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: March 31, 1996
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, P. O. Box 3849, York, PA 17402-0138
(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 April 30, 1996:
Common stock - $.01 Par Value 4,099,166 shares
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
INDEX
PAGE
NUMBER
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996
(unaudited) and December 31, 1995. . . . . . . . . . 2
Consolidated Statements of Income for the three
months ended March 31, 1996 and 1995 (unaudited) . . 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 (unaudited) . . 5
Notes to Consolidated Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 6
Part II OTHER INFORMATION . . . . . . . . . . . . . . . . . 7
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 7
Item 2. Changes in Securities . . . . . . . . . . . . . . . 7
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 7
Item 4. Submission of Matters to Vote of Security Holders. . 7
Item 5. Other Information . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands,
except per share data)
March 31, December 31,
Assets 1996 1995
(Unaudited)
Investments:
Held to maturity:
Fixed maturities (fair value $15,738 and
$15,712) . . . . . . . . . . . . . . . . $ 15,671 $ 15,217
Available for sale:
Fixed maturities (cost $29,421 and
$27,007) . . . . . . . . . . . . . . . . 29,214 27,215
Equity securities (cost $9,171 and
$8,189). . . . . . . . . . . . . . . . . 9,872 8,720
Short-term investments . . . . . . . . . . . . 1,928 5,191
Other investments. . . . . . . . . . . . . . . 2,093 1,867
Total investments . . . . . . . . . . . . . 58,778 58,210
Cash. . . . . . . . . . . . . . . . . . . . . . . 281 99
Accrued investment income receivable. . . . . . . 864 864
Amounts receivable from reinsurers. . . . . . . . 2,997 3,315
Amounts receivable from reinsured company . . . . 663 595
Agents balances (net of allowance for doubtful
accounts of $100). . . . . . . . . . . . . . . 6,930 5,501
Installment premiums receivable . . . . . . . . . 5,976 5,965
Agents balances and installment premiums
receivable from related parties. . . . . . . . 3,581 3,694
Premium finance receivables (net of unearned
finance charges and allowance for credit
losses of $146 and $135) . . . . . . . . . . . 6,650 6,534
Reinsurance receivable. . . . . . . . . . . . . . 10,034 8,615
Deferred acquisition costs. . . . . . . . . . . . 4,969 4,831
Property and equipment (net of accumulated
depreciation of $1,406 and $1,284) . . . . . . 3,233 3,270
Other assets. . . . . . . . . . . . . . . . . . . 864 134
Total assets. . . . . . . . . . . . . . . . $105,820 $101,627
See accompanying notes to consolidated financial statements.
2
WALSHIRE ASSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands,
except per share data)
March 31, December 31,
Liabilities and Shareholders Equity 1996 1995
(Unaudited)
Liabilities:
Unpaid claims and claim settlement expenses. $ 23,462 $ 20,153
Unearned premiums. . . . . . . . . . . . . . 28,392 27,555
Short-term notes payable . . . . . . . . . . 2,477 2,250
Long-term notes payable. . . . . . . . . . . 1,361 1,481
Deposits by insureds . . . . . . . . . . . . 2,047 1,488
Commissions payable to agents. . . . . . . . 930 1,049
Commissions payable to related parties . . . 374 473
Other liabilities. . . . . . . . . . . . . . _ 719 1,164
Total liabilities . . . . . . . . . . . . 59,762 55,613
Shareholders equity:
Preferred stock, par value $.01 per share;
2,000 shares authorized; 142 shares
issued; 133 and 138 shares outstanding. . 1 1
Common stock, par value $.01 per share;
10,000 shares authorized; 4,099 and
4,064 shares issued and outstanding . . . 41 41
Additional paid-in capital . . . . . . . . . 32,070 31,918
Unrealized gain on investments available
for sale (net of deferred taxes of $168
and $181) . . . . . . . . . . . . . . . . 326 558
Retained earnings. . . . . . . . . . . . . . 13,620 13,496
Shareholders equity. . . . . . . . . . . 46,058 46,014
Total liabilities and shareholders equity . $105,820 $101,627
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
March 31,_____
1996 1995
(Unaudited)(Unaudited)
Revenues:
Premiums earned . . . . . . . . . . . . . . . . . $13,791 $ 10,540
Premiums ceded. . . . . . . . . . . . . . . . . . ( 3,055) ( 2,302)
Net premiums earned . . . . . . . . . . . . . . . 10,736 8,238
Net investment income . . . . . . . . . . . . . . 731 662
Net realized gains on investments . . . . . . . . 67 66
Other . . . . . . . . . . . . . . . . . . . . . . 175 168
Total revenues . . . . . . . . . . . . . . . . 11,709 9,134
Expenses:
Claims and claim settlement expenses. . . . . . . 8,387 4,860
Reinsurance recoveries. . . . . . . . . . . . . . ( 737) ( 98)
Net claims and claim settlement expenses. . . . . 7,650 4,762
Amortization of deferred acquisition costs. . . . 1,662 1,196
Underwriting, general and administrative
expenses. . . . . . . . . . . . . . . . . . . . 1,813 1,518
Interest. . . . . . . . . . . . . . . . . . . . . 82 78
Total expenses . . . . . . . . . . . . . . . . 11,207 7,554
Income before income taxes . . . . . . . . . . . . . 502 1,580
Provision for income taxes . . . . . . . . . . . . . 5 332
Net income . . . . . . . . . . . . . . . . . . . . . 497 1,248
Less dividends on convertible preferred stock. . . . 108 115
Net income available for common stock. . . . . . . . $ 389 $ 1,133
Net income per common share and common equivalent
share:
Primary:
Net income . . . . . . . . . . . . . . . . . . $ .09 $ .27
Weighted average shares outstanding. . . . . . 4,328 4,147
See accompanying notes to consolidated financial statements.
