SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
SEPTEMBER 30, 1998 0-6478
FOREMOST CORPORATION OF AMERICA
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-1863522
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5600 BEECH TREE LANE
CALEDONIA, MICHIGAN 49316
(Address of Principal Executive Offices) (Zip Code)
Mailing address:
P.O. BOX 2450, GRAND RAPIDS, MICHIGAN 49501
Registrant's telephone number, including area code
(616) 942-3000
Indicate by check mark whether the registrant (1) 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 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 close of the period covered by this report.
OUTSTANDING AT
CLASS SEPTEMBER 30, 1998
----- ------------------
Common Stock, $1.00 par value, 27,232,940 shares
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FOREMOST CORPORATION OF AMERICA
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION:
Item 1. - Financial Statements:
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 1-2
Consolidated Statements of Income -
Nine Months Ended September 30, 1998 and 1997 3-4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 5
Condensed Notes to Consolidated Financial Statements 6-8
Item 2. - Management's Discussion and Analysis 9-13
PART II. OTHER INFORMATION:
Item 5. - Other Information 14
Item 6. - Exhibits and Reports on Form 8-K 15
Signatures 16
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOREMOST CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(In thousands, except share data)
ASSETS:
Investments:
Fixed maturities held to maturity $ 982 $ 1,974
Securities available for sale:
Fixed maturities 363,965 376,868
Equity securities 79,506 83,677
Mortgage loans and land contracts on real estate 12,137 12,350
Investment real estate 12,340 11,920
Short-term investments 32,806 26,656
-------- --------
Total investments 501,736 513,445
Cash 1,610 2,409
Accrued investment income 6,035 6,293
Premiums receivable 79,315 71,541
Due from reinsurance companies 23,377 20,645
Other receivables 1,907 2,568
Prepaid policy acquisition costs 77,386 74,179
Prepaid reinsurance premiums 803 979
Real estate and equipment 52,749 38,341
Other assets 15,957 14,380
-------- --------
Total assets $760,875 $744,780
======== ========
LIABILITIES:
Unearned premium $262,794 $246,429
Insurance losses and loss adjustment expenses 89,065 82,722
Accounts payable and accrued expenses 33,197 33,022
Notes and other obligations payable 91,649 92,201
Income taxes 14,253 20,853
Other liabilities 14,432 14,102
-------- --------
Total liabilities 505,390 489,329
======== ========
Shareholders' Equity:
Preferred stock - 10,000,000 shares authorized,
none issued - -
Common stock, $1 par - 70,000,000
and 35,000,000 shares authorized, 27,232,940
and 27,700,872 shares issued and outstanding
at September 30, 1998 and December 31, 1997,
respectively 27,233 27,701
Other shareholders' equity 228,252 227,750
-------- --------
Total shareholders' equity 255,485 255,451
-------- --------
Total liabilities and shareholders' equity $760,875 $744,780
======== ========
See accompanying condensed notes to consolidated financial statements.
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FOREMOST CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands except per share data)
Income:
Property and casualty premium earned $109,673 $108,014 $326,483 $321,550
Net investment income 6,129 6,689 18,283 19,292
Realized gains 1,828 1,844 5,871 8,794
Other 503 609 1,792 1,831
-------- -------- -------- --------
Total income 118,133 117,156 352,429 351,467
-------- -------- -------- --------
Expense:
Insurance losses and loss expenses 63,064 58,229 192,467 191,628
Amortization of prepaid policy
acquisition costs 31,981 31,221 96,193 93,084
Operating 4,989 5,106 14,711 15,360
Interest 1,760 2,004 5,423 6,307
-------- -------- -------- --------
Total expense 101,794 96,560 308,794 306,379
-------- -------- -------- --------
Income before taxes 16,339 20,596 43,635 45,088
Income tax provision (4,492) (6,173) (11,113) (12,396)
-------- -------- -------- --------
Net income - continuing operations 11,847 14,423 32,522 32,692
Net income - discontinued operations - 20 - 110
-------- -------- -------- --------
Net income - before extraordinary item 11,847 14,443 32,522 32,802
Extraordinary loss on early
extinguishment of debt (net of $1,782
of federal income tax) - - (3,310) -
-------- -------- -------- --------
Consolidated net income $ 11,847 $ 14,443 $ 29,212 $ 32,802
======== ======== ======== ========
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Per share of common stock:
Net income - continuing operations $ 0.43 $ 0.52 $ 1.19 $ 1.17
Net income - discontinued operations - - $ - $ -
Extraordinary loss - net of tax benefit - - $ (0.12) $ -
-------- -------- -------- --------
Net income $ 0.43 $ 0.52 $ 1.07 $ 1.17
======== ======== ======== ========
Average shares outstanding 27,240 27,701 27,391 27,955
======== ======== ======== ========
Cash dividends per share $ 0.09 $ 0.09 $ 0.27 $ 0.27
======== ======== ======== ========
Per share of common stock - diluted
Net income - continuing operations $ 0.43 $ 0.51 $ 1.16 $ 1.15
Net income - discontinued operations - - $ - $ -
Extraordinary loss - net of tax benefit - - $ (0.12) $ -
-------- -------- -------- --------
Net income $ 0.43 $ 0.51 $ 1.04 $ 1.15
======== ======== ======== ========
Average shares outstanding 27,753 28,318 27,963 28,543
======== ======== ======== ========
See accompanying condensed notes to consolidated financial statements.
