UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File No. 1-11941
FARM FAMILY HOLDINGS, INC.
A Delaware Corporation IRS No. 14-1789227
344 Route 9W, Glenmont, New York 12077-2910
Registrant's telephone number: (518) 431-5000
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 [ ]
The number of shares outstanding of the issuer's common stock as of
May 8, 2000 is 6,070,984.
FARM FAMILY HOLDINGS, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Income and Comprehensive Income -
Three Months Ended March 31, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Report of Independent Accountants 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures of Market Risk 18
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
2
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands) (Unaudited)
March 31, 2000 December 31, 1999
--------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
Fixed maturities
Available for sale, at fair value
(Amortized cost: $1,005,494 in 2000 and $1,002,850 in 1999) $966,699 $960,054
Held to maturity, at amortized cost
(Fair value: $7,605 in 2000 and $7,820 in 1999) 7,683 7,971
Equity securities - available for sale, at fair value
(Cost: $42,175 in 2000 and $42,819 in 1999) 41,200 45,809
Mortgage loans 28,143 26,832
Policy loans 31,220 30,839
Other invested assets 175 176
--------------------------------------------------------------------------------------------------------------------
Total investments 1,075,120 1,071,681
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 19,217 19,190
Insurance receivables:
Reinsurance receivables 27,452 24,748
Premiums receivable, net 43,703 32,094
Deferred acquisition costs 19,858 17,630
Present value of future profits 28,534 28,571
Accrued investment income 17,570 18,875
Property and equipment, net 14,481 14,520
Deferred income tax asset, net 25,898 29,605
Other assets 5,140 4,884
--------------------------------------------------------------------------------------------------------------------
Total Assets $1,276,973 $1,261,798
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses
for property/casualty insurance $189,987 $186,130
Reserves for life policies and contract benefits 244,987 239,891
Funds on deposit from policyholders 411,924 416,971
Unearned premium reserve 84,226 74,364
Accrued dividends to policyholders 5,515 5,263
Reinsurance premiums payable 5,990 4,168
Accrued expenses and other liabilities 18,021 19,471
Participating policyholders' interest 113,696 128,516
--------------------------------------------------------------------------------------------------------------------
Total liabilities 1,074,346 1,074,774
--------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Mandatory redeemable preferred stock, redemption value - $5,830;
163,214 Series A shares issued and outstanding 5,830 5,830
Stockholders' equity:
Preferred stock, $.01 par value, 836,786 shares authorized,
no shares issued and outstanding ---- ----
Common stock, $.01 par value, 10,000,000 shares authorized,
6,113,984 and 6,110,684 shares issued and outstanding 61 61
Additional paid-in capital 123,590 123,504
Retained earnings 76,581 60,172
Accumulated other comprehensive loss (3,435) (2,543)
--------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 196,797 181,194
--------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,276,973 $1,261,798
====================================================================================================================
See accompanying notes to Consolidated Financial Statements.
3
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
($ in thousands, except per share amounts) (Unaudited)
Three Months Ended
March 31,
2000 1999
--------------------------------------------------------------------------------------------------------
Revenues:
Premiums from property/casualty insurance $47,522 $48,334
Premiums from life and health insurance and contract charges 9,563 ----
Net investment income 18,493 4,834
Realized investment gains (losses), net (208) 279
Other income 621 277
--------------------------------------------------------------------------------------------------------
Total revenues 75,991 53,724
--------------------------------------------------------------------------------------------------------
Losses, benefits, and expenses:
Losses and loss adjustment expenses on property/casualty insurance 38,534 36,486
Policyholder contract benefits 14,660 ----
Amortization expense 8,751 8,996
Other operating costs and expenses 5,674 2,836
Participating policyholders' interest (15,895) ----
--------------------------------------------------------------------------------------------------------
Total losses, benefits and expenses 51,724 48,318
Income before federal income tax expense and preferred stock dividends 24,267 5,406
Federal income tax expense 7,769 1,663
--------------------------------------------------------------------------------------------------------
Income before preferred stock dividends 16,498 3,743
Preferred stock dividends 89 ----
--------------------------------------------------------------------------------------------------------
Net income attributable to common stockholders 16,409 3,743
--------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
Unrealized holding losses arising during the period
(net of tax benefit of $482 and $1,730, respectively) (896) (3,213)
Reclassification adjustment for losses included in net income
(net of tax benefit of $2 and $98, respectively) 4 181
--------------------------------------------------------------------------------------------------------
Other comprehensive loss (892) (3,032)
--------------------------------------------------------------------------------------------------------
Comprehensive income $15,517 $711
========================================================================================================
Per Share Data:
Net income - basic $2.69 $0.71
========================================================================================================
Net income - diluted $2.66 $0.71
========================================================================================================
Basic weighted average shares outstanding 6,111,119 5,253,813
========================================================================================================
Diluted weighted average shares outstanding 6,167,294 5,296,143
========================================================================================================
See accompanying notes to Consolidated Financial Statements.
