, including area code)
(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
Indicate the number of shares outstanding of each of the issuer s classes of
common stock, as of the latest practical date.
Class: Outstanding at July 31, 1995:
Common stock - $.01 Par Value 3,665,902 shares
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
INDEX
PAGE
NUMBER
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1995
(unaudited) and December 31, 1994. . . . . . . . . . 2
Consolidated Statements of Income for the three
months ended June 30, 1995 and 1994 (unaudited). . . 4
Consolidated Statement of Income for the six months
ended June 30, 1995 and 1994 (unaudited) . . . . . . 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1995 and 1994 (unaudited) . . 6
Notes to Consolidated Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 7
Part II OTHER INFORMATION . . . . . . . . . . . . . . . . . 9
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 9
Item 4. Submission of Matters to Vote of Security Holders. . 9
Item 5. Other Information . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands,
except per share data)
June 30, December 31,
Assets 1995 1994
(Unaudited)
Investments
Held to maturity:
Fixed maturities (market $17,221 and
$16,140) . . . . . . . . . . . . . . . . $17,023 $16,508
Available for sale:
Fixed maturities (cost $23,990 and
$22,588) . . . . . . . . . . . . . . . . 23,944 21,664
Equity securities (cost: $7,981 and
$8,263). . . . . . . . . . . . . . . . . 8,036 7,611
Short-term investments . . . . . . . . . . . . 3,154 3,889
Other investments. . . . . . . . . . . . . . . 852 868
Total investments . . . . . . . . . . . . . 53,009 50,540
Cash. . . . . . . . . . . . . . . . . . . . . . . 372 184
Accrued investment income receivable. . . . . . . 832 895
Amounts receivable from reinsurers. . . . . . . . 2,709 2,644
Amounts receivable from reinsured company . . . . 1,338 1,325
Agents balances (net of allowance for doubtful
accounts of $100). . . . . . . . . . . . . . . 4,231 3,627
Installment premiums receivable . . . . . . . . . 4,387 3,633
Agents balances and installment premiums
receivable from related parties. . . . . . . . 3,502 2,258
Premium finance receivable (net of unearned
finance charges and allowance for credit
losses of $109 and $123) . . . . . . . . . . . 5,649 4,678
Reinsurance receivable. . . . . . . . . . . . . . 5,838 6,355
Deferred acquisition costs. . . . . . . . . . . . 4,245 3,791
Property and equipment, (net of accumulated
depreciation of $1,135 and $1,054) . . . . . . 2,773 2,656
Other assets. . . . . . . . . . . . . . . . . . . 376 482
Total assets. . . . . . . . . . . . . . . . $89,261 $83,068
See accompanying notes to consolidated financial statements.
2
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands,
except per share data)
Liabilities and Shareholders Equity June 30 December 31
1995 1994
(Unaudited)
Liabilities:
Unpaid claims, claim settlement expenses
and claims drafts . . . . . . . . . . . . $16,149 $14,292
Unearned premiums. . . . . . . . . . . . . . 24,067 21,065
Short-term notes payable . . . . . . . . . . 1,168 3,435
Long-term notes payable. . . . . . . . . . . 1,673 1,921
Deposits by insureds . . . . . . . . . . . . 1,217 747
Commissions payable to agents. . . . . . . . 667 571
Commissions payable to related parties . . . 374 214
Other liabilities. . . . . . . . . . . . . . 782 809
Total liabilities . . . . . . . . . . . . 46,097 43,054
Shareholders equity
Preferred stock, par value $.01 per share;
2,000 shares authorized; 142 shares
issued and outstanding. . . . . . . . . . 1 1
Common stock, par value $.01 per share;
10,000 shares authorized; 3,666 and
3,638 shares issued and outstanding . . . 37 36
Additional paid-in capital . . . . . . . . . 25,955 25,751
Unrealized gain (loss) on investments
available for sale (net of deferred tax
expense (benefit) of $3 and ($534)) . . . 6 ( 1,042)
Retained earnings. . . . . . . . . . . . . . 17,165 15,268
Net shareholders equity. . . . . . . . . 43,164 40,014
Total liabilities and shareholders equity . $89,261 $83,068
See accompanying notes to consolidated financial statements.