-4-
FOREMOST CORPORATION OF AMERICA
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
---- ----
(In thousands)
Operating Activities:
Net cash from operating activities $ 37,640 $ 25,315
-------- --------
Investing Activities:
Purchases of securities and loans made (82,768) (100,026)
Purchases of real estate and equipment (16,586) (1,243)
Sales of securities 78,781 61,757
Maturities of securities and receipts
from repayments of loans 13,476 35,417
Sales of real estate and equipment 934 798
(Increase) decrease in short-term investments (6,150) 5,870
-------- --------
Net cash from (for) investing activities (12,313) 2,573
-------- --------
Financing Activities:
Prepayment of mortgage (30,781) -
Extraordinary loss on early
extinguishment of debt (3,310) -
Repayment of debt (7,271) (1,753)
Proceeds from borrowings 37,500 2,000
Reacquisition of common stock (12,094) (19,367)
Dividends paid (7,391) (7,570)
Exercise of stock options: Receipts 2,100 3,345
Exercise of stock options: Repurchases (4,879) (5,952)
-------- --------
Net cash for financing activities (26,126) (29,297)
-------- --------
-5-
Cash increase (decrease) (799) (1,409)
Cash at beginning of year 2,409 5,141
-------- --------
Cash at end of period $ 1,610 $ 3,732
======== ========
See accompanying condensed notes to consolidated financial statements.
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FOREMOST CORPORATION OF AMERICA
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The notes to the consolidated financial statements are condensed and
do not contain all information required by generally accepted
accounting principles to be included in a full set of financial
statements.
2. All information is unaudited; however, in the opinion of management,
all adjustments (consisting only of normal recurring accruals) have
been made which are necessary to present fairly the results shown.
All significant intercompany balance and transactions have been
eliminated in consolidation. Interim results are not necessarily
indicative of the results to be expected in any other period.
3. During the first quarter of 1998, Foremost Corporation of America
adopted Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income," which requires that all components of
comprehensive income and total comprehensive income be reported on one
of the following: a statement of income and comprehensive income, a
statement of comprehensive income or a statement of stockholder's
equity. Comprehensive income is comprised of net income and all
changes to stockholder's equity, except those due to investments by
owners (changes in paid in capital) and distributions to owners
(dividends). For interim reporting purposes, SFAS 130 requires
disclosure of total comprehensive income.