4
WALSHIRE ASSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended
March 31, _______
1996 1995
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 497 $ 1,248
Adjustments to reconcile net income to net
cash provided by operating activities
Net realized gains on investments. . . . . . . ( 67) ( 66)
Decrease (increase) in assets:
Accrued investment income receivable. . . . . - ( 12)
Amounts receivable from reinsurers. . . . . . 318 285
Amounts receivable from reinsured company . . ( 68) ( 115)
Agents balances and installment premiums
receivable . . . . . . . . . . . . . . . . . (1,440) ( 624)
Agents balances and installment premiums
receivable from related parties. . . . . . . 113 ( 324)
Premium finance receivables . . . . . . . . . ( 116) ( 874)
Reinsurance receivables . . . . . . . . . . . (1,419) 224
Deferred acquisition costs. . . . . . . . . . ( 138) ( 104)
Other, net. . . . . . . . . . . . . . . . . . ( 607) 121
(Decrease) increase in liabilities:
Unpaid claims, claim settlement expenses and
claim drafts outstanding . . . . . . . . . . 3,309 638
Unearned premiums . . . . . . . . . . . . . . 837 920
Deposits by insureds. . . . . . . . . . . . . 559 219
Other, net. . . . . . . . . . . . . . . . . . ( 654) ( 94)
Net cash provided by operating activities. . . . . 1,124 1,442
Cash flows from investing activities:
Purchase of investments:
Held to maturity . . . . . . . . . . . . . . . . (1,377) ( 902)
Available for sale . . . . . . . . . . . . . . . (4,575) (1,888)
Sale of investments:
Available for sale . . . . . . . . . . . . . . . 810 1,192
Maturity of investments. . . . . . . . . . . . . . 1,253 486
Net sale of short term and other investments . . . 3,049 3,466
Purchase of property and equipment . . . . . . . . ( 86) ( 185)
Sale of property and equipment . . . . . . . . . . - 31
Other, net . . . . . . . . . . . . . . . . . . . . 97 ( 224)
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . ( 829) 1,976
Cash flows from financing activities:
Cash dividends paid. . . . . . . . . . . . . . . . ( 372) ( 352)
Issuance of common stock . . . . . . . . . . . . . 153 79
Proceeds from notes payable . . . . . . . . . . . 226 -
Payment of notes payable . . . . . . . . . . . . . ( 120) (3,036)
Net cash used in financing activities. . . . . . ( 113) (3,309)
Net increase in cash . . . . . . . . . . . . . . . . 182 109
Cash at beginning of the period. . . . . . . . . . . 99 184
Cash at end of the period. . . . . . . . . . . . . . $ 281 $ 293
Se e accompanying notes to consolidated financial statements.
5
WA LSHIRE ASSURANCE COMPANY AND SUBSIDIARIES
NO TES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated balance sheet as of March 31, 1996, the consolidated
statements of income for the three months ended March 31, 1996 and 1995, and the
consolidated statements of cash flows for the three 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 March 31, 1996 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 1995 Annual Report dated February 29, 1996. The
results of operations for the period ended March 31, 1996 are not necessarily
indicative of the results of operations for the full year.
3.Net income per common 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.
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations
Revenues for the three month period ended March 31, 1996 increased $2.6 million,
or 28.2%, from revenues for the three month period ended March 31, 1995. This
increase was primarily the result of an increase in premiums earned. Direct
premiums written increased 26.7% in the three month period ended March 31, 1996
when compared to the same period in 1995. The following table sets forth the
direct premiums written by the Company for the three month periods ended March
31, 1996 and 1995 by line of business.
(In thousands)
Three months ended March 31,
1996 1995 %Change
Auto liability $ 6,165 $ 4,988 23.6 %
Auto physical damage 5,532 4,285 29.1 %
Workers compensation 1,788 1,215 47.2 %
Inland marine 856 682 25.5 %
Other 98 230 (57.4)%
Total $14,439 $11,400 26.7 %
6
Expenses for the three month period ended March 31, 1996 increased $3.7 million,
or 48.4%, over expenses for the three month period ended March 31, 1996. The
increase was the result of increases in net claims and claim settlement
expenses, amortization of deferred acquisition costs and underwriting, general
and administrative expenses. 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 60.8% in 1995 to 72.6% in 1996. In the first quarter
of 1996, claims were negatively impacted as a result of the most severe winter
weather conditions in recent history. The increase in the amortization of
deferred acquisition costs was primarily the result of the increase in net
premiums earned. Increases in underwriting, general and administrative expenses
were primarily the result of increases in premiums written. The statutory
combined ratio for the three month period ended March 31, 1996 was 101.9%, an
increase from 88.0% for the three month period ended March 31, 1995.
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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
7
SIGNA TURES
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: May 14, 1996 /s/ Kenneth R. Taylor
Kenneth R. Taylor
President and Chief
Executive Officer
DATE: May 14, 1996 /s/ Gary J. Orndorff
Gary J. Orndorff
Vice President/Treasurer
and Chief Financial Officer
8