3
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands,
except per share data)
Three Months Ended
June 30,
1995 1994
(Unaudited)(Unaudited)
Revenues:
Premiums earned . . . . . . . . . . . . . . . . . $11,356 $ 8,724
Premiums ceded. . . . . . . . . . . . . . . . . . ( 2,552) ( 1,709)
Net premiums earned . . . . . . . . . . . . . . . 8,804 7,015
Net investment income . . . . . . . . . . . . . . 673 548
Net realized gains on investments . . . . . . . . 73 68
Other . . . . . . . . . . . . . . . . . . . . . . 180 158
Total revenues . . . . . . . . . . . . . . . . 9,730 7,789
Expenses:
Claims and claim settlement expenses. . . . . . . 6,126 3,635
Reinsurance recoveries. . . . . . . . . . . . . . ( 1,132) ( 41)
Net claims and claims settlement expenses . . . . 4,994 3,594
Amortization of deferred acquisition costs. . . . 1,312 1,428
Underwriting, general and administrative
expenses. . . . . . . . . . . . . . . . . . . . 1,644 1,394
Interest. . . . . . . . . . . . . . . . . . . . . 69 50
Total expenses . . . . . . . . . . . . . . . . 8,019 6,466
Income before income taxes . . . . . . . . . . . . . 1,711 1,323
Provision for income taxes . . . . . . . . . . . . . 357 300
Net income . . . . . . . . . . . . . . . . . . . . . 1,354 1,023
Less dividends on convertible preferred stock. . . . 115 115
Net income available for common stock. . . . . . . . $ 1,239 $ 908
Net income per common share and common equivalent
share:
Primary:
Net income . . . . . . . . . . . . . . . . . . $ .32 $ .25
Weighted average shares outstanding. . . . . . 3,821 3,674
Fully diluted:
Net income . . . . . . . . . . . . . . . . . . $ .31 $ .24
Weighted average shares outstanding. . . . . . 4,395 3,722
See accompanying notes to consolidated financial statements.
4
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands,
except per share data)
Six Months Ended
June 30,
1995 1994
(Unaudited)(Unaudited)
Revenues:
Premiums earned . . . . . . . . . . . . . . . . . $21,896 $16,860
Premiums ceded. . . . . . . . . . . . . . . . . . ( 4,854) ( 3,327)
Net premiums earned . . . . . . . . . . . . . . . 17,042 13,533
Net investment income . . . . . . . . . . . . . . 1,335 1,048
Net realized gains on investments . . . . . . . . 139 396
Other . . . . . . . . . . . . . . . . . . . . . . 348 400
Total revenues . . . . . . . . . . . . . . . . 18,864 15,377
Expenses:
Claims and claim settlement expenses. . . . . . . 10,986 8,422
Reinsurance recoveries. . . . . . . . . . . . . . ( 1,230) ( 875)
Net claims and claims settlement expenses . . . . 9,756 7,547
Amortization of deferred acquisition costs. . . . 2,508 2,914
Underwriting, general and administrative
expenses. . . . . . . . . . . . . . . . . . . . 3,162 2,674
Interest. . . . . . . . . . . . . . . . . . . . . 147 105
Total expenses . . . . . . . . . . . . . . . . 15,573 13,240
Income before income taxes . . . . . . . . . . . . . 3,291 2,137
Provision for income taxes . . . . . . . . . . . . . 689 491
Net income . . . . . . . . . . . . . . . . . . . . . 2,602 1,646
Less dividends on convertible preferred stock. . . . 230 144
Net income available for common stock. . . . . . . . $ 2,372 $ 1,502
Net income per common share and common equivalent
share:
Primary:
Net income . . . . . . . . . . . . . . . . . . $ .62 $ .41
Weighted average shares outstanding. . . . . . 3,798 3,699
Fully diluted:
Net income . . . . . . . . . . . . . . . . . . $ .59 $ .40
Weighted average shares outstanding. . . . . . 4,389 3,721
See accompanying notes to consolidated financial statements.