4
FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the Three Months
Ended March 31,
2000 1999
-----------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $16,409 $3,743
-----------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Realized investment losses (gains), net 208 (279)
Amortization of bond discount 1,142 87
Amortization and depreciation 9,360 8,996
Interest credited to policyholders 6,013 ----
Deferred income taxes 6,855 (295)
Participating policyholders' interest (15,895) ----
Dividends to policyholders (2,990) ----
Capitalization of deferred acquisition costs (10,941) (8,961)
Loss on sale of property and equipment 6 ----
Changes in:
Reinsurance receivables (2,704) (1,592)
Premiums receivable, net (11,609) 397
Accrued investment income 1,305 236
Receivable from affiliates, net ---- 1,266
Other assets (256) (979)
Reserves for property/casualty insurance losses and loss adjustment expenses 3,857 1,216
Reserves for life policies and contract benefits 5,096 ----
Unearned premium reserve 9,862 423
Reinsurance premiums payable 1,822 (1,055)
Accrued expenses and other liabilities (1,198) 809
-----------------------------------------------------------------------------------------------------------------------
Total adjustments (67) 269
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,342 4,012
-----------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from sales:
Fixed maturities 10,139 705
Equity securities 1,062 366
Investment collections:
Fixed maturities 7,156 5,876
Other investments 189 18
Investment purchases:
Fixed maturities (21,344) (11,250)
Other investments (1,500) (476)
Policy loans issued, net (381) ----
Change in other invested assets 1 ----
Purchases of property and equipment (577) ----
-----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,255) (4,761)
-----------------------------------------------------------------------------------------------------------------------
Financing Activities
Contractholder fund deposits 6,235 ----
Contractholder fund withdrawals (17,295) ----
-----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (11,060) ----
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 27 (749)
Cash and cash equivalents, beginning of period 19,190 10,677
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $19,217 $9,928
=======================================================================================================================
See accompanying notes to Consolidated Financial Statements.
5
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Farm
Family Holdings, Inc. ("Farm Family Holdings") and its wholly-owned subsidiaries
(collectively referred to as the "Company"). The primary subsidiaries of Farm
Family Holdings are Farm Family Casualty Insurance Company ("Farm Family
Casualty") and Farm Family Life Insurance Company ("Farm Family Life").
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, these statements contain all
adjustments, including normal recurring accruals, which are necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods. The results of the Company's operations for any interim
period are not necessarily indicative of the results of the Company's operations
for a full fiscal year.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and the related notes included in Farm
Family Holdings' December 31, 1999 Form 10-K.
2. Participating Policyholders' Interest
A significant portion of the Company's life insurance segment's products is
written on a "participating" basis, as defined in the New York State Insurance
Law. Profits earned on participating business are reserved for the payment of
dividends to participating policyholders, except for the stockholders' share of
profits on participating policies, which is limited annually to the greater of
10% of the profit on participating business, or 50 cents per thousand dollars of
the face amount of participating life insurance in force.
In November 1999, the Company requested an opinion of the Insurance Department
of the State of New York (the "Department") as to whether interest credited in
excess of the interest guaranteed under certain participating insurance
policies, annuities and dividend accumulations ("Excess Interest") and the
difference between the guaranteed cost of insurance or premium and the cost of
insurance or premium actually charged ("Spreads"), as well as dividends to
participating policyholders, could be included in its calculation of the
estimate of statutory profits on participating life insurance business allocable
to stockholders. In April 2000, the Department