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: September 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 October 31, 1995:
Common stock - $.01 Par Value 3,695,007 shares
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
INDEX
PAGE
NUMBER
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1995
(unaudited) and December 31, 1994. . . . . . . . . . 2
Consolidated Statements of Income for the three
months ended September 30, 1995 and 1994
(unaudited). . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income for the nine months
ended September 30, 1995 and 1994 (unaudited) . . . . 5
Consolidated Statements of Cash Flows for the nine
months ended September 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)
September 30, December 31,
Assets 1995 1994
(Unaudited)
Investments
Held to maturity:
Fixed maturities (market $18,349 and
$16,140) . . . . . . . . . . . . . . . . $18,043 $16,508
Available for sale:
Fixed maturities (cost $23,761 and
$22,588) . . . . . . . . . . . . . . . . 23,740 21,664
Equity securities (cost: $8,638 and
$8,263). . . . . . . . . . . . . . . . . 9,147 7,611
Short-term investments . . . . . . . . . . . . 2,126 3,889
Other investments. . . . . . . . . . . . . . . 1,609 868
Total investments . . . . . . . . . . . . . 54,665 50,540
Cash. . . . . . . . . . . . . . . . . . . . . . . 127 184
Accrued investment income receivable. . . . . . . 895 895
Amounts receivable from reinsurers. . . . . . . . 3,606 2,644
Amounts receivable from reinsured company . . . . 1,468 1,325
Agents balances (net of allowance for doubtful
accounts of $100). . . . . . . . . . . . . . . 4,473 3,627
Installment premiums receivable . . . . . . . . . 3,648 3,633
Agents balances and installment premiums
receivable from related parties. . . . . . . . 3,214 2,258
Premium finance receivable (net of unearned
finance charges and allowance for credit
losses of $136 and $123) . . . . . . . . . . . 5,608 4,678
Reinsurance receivable. . . . . . . . . . . . . . 6,794 6,355
Deferred acquisition costs. . . . . . . . . . . . 4,195 3,791
Property and equipment, (net of accumulated
depreciation of $1,228 and $1,054) . . . . . . 3,352 2,656
Other assets. . . . . . . . . . . . . . . . . . . 157 482
Total assets. . . . . . . . . . . . . . . . $92,202 $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 September 30, December 31
1995 1994
(Unaudited)
Liabilities:
Unpaid claims, claim settlement expenses
and claims drafts . . . . . . . . . . . . $18,048 $14,292
Unearned premiums. . . . . . . . . . . . . . 23,272 21,065
Short-term notes payable . . . . . . . . . . 1,230 3,435
Long-term notes payable. . . . . . . . . . . 1,601 1,921
Deposits by insureds . . . . . . . . . . . . 1,252 747
Commissions payable to agents. . . . . . . . 606 571
Commissions payable to related parties . . . 395 214
Other liabilities. . . . . . . . . . . . . . 1,047 809
Total liabilities . . . . . . . . . . . . 47,451 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; 3,678 and
3,638 shares issued and outstanding . . . 37 36
Additional paid-in capital . . . . . . . . . 26,057 25,751
Unrealized gain (loss) on investments
available for sale (net of deferred tax
expense (benefit) of $177 and ($534)) . . 311 ( 1,042)
Retained earnings. . . . . . . . . . . . . . 18,345 15,268
Net shareholders equity. . . . . . . . . 44,751 40,014
Total liabilities and shareholders equity . $92,202 $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
September 30,
1995 1994
(Unaudited)(Unaudited)
Revenues:
Premiums earned . . . . . . . . . . . . . . . . . $11,452 $ 9,417
Premiums ceded. . . . . . . . . . . . . . . . . . ( 2,669) ( 1,883)
Net premiums earned . . . . . . . . . . . . . . . 8,783 7,534
Net investment income . . . . . . . . . . . . . . 705 591
Net realized gains on investments . . . . . . . . 108 262
Other . . . . . . . . . . . . . . . . . . . . . . 183 151
Total revenues . . . . . . . . . . . . . . . . 9,779 8,538
Expenses:
Claims and claim settlement expenses. . . . . . . 5,054 4,471
Reinsurance recoveries. . . . . . . . . . . . . . ( 129) ( 108)
Net claims and claims settlement expenses . . . . 4,925 4,363
Amortization of deferred acquisition costs. . . . 891 1,461
Underwriting, general and administrative
expenses. . . . . . . . . . . . . . . . . . . . 1,953 1,357
Interest. . . . . . . . . . . . . . . . . . . . . 65 55
Total expenses . . . . . . . . . . . . . . . . 7,834 7,236
Income before income taxes . . . . . . . . . . . . . 1,945 1,302
Provision for income taxes . . . . . . . . . . . . . 411 301
Net income . . . . . . . . . . . . . . . . . . . . . 1,534 1,001
Less dividends on convertible preferred stock. . . . 115 115
Net income available for common stock. . . . . . . . $ 1,419 $ 886
Net income per common share and common equivalent
share:
Primary:
Net income . . . . . . . . . . . . . . . . . . $ .37 $ .24
Weighted average shares outstanding. . . . . . 3,874 3,740
Fully diluted:
Net income . . . . . . . . . . . . . . . . . . $ .35 $ .24
Weighted average shares outstanding. . . . . . 4,406 3,740
See accompanying notes to consolidated financial statements.