5
WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
1995 1994
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 2,602 $ 1,646
Adjustments to reconcile net income to net
cash provided by operating activities
Net realized gains on investments. . . . . . . ( 139) ( 396)
Decreased (increase) in assets:
Accrued investment income receivable . . . . . 63 ( 3)
Amounts receivable from reinsurers . . . . . . ( 65) ( 223)
Amounts receivable from reinsured company. . . ( 13) 86
Agents balances and installment premiums
receivable . . . . . . . . . . . . . . . . . ( 604) (1,091)
Agents balances and installment premiums
receivable from related parties. . . . . . . (1,998) ( 75)
Premium finance receivables. . . . . . . . . . ( 971) 99
Reinsurance receivables. . . . . . . . . . . . 517 ( 377)
Deferred acquisition costs . . . . . . . . . . ( 454) ( 292)
Other, net . . . . . . . . . . . . . . . . . . 327 20
(Decrease) increase in liabilities:
Unpaid claims, claim settlement expenses and
claim drafts outstanding . . . . . . . . . 1,857 1,587
Unearned premiums. . . . . . . . . . . . . . . 3,002 1,792
Deposits by insureds . . . . . . . . . . . . . 470 ( 546)
Other, net . . . . . . . . . . . . . . . . . . 229 ( 34)
Net cash provided by operating activities. . . . . 4,823 2,193
Cash flows from investing activities:
Purchase of investments:
Held to maturity . . . . . . . . . . . . . . . . (1,273) (2,312)
Available for sale . . . . . . . . . . . . . . . (3,511) (8,674)
Sale of investments:
Available for sale . . . . . . . . . . . . . . . 2,596 4,449
Maturity of investments. . . . . . . . . . . . . . 505 1,925
Net (purchase) sale of short term and other
investments. . . . . . . . . . . . . . . . . . . 768 (3,161)
Purchase of property and equipment . . . . . . . . ( 369) ( 153)
Sale of property and equipment . . . . . . . . . . 31 16
Other, net . . . . . . . . . . . . . . . . . . . . ( 367) 482
Net cash used in investing activities. . . . . . (1,620) (7,428)
Cash flows from financing activities:
Cash dividends paid. . . . . . . . . . . . . . . . ( 705) ( 441)
Issuance of common stock . . . . . . . . . . . . . 205 63
Issuance of preferred stock. . . . . . . . . . . . - 6,777
Payment of notes payable . . . . . . . . . . . . . (2,515) (1,137)
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . (3,015) 5,262
Net increase in cash . . . . . . . . . . . . . . . . 188 27
Cash at beginning of the period. . . . . . . . . . . 184 56
Cash at end of the period. . . . . . . . . . . . . . $ 372 $ 83
Se e accompanying notes to consolidated financial statements.
6
WALSHIRE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated balance sheet as of June 30, 1995, the consolidated
statements of income for the three and six months ended June 30, 1995 and 1994,
and the consolidated statements of cash flows for the six months then ended have
been prepared by Walshire Assurance Company ( the Company ) without audit. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at June 30, 1995 and for all periods presented, have
been made.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these unaudited consolidated financial
statements be read in conjunction with the financial statements and notes
thereto
included in the Company s 1994 Annual Report dated March 3, 1995. The results
of operation for the period ended June 30, 1995 are not necessarily indicative
of the results of operations for the full year.
3. Primary net income per share is computed after recognition of preferred
stock
dividend requirements and is based on the weighted average number of shares of
common stock and common stock equivalents outstanding. The number of common
shares was increased by the number of shares issuable on the exercise of options
when the market price of the common stock exceeds the exercise price of the
options. This increase in the number of common shares was reduced by the number
of common shares that are assumed to have been purchased with the proceeds from
the exercise of the options; these purchases were assumed to have been made at
the average price of the common stock during that part of the year when the
market price of the common stock exceeded the exercise price of the options.
Fully diluted net income per share was determined on the assumption that
the convertible preferred stock was converted and the outstanding stock options
were exercised on January 1, 1995. As to the preferred stock, net income was
adjusted for dividends declared. As to the options, outstanding shares were
increased as described above except that purchases of common stock are assumed
to have been made at the higher of the period-end price or the average price of
the common stock during that part of the year when the market price of the
common
stock exceeded the exercise price of the options.
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations
Revenues for the three month period ended June 30, 1995 increased $1.9 million,
or 24.9%, from revenues for the three month period ended June 30, 1994. This
increase was primarily the result of an increase in premiums earned. Direct
premiums written increased 29.8% in the three month period ended June 30, 1995
when compared to the same period in 1994. The following table sets forth the
direct premiums written by the Company for the three month periods ended
June 30,
1995 and 1994 by line of business.
