August 22, 1995
TO THE SHAREHOLDERS OF HEALTH INSURANCE OF VERMONT:
As you know from recent correspondence, management at Health Insurance of
Vermont has been diverted to a considerable extent from its customary
duties of operating an insurance company. As a result of several factors,
including this distraction, as well as non-recurring consultants' fees, a
2-1/2% increase in the ratio of net claims to net premiums and what
management hopes are non-recurring legal fees, the results for the first
half of 1995, although providing a profit, are disappointing.
Net income for the first half of 1995 amounted to $51,585, or $.10 per
share, which was down from the $342,101, or $.65 per share, for the same
period last year. This is a difference of some $290,000, of which
approximately $75,000 can be attributed to that increase in the ratio of
claims, mostly in California. Management has addressed this issue of
claims, and we believe it has been corrected. The balance of the
difference can be attributed to the other factors mentioned above.
Nonetheless, book value did increase, amounting to $15.73 per share at
June 30, 1995, up from $15.26 per share at the same time in 1994.
We are pleased to report that production records continue to be
established, with new business paid for reaching a new high of $877,166
for the first half of the year, up 8.1% over the $811,705 produced in the
same period in 1994. This represents a 61.2% increase over the $536,690
produced only two years ago. Premium revenues rose to $3,059,966, up 8.3%
from the $2,825,976 written in the first half of 1994. Annualized
premiums in force reached a new high with $6,574,540 in force at June 30,
1995, up 9.0% from the $6,032,109 in force at June 30, 1994.
As has been previously announced, Health Insurance of Vermont has engaged
the investment banking firm of Advest, Inc. of New York City to assist the
Company in refining its strategic plan and is making progress in exploring
avenues for enhancing shareholder value. Management also continues to try
to resolve the differences between the dissident group and the Company.
If the dispute can be settled, management can re-direct its full energies
to resuming the growth of the Company, which regrettably, has been slowed
for the moment.
Here are significant highlights for the first half of 1995 as compared to
the same periods for 1994 and 1993:
SIX MONTHS ENDED JUNE 30 1995 1994 1993
New Business Submitted $1,413,326 $1,220,346 $ 883,654
New Business Paid For 877,166 811,705 536,690
Premium Revenues 3,059,966 2,825,976 2,431,086
Annualized Premium in Force 6,574,540 6,032,109 5,269,316
Net Income 51,585 342,101 321,490
Earnings Per Share .10 .65 .62
Book Value Per Share 15.73 15.26 13.84
Once again our sincere thanks to all of you for your continued support.
Sincerely,
/s/ John W. Mahoney
John W. Mahoney
President
HEALTH INSURANCE OF VERMONT, INC.
BALANCE SHEETS
June 30 December 31
1995 1994
ASSETS
Investments:
Fixed maturities:
Bonds, available-for-sale $11,868,141 $11,603,155
Short-term investments:
Money market funds 704,190 100,953
Certificates of deposit 390,000 290,000
----------- -----------
Total Investments 12,962,331 11,994,108
Cash 125,341 147,502
Accrued investment income 235,194 225,249
Other assets 124,984 93,036
Reinsurance recoverable on paid losses 19,715 18,733
Prepaid reinsurance premium 94,425 97,321
Reinsurance receivables 1,705,170 1,673,584
Deferred policy acquisition costs 3,869,214 3,665,508
Cash surrender value of life insurance 535,352 495,644
Property and equipment, at cost:
Land and office building 602,464 602,464
Office equipment and furniture 410,248 394,531
Less accumulated depreciation (384,190) (340,606)
----------- -----------
Net property and equipment 628,522 656,389
----------- -----------
Total Assets $20,300,248 $19,067,074
=========== ===========
LIABILITIES
Policy liabilities:
Future accident and health policy benefits and claims $10,352,903 $ 9,872,915
Unearned premiums 577,161 567,828
Other policy claims and benefits 316,570 312,683
Other policyholders' funds 82,168 74,657
Other liabilities 417,099 289,856
Federal income taxes payable - 3,803
Deferred federal income taxes 194,201 100,107
----------- -----------
Total Liabilities 11,940,102 11,221,849
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $3.00 par value, 1,000,000 shares
authorized; 531,596 and 522,660 shares issued and
outstanding at June 30, 1995 and December 31, 1994,
respectively 1,594,788 1,567,980
Additional paid-in capital 1,101,463 1,072,744
Retained earnings, unappropriated 5,492,975 5,441,948
Net unrealized gain (loss) on debt securities 170,920 (236,889)
----------- -----------
Total Stockholders' Equity 8,360,146 7,845,225
----------- -----------
Total Liabilities and Stockholders' Equity $20,300,248 $19,067,074
=========== ===========
HEALTH INSURANCE OF VERMONT, INC.
STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
Revenues:
Premiums $1,561,972 $1,436,704 $3,059,966 $2,825,976
Net investment income 208,382 199,662 396,994 333,156
Realized losses on investments - (9,738) - (9,738)
---------- ---------- ---------- ----------
Total Income 1,770,354 1,626,628 3,456,960 3,149,394
---------- ---------- ---------- ----------
Benefits, Losses and Expenses:
Benefits, claims, losses and
settlement expenses 880,066 801,200 1,670,961 1,452,986
Underwriting, acquisition and
insurance expenses 858,264 644,937 1,723,848 1,307,657
---------- ---------- ---------- ----------
Total Benefits, Losses and
Expenses 1,738,330 1,446,137 3,394,809 2,760,643
---------- ---------- ---------- ----------
Income Before Income Tax Expense 32,024 180,491 62,151 388,751
---------- ---------- ---------- ----------
Income Tax Expense:
Current - 27,546 - 42,838
Deferred 5,444 (5,887) 10,566 3,812
---------- ---------- ---------- ----------
Total Income Tax Expense 5,444 21,659 10,566 46,650
---------- ---------- ---------- ----------
Net Income $ 26,580 $ 158,832 $ 51,585 $ 342,101
========== ========== ========== ==========
Earnings Per Share $ .05 $ .30 $ .10 $ .65
========== ========== ========== ==========
Shares Used To Calculate Earnings Per
Share 531,596 522,660 531,596 522,660
========== ========== ========== ==========
Earnings Per Share (Fully Diluted) $ .05 $ .30 $ .10 $ .65
========== ========== ========== ==========
Shares Used To Calculate Earnings Per
Share (Fully Diluted) 537,596 529,238 537,596 529,238
========== ========== ========== ==========
Dividends Per Share NONE NONE NONE NONE
========== ========== ========== ==========
The above financial information, in the opinion of management reflects all
adjustments necessary to a fair statement, and has been prepared in
accordance with generally accepted accounting principals.