4
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands,
except per share data)
Nine Months Ended
September 30,
1995 1994
(Unaudited)(Unaudited)
Revenues:
Premiums earned . . . . . . . . . . . . . . . . . $33,348 $26,277
Premiums ceded. . . . . . . . . . . . . . . . . . ( 7,523) ( 5,210)
Net premiums earned . . . . . . . . . . . . . . . 25,825 21,067
Net investment income . . . . . . . . . . . . . . 2,040 1,639
Net realized gains on investments . . . . . . . . 247 658
Other . . . . . . . . . . . . . . . . . . . . . . 531 551
Total revenues . . . . . . . . . . . . . . . . 28,643 23,915
Expenses:
Claims and claim settlement expenses. . . . . . . 16,040 12,893
Reinsurance recoveries. . . . . . . . . . . . . . ( 1,359) ( 983)
Net claims and claims settlement expenses . . . . 14,681 11,910
Amortization of deferred acquisition costs. . . . 3,399 4,375
Underwriting, general and administrative
expenses. . . . . . . . . . . . . . . . . . . . 5,115 4,031
Interest. . . . . . . . . . . . . . . . . . . . . 212 160
Total expenses . . . . . . . . . . . . . . . . 23,407 20,476
Income before income taxes . . . . . . . . . . . . . 5,236 3,439
Provision for income taxes . . . . . . . . . . . . . 1,100 792
Net income . . . . . . . . . . . . . . . . . . . . . 4,136 2,647
Less dividends on convertible preferred stock. . . . 345 259
Net income available for common stock. . . . . . . . $ 3,791 $ 2,388
Net income per common share and common equivalent
share:
Primary:
Net income . . . . . . . . . . . . . . . . . . $ .99 $ .64
Weighted average shares outstanding. . . . . . 3,825 3,722
Fully diluted:
Net income . . . . . . . . . . . . . . . . . . $ .94 $ .64
Weighted average shares outstanding. . . . . . 4,386 3,734
See accompanying notes to consolidated financial statements.