Comprehensive income and its components consist of the following:
FOR THE THREE
MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
---- ----
(In thousands)
Net Income $11,847 $14,443
Other Comprehensive Income:
Unrealized Gain (Loss) on Securities
Available for Sale, (Net of
Tax of ($3,321) and $3,295) $(6,169) $ 6,119
------- -------
Comprehensive Income $ 5,678 $20,562
======= =======
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FOREMOST CORPORATION OF AMERICA
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
---- ----
(In thousands)
Net Income $29,212 $32,802
Other Comprehensive Income:
Unrealized Gain (Loss) on Securities
Available for Sale, (Net of
Tax of ($4,739) and $2,891) $(8,802) $ 5,370
------- -------
Comprehensive Income $20,410 $38,172
======= =======
4. Earnings per share amounts are computed based on the weighted average
number of common shares outstanding during each quarter. The
reconciliation of basic to diluted earnings per share amounts is as
follows:
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
-----------------------------------------
NET OUTSTANDING PER SHARE
INCOME SHARES AMOUNT
------- ----------- ---------
(In thousands, except per share amounts)
Basic EPS $11,847 27,240 $ .43
O/S Stock Options - 513 -
------- ------- -------
Diluted EPS $11,847 27,753 $ .43
======= ======= =======
-8-
FOREMOST CORPORATION OF AMERICA
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
-----------------------------------------
NET OUTSTANDING PER SHARE
INCOME SHARES AMOUNT
------- ----------- ---------
(In thousands, except per share amounts)
Basic EPS $14,443 27,701 $ .52
O/S Stock Options - 617 -
------- ------- -------
Diluted EPS $14,443 28,318 $ .51
======= ======= =======
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
-----------------------------------------
NET OUTSTANDING PER SHARE
INCOME SHARES AMOUNT
------- ----------- ---------
(In thousands, except per share amounts)
Basic EPS $29,212 27,391 $ 1.07
O/S Stock Options - 572 -
------- ------- -------
Diluted EPS $29,212 27,963 $ 1.04
======= ======= =======
-9-
FOREMOST CORPORATION OF AMERICA
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
-----------------------------------------
NET OUTSTANDING PER SHARE
INCOME SHARES AMOUNT
------- ----------- ---------
(In thousands, except per share amounts)
Basic EPS $32,802 27,955 $ 1.17
O/S Stock Options - 588 -
------- ------- -------
Diluted EPS $32,802 28,543 $ 1.15
======= ======= =======
5. On June 29, 1998, the Company entered into an unsecured credit
agreement with a group of banks. The credit agreement replaces the
existing unsecured credit agreement and the building mortgage loan
that was paid off on May 5, 1998. The new agreement provides for a
five year revolving credit facility not to exceed $40 million and a
seven year term loan of $80 million, of which $30 million of the term
loan will amortize down over six years at $1.25 million per quarter.
Borrowing rates are based on eurodollar and negotiated rates. The
existing interest rate swap agreement on $58 million of the facility
is still in effect. As of September 30, 1998, the Company had $29.5
million available under the revolving credit facility. The Company
also renewed the $20 million uncommitted line of credit facility,
which expired on June 30, 1998, for another year. In August 1998, the
Company entered into a interest rate swap agreement with a financial
institution for $30 million of the term loan that is amortizing. This
agreement effectively fixes the interest rate at 5.705% plus credit
spread until the loan amortizes to zero on May 31, 2004. The
Company's exposure to credit risk is limited to interest movements and
is considered to be negligible.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Foremost Corporation of America's combined loss and expense ratio for
the first nine months of 1998 was 93.5% compared to 93.3% for the same
period last year, in spite of industry catastrophe losses of $8.3 billion
for the first nine months of 1998 compared with $2.6 billion for all of
1997. Operating earnings for the first nine months of 1998, are up by 8%
over the same period last year. Return on equity for the first nine months
of 1998 is an annualized 15%. These results are a reflection of the
success of the Company's catastrophe exposure management efforts.
Net income from continuing operations, before an extraordinary item,
was $1.16 per share for the first nine months compared to $1.15 per share
in 1997. Realized gains of $.13 per share in 1998 and $.20 per share in
1997 are included in the nine months results. Net income from continuing
operations was $.43 per share, including $.04 per share in realized gains
for the third quarter of 1998, compared to $.51 per share in 1997,
including $.04 per share in realized gains. All per share amounts are
stated on a diluted basis.
On May 5, 1998, the Company pre-paid the $30.8 million mortgage on its
corporate headquarters and incurred a $3.3 million after-tax prepayment
penalty to extinguish this debt. This cost is classified as an
extraordinary item in the financial statements for the second quarter of
1998 and reduced earnings by $.12 per share. The reason for prepaying the
mortgage was to eliminate the restrictive operating covenants attached to
this debt, which hindered the Company's ability to manage its capital base
and leverage ratios through stock repurchases. The cost of this prepayment
penalty will be recouped over time by the Company's present ability to
borrow funds from its line of credit at lower interest rates. The interest
savings equal approximately $.03 per share annually to the Company's
operating results.
The combined loss and expense ratio for the property and casualty
group was 91.9% for the third quarter of 1998 compared to 87.8% for the
same period last year. The increase in the combined ratio can be
attributed to higher catastrophe losses, which tripled from last year's
third quarter and resulted in an additional 4.8 points to the combined
ratio. The Property Claims Services of the Insurance Services Office, Inc.
estimates industry-wide catastrophe losses for the third quarter
approximating $3.7 billion, which is more than seven times the amount of
such losses in the third quarter of 1997.