7
(In thousands)
Three months ended June 30,
1995 1994 %Change
Auto liability $ 6,407 $ 4,667 37.3%
Auto physical damage 4,797 4,393 9.2%
Workers Compensation 1,333 560 138.0%
Inland marine 685 570 20.2%
Other 185 140 32.1%
Total $13,407 $10,330 29.8%
Expenses for the three month period ended June 30, 1995 increased $1.6 million,
or 24.0%, over expenses for the three month period ended June 30, 1994. The
increase was primarily the result of increases in net claims and claim
settlement
expenses and underwriting, general and administrative expenses, offset, in part,
by a decrease in amortization of deferred acquisition costs. Increases in net
claims and claim settlement expenses were the result of increases in earned
premiums, as well as an increase in the statutory loss ratio from 52.8% in 1994
to 59.6% in 1995. Increases in underwriting, general and administrative
expenses
were primarily the result of increases in premiums written. The decrease in the
amortization of deferred acquisition costs was primarily the result of the
increase in ceding commissions, offset, in part, by an increase in net premiums
earned. The statutory combined ratio for the three month period ended June 30,
1995 was 86.6%, a slight increase from 84.5% for the three month period ended
June 30, 1994.
Revenues for the six month period ended June 30, 1995 increased $3.5 million,
or 22.7%, from revenues for the six month period ended June 30, 1994. This
increase was primarily the result of an increase in premiums earned. Direct
premiums written increased 33.7% in the six month period ended June 30, 1995
when
compared to the same period in 1994. The following table sets forth the direct
premiums written by the Company for the six month periods ended June 30, 1995
and
1994 by line of business.
(In thousands)
Six months ended June 30,
1995 1994 %Change
Auto liability $11,395 $ 8,415 35.4%
Auto physical damage 9,082 8,213 10.6%
Workers Compensation 2,548 560 355.0%
Inland marine 1,367 1,055 29.6%
Other 415 310 33.9%
Total $24,807 $18,553 33.7%
Expenses for the six month period ended June 30, 1995 increased $2.3 million,
or 17.6%, over expenses for the six month period ended June 30, 1994. The
increase was primarily the result of increases in net claims and claim
settlement
expenses and underwriting, general and administrative expenses, offset, in part,
by a decrease in amortization of deferred acquisition costs. Increases in net
claims and claim settlement expenses were the result of increases in earned
premiums, and a slight increase in the statutory loss ratio from 57.3% in 1994
to 60.2% in 1995. In the first quarter of 1994, claims were negatively impacted
as a result of the severe weather conditions. Increases in underwriting, general
and administrative expenses were primarily the result of increases in premiums
written. The decrease in the amortization of deferred acquisition costs were
primarily the result of the increase in ceding commissions, offset, in part, by
an increase in net premiums earned. The statutory combined ratio for the six
month period ended June 30, 1995 was 87.3%, a decrease from 91.4% for the six
month period ended June 30, 1994.
8
Liquidity and Capital Resources
Historically, the Company has generated funds sufficient to support its
operations and has maintained a high degree of liquidity in its investment
portfolio. The primary sources of funds to meet the demands of claim
settlements
and operating expenses are premiums, ceding commissions and investment income.
The Company s funds generally are invested in securities with maturities
intended
to provide adequate funds to pay claims and expenses without the forced sale of
investments. The Company believes that its current cash and short term
investments, together with funds generated from operations, will be sufficient
to meet its operating and capital requirements for the foreseeable future.
Part II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
The Annual Meeting of Shareholders was held on May 18, 1995. The
only matter to be voted upon at the meeting was the election of two
directors. The results of the election were as follows:
L. Edward Sausman William R. Tierney, Jr.
Voting For 2,829,216 2,813,511
Voting against or
withheld 88,331 104,036
Abstentions and
Broker non-votes 735,125 735,125
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
9
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WALSHIRE ASSURANCE COMPANY
(Registrant)
DATE: August 7, 1995 /s/ Kenneth R. Taylor
Kenneth R. Taylor
President and Chief
Executive Officer
DATE: August 7, 1995 /s/ Gary J. Orndorff
Gary J. Orndorff
Vice President/Treasurer
and Chief Financial Officer
10