5
WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
1995 1994
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 4,136 $ 2,647
Adjustments to reconcile net income to net
cash provided by operating activities
Net realized gains on investments. . . . . . . ( 247) ( 658)
Increase (Decrease) in assets:
Accrued investment income receivable. . . . . - 2
Amounts receivable from reinsurers. . . . . . ( 962) ( 891)
Amounts receivable from reinsured company . . ( 143) 35
Agents balances and installment premiums
receivable . . . . . . . . . . . . . . . . . ( 846) ( 796)
Agents balances and installment premiums
receivable from related parties. . . . . . . ( 971) ( 161)
Premium finance receivables . . . . . . . . . ( 930) 6
Reinsurance receivables . . . . . . . . . . . ( 439) ( 895)
Deferred acquisition costs. . . . . . . . . . ( 404) ( 260)
Other, net. . . . . . . . . . . . . . . . . . 669 306
Increase (Decrease) in liabilities:
Unpaid claims, claim settlement expenses and
claim drafts . . . . . . . . . . . . . . . . 3,756 2,911
Unearned premiums . . . . . . . . . . . . . . 2,207 1,778
Deposits by insureds. . . . . . . . . . . . . 505 ( 246)
Other, net. . . . . . . . . . . . . . . . . . 460 ( 80)
Net cash provided by operating activities. . . . . 6,791 3,698
Cash flows from investing activities:
Purchase of investments:
Held to maturity . . . . . . . . . . . . . . . . (2,410) ( 5,711)
Available for sale . . . . . . . . . . . . . . . (5,440) (11,911)
Sale of investments:
Available for sale . . . . . . . . . . . . . . . 3,929 7,542
Maturity of investments. . . . . . . . . . . . . . 785 1,925
Net (purchase) sale of short term and other
investments. . . . . . . . . . . . . . . . . . . 1,042 ( 775)
Purchase of property and equipment . . . . . . . . (1,176) ( 280)
Sale of property and equipment . . . . . . . . . . 136 15
Other, net . . . . . . . . . . . . . . . . . . . . ( 436) 651
Net cash used in investing activities. . . . . . (3,570) ( 8,544)
Cash flows from financing activities:
Cash dividends paid. . . . . . . . . . . . . . . . (1,060) ( 764)
Issuance of common stock . . . . . . . . . . . . . 307 233
Issuance of preferred stock. . . . . . . . . . . . - 6,777
Proceeds from notes payable. . . . . . . . . . . . 750 -
Payment of notes payable . . . . . . . . . . . . . (3,275) ( 1,240)
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . (3,278) 5,006
Net increase (decrease) in cash . . . . . . . . . . ( 57) 160
Cash at beginning of the period. . . . . . . . . . . 184 56
Cash at end of the period. . . . . . . . . . . . . . $ 127 $ 216
See accompanying notes to consolidated financial statements.
6
W ALSHIRE AND SUBSIDIARIES
N OTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated balance sheet as of September 30, 1995, the consolidated
statements of income for the three and nine months ended September 30, 1995 and
1994, and the consolidated statements of cash flows for the nine 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 September 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 September 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 and nine month periods ended September 30, 1995 increased
$1.2 million and $4.7 million, or 14.5% and 19.8%, respectively, from revenues
for the three and nine month periods ended September 30, 1994. These increases
were primarily the results of increases in premiums earned. Direct premiums
written increased 13.7% and 27.0% in the three and nine month periods ended
September 30, 1995 when compared to the same periods in 1994. The following
tables set forth the direct premiums written by the insurance subsidiaries of
the
Company for the three and nine month periods ended September 30, 1995 and 1994
by line of business.
7
(In thousands)
Three months ended September 30,
1995 1994 %Change
Auto liability $ 4,532 $ 3,793 19.5%
Auto physical damage 4,458 4,245 5.0%
Workers Compensation 768 531 44.6%
Inland marine 545 487 11.9%
Other 269 239 12.6%
Total $10,572 $ 9,295 13.7%
(In thousands)
Nine months ended September 30,
1995 1994 %Change
Auto liability $15,927 $12,207 30.5%
Auto physical damage 13,540 12,458 8.7%
Workers Compensation 3,316 1,092 203.7%
Inland marine 1,912 1,541 24.1%
Other 684 549 24.6%
Total $35,379 $27,847 27.0%
Expenses for the three and nine month periods ended September 30, 1995 increased
$.6 million and $2.9 million, or 8.3% and 14.3%, respectively, over expenses for
the three and nine month periods ended September 30, 1994. The increases were
primarily the results 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 primarily the result of increases in earned
premiums. The statutory loss ratio for the three month period ended September
30, 1995, was 57.7%, a slight decrease from 59.5% for the same period in 1994.
The statutory loss ratio for the nine month period ended September 30, 1995 was
59.3%, a slight increase from 58.1% for the same period in 1994. 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 and nine month periods ended September 30, 1995 were 87.3%
and 87.1%, a decrease from 91.3% and 91.5% for the three and nine month periods
ended September 30, 1994.
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.
8
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
None
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: November 6, 1995 /s/ Kenneth R. Taylor
Kenneth R. Taylor
President and Chief
Executive Officer
DATE: November 6, 1995 /s/ Gary J. Orndorff
Gary J. Orndorff
Vice President/Treasurer
and Chief Financial Officer
10