Written premium by major product line is as follows:
-11-
3RD QUARTER
---------------------------
INCREASE
1998 1997 (DECREASE)
-------- -------- ----------
(In thousands)
Mobile Home $ 97,688 $ 95,982 1.8%
RV 11,003 11,760 (6.4%)
Automobile 3,981 2,753 44.6%
Basics 2,176 1,777 22.4%
Homeowners 896 1,059 (15.4%)
Other 947 1,358 (30.3%)
-------- -------- ------
Total $116,691 $114,689 1.7%
======== ======== ======
NINE MONTHS
---------------------------
INCREASE
1998 1997 (DECREASE)
-------- -------- ----------
(In thousands)
Mobile Home $279,980 $278,386 0.6%
RV 39,695 40,411 (1.8%)
Automobile 12,857 9,885 30.1%
Basics 6,303 5,376 17.2%
Homeowners 1,920 2,734 (29.8%)
Other 2,717 4,338 (37.4%)
-------- -------- ------
Total $343,472 $341,130 0.7%
======== ======== ======
Mobile home written premium for the first nine months of 1998 was flat
on a comparable basis due to the effect of the Company's on-going
catastrophe management program of not accepting new business in Florida and
in certain portions of California. Direct response automobile premium
increased to $6 million in the first nine months of 1998 compared with $1.5
-12-
million in the same period of 1997. The Company's dwelling fire
insurance, called BASICS, continues its strong growth with a 17% increase
in written premium in the first nine months.
After-tax investment income contributed $.188 per share in the third
quarter of 1998 compared to $.194 per share in 1997. For the first nine
months of the year, after-tax investment income contributed $.56 per share
in 1998 and 1997.
FINANCIAL POSITION
The principle sources of cash for the first nine months of 1998 were
$86.1 million from sales and maturities of investments and $37.6 million
from operations. The Company also borrowed an additional $5.5 million from
its line of credit. The primary uses of cash were $99.4 million for the
purchases of securities, real estate and equipment, $16.9 million to
purchase treasury stock and $7.4 million to pay dividends to shareholders.
The Company had $34.4 million in cash and other liquid assets at September
30, 1998.
Total invested assets on a cost basis increased 0.4%, or $1.8 million
during the first nine months of 1998. Market values of securities
available for sale decreased $8.8 million net of tax in the first nine
months of 1998.
On June 29, 1998, the Company entered into an unsecured credit
agreement with a group of banks. The credit agreement replaces the
existing unsecured credit agreement and the building mortgage loan that was
paid off on May 5, 1998. The new agreement provides for a five year
revolving credit facility not to exceed $40 million and a seven year term
loan of $80 million, of which $30 million of the term loan will amortize
down over six years at $1.25 million per quarter. Borrowing rates are
based on eurodollar and negotiated rates, The existing interest rate swap
agreement on $58 million of the facility is still in effect. As of
September 30, 1998, the Company had $29.5 million available under the
revolving credit facility. The Company also renewed the $20 million
uncommitted line of credit facility, which expired on June 30, 1998, for
another year. In August, 1998, the Company entered into a interest rate
swap agreement with a financial institution for $30 million of the term
loan that is amortizing. This agreement effectively fixes the interest
rate at 5.705% plus credit spread until the loan amortizes to zero on May
31, 2004. The Company's exposure to credit risk is limited to interest
movements and is considered to be negligible.
The Company continued to manage its capital base and leverage ratios
by repurchasing 31,475 shares of its common stock during the third quarter
of 1998, under a previously announced repurchase plan. Since the
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inception of this repurchase plan in February 1994, the Company has
purchased 5,997,672 shares, adjusted for the January 1998 three-for-one
stock split.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue is the result of computer programs,
microcontrollers, and other systems being designed using two digits instead
of four to define the applicable year. The problem exists when date
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. By nature, the insurance industry is highly dependent
upon computer systems because of significant transaction volumes and date
dependencies for many of its applications. The Company has completed a
detailed review of its computer programs to identify the systems that could
be affected by the Year 2000 problem. The Company has a detailed written
plan, which regularly is updated and monitored by technical personnel.
Plan status is regularly reviewed by management of the Company. The
Company also has hired an outside consulting firm to assist in the process
of identifying, assessing, remediating, and testing Year 2000 problems.
The procedures used by these consultants for the Year 2000 conversion
effort have been certified by Information Technology Association of America
"ITAA." The ITAA 2000 Certification Program evaluates the consultant's
processes and methods used to develop new software or convert existing
software to meet the date related needs of the next century. The Company
is in the process of evaluating the Year 2000 readiness of third parties.
Significant third parties with which the Company interfaces with regard to
the Year 2000 problem include, among others, agents, technology vendors,
financial institutions and service providers, and companies that provide
utility infrastructure (power, delivery services, telecommunications).
Unreadiness by these third parties would expose the Company to the
potential for loss and impairment of business processes and activities.
The Company is assessing these risks through bilateral efforts and is
considering the need for contingency plans intended to address perceived
risks. The Company cannot predict what effect the failure of such a third
party to address, in a timely manner, the Year 2000 problem would have on
the Company.
As of September 30, 1998, the Company has completed approximately 70%
of the Year 2000 modifications of its mainframe computer applications. The
Company has identified the non-IT systems that have Year 2000 issues and has
a plan to assess, remediate, and test, if necessary, these systems. The
Company will continue to assess the impact of the Year 2000 issue on the
remainder of its systems and applications throughout 1998 and 1999. The
Company has performed tests of its systems and applications during 1998 and
will continue to do so in 1999. The Company's goal is to have systems and
applications Year 2000 ready by the middle of 1999, allowing the remaining
time to be used for further validation and testing.
-14-
The Company spent approximately $1.8 million before 1997, $3.8 million
in connection with Year 2000 issues in 1997 and expects that it will spend
approximately $4.5 million and $2.9 million in 1998 and 1999, respectively.
These costs primarily will consist of professional fees paid to third party
providers of remediation services. It is the Company's policy to expense all
costs associated with these systems changes. The Company also may invest in
new or upgraded technology which has definable value lasting beyond 2000. In
these instances, where Year 2000 compliance is merely ancillary, the
Company may capitalize and depreciate such an asset over its estimated
useful life.
Based on currently available information, management does not
presently anticipate that the costs to address the Year 2000 issues will
have a material adverse impact on the Company's financial conditions,
results of operations or liquidity. However, the extent to which the
computer operations and other systems of the Company's important third
parties are adversely affected could, in turn, affect the Company's ability
to communicate with such third parties and could materially affect the
Company's results of operations in any period or periods.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates. There can be no guarantee that these estimates will be achieved
and actual results could differ from those anticipated. Specific factors
that might cause differences include, but are not limited to, the ability
of other companies on which the Company's systems rely to modify or convert
their systems to be Year 2000 ready, the ability to locate and correct all
relevant computer codes and microprocessors, the ability of all third
parties who have business relationships with the Company to continue their
businesses without interruption, and similar uncertainties. As a result,
the Company is in the process of evaluating possible internal and external
scenarios that might have an adverse effect on the Company, as well as the
need for contingency plans to address these scenarios. We anticipate that
all necessary contingency plans will be completed during 1999.
This Year 2000 Readiness Disclosure is based upon and partially
repeats information provided by the Company's outside consultants and
others regarding the Year 2000 readiness of the Company and its customers,
suppliers, financial institutions, and other parties. Although the Company
believes this information to be accurate, it has not independently verified
such information.
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, contained in
this 10-Q report are forward-looking statements. Forward-looking
statements generally are accompanied by words such as "anticipate,"
-15-
"believe," "estimate," "project," "expect" or similar statements. Such
forward-looking information involves important known and unknown risks and
uncertainties and other factors that may cause the actual results,
performance or achievements of the company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that such expectations will prove correct.
Factors that could cause the company's results to differ materially from
the results discussed in such forward-looking statements include
competition from other insurance companies, the general economic
conditions, the effects of the Year 2000 issue on the Company's business,
the effects of governmental regulation and the effects of weather-related
catastrophes. All forward-looking statements are expressly qualified in
their entirety by the cautionary statements in this paragraph and current
and potential stockholders are cautioned not to place undue reliance on the
forward-looking statements made in this report.
SUBSEQUENT EVENT
On October 1, 1998, the Company commenced action against First USA
Bank and Banc One Corporation ("Defendants") in the United States District
Court for the Western District of Michigan arising out of a dispute
concerning an Insurance Services Agreement. The agreement granted the
Company the exclusive right to provide certain insurance products to
Defendants' credit card customers, and provided that Defendants would
market the Company's products to credit card customers in exchange for a
royalty fee from the Company. Defendants have not yet filed a response to
the complaint, and no discovery has taken place in the litigation.
-16-
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company's Bylaws contain provisions regarding the procedure and
permissibility of shareholder proposals. Under the Bylaws no matter may be
presented for shareholder action at an annual or special meeting of
shareholders unless such matter is: (i) specified in the notice of the
meeting (or any supplement to the notice) given by or at the direction of
the Board of Directors; (ii) otherwise presented at the meeting by or at
the direction of the Board of Directors; (iii) properly presented for
action at the meeting by a shareholder in accordance with the notice
provisions set forth in the Bylaws and any other applicable requirements;
or (iv) a procedural matter presented, or accepted for presentation, by the
Chairman of the meeting in his or her sole discretion.
For a matter to be properly presented by a shareholder, the
shareholder must have given timely notice of the matter in writing to the
Secretary of the Company. To be timely, the notice must be delivered to or
mailed to and received at the principal executive offices of the Company
not less than 120 calendar days prior to the date corresponding to the date
of the Company's proxy statement or notice of meeting released to
shareholders in connection with the last preceding annual meeting of
shareholders in the case of an annual meeting (unless the Company did not
hold an annual meeting within the last year, or if the date of the upcoming
annual meeting changed by more than 30 days from the date of the last
preceding meeting, then the notice must be delivered or mailed and received
not more than seven days after the earlier of the date of the notice of the
meeting or public disclosure of the date of the meeting), and not more than
seven days after the earlier of the date of the notice of the meeting or
public disclosure of the date of the meeting in the case of a special
meeting. The notice by the shareholder must set forth: (i) a brief
description of the matter the shareholder desires to present for
shareholder action; (ii) the name and record address of the shareholder
proposing the matter for shareholder action; (iii) the class and number of
shares of capital stock of the Company that are beneficially owned by the
shareholder; and (iv) any material interest of the shareholder in the
matter proposed for shareholder action.
The shareholder proposal, together with any accompanying supporting
statement, may not in the aggregate exceed 500 words. Except to the extent
that a shareholder proposal submitted pursuant to the Bylaws is not made
available at the time of mailing, the notice of the purposes of the meeting
shall include the name and address of and the number of shares of the
voting security held by the proponent of each shareholder proposal.
A shareholder may submit matters and proposals for shareholder action
at any annual or special shareholder meeting if the matters and proposals
-17-
are of general concern to, and are proper subjects for action by, the
shareholders. A submitted proposal or matter may not be presented for
shareholder action if it: (i) relates to the enforcement of a personal
claim or the redress of a personal grievance against the Company, its
management or any other person; (ii) consists of a recommendation, request
or mandate that action be taken with respect to a matter, including a
general economic, political, racial, religious, social or similar cause,
that is not significantly related to the Company's business or is not
within the Company's power to effectuate; (iii) has, at the shareholder's
request, previously been submitted in either of the last two annual
shareholder meetings and the shareholder has failed to present the
proposal, in person or by proxy, for action at the meeting; (iv) is
substantially similar to a matter or proposal presented within the
preceding five calendar years: (x) if it was submitted once during the past
five annual meetings and it received less than 3% of the total votes cast,
or (y) if it was submitted twice during the past five annual meetings and
it received less than 6% of the total votes cast at the time of its second
submission, or (z) if it was submitted three times during such period and
it received less than 10% of the votes cast at the time of its third
submission (if any of (x), (y) or (z) apply, the proposal may be omitted
for three years after the latest previous submission); or (v) consists of a
recommendation or request that the management take action with respect to a
matter relating to the conduct of the Company's ordinary business
operations.
Notwithstanding the above, if the shareholder desires to require the
Company to include the shareholder's proposal in the Company's proxy
materials, matters and proposals submitted for inclusion on the agenda
shall be governed by the rules and regulations under the Securities
Exchange Act of 1934, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Articles of Incorporation. See Exhibit 3.1
4.2 Bylaws. See Exhibit 3.2
4.3 Specimen Stock Certificate
27 Financial Data Schedule
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(b) Reports on 8-K - There were no reports filed on Form 8-K for the
quarter ended September 30, 1998.
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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.
FOREMOST CORPORATION OF AMERICA
(Registrant)
Date: November 12, 1998 /S/ PAUL D. YARED
Paul D. Yared
Its: Senior Vice President, Secretary
and General Counsel
Date: November 12, 1998 /S/ KENNETH C. HAINES
Kenneth C. Haines
Its: Controller
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Articles of Incorporation. See Exhibit 3.1
4.2 Bylaws. See Exhibit 3.2
4.3 Specimen Stock Certificate
27 Financial Data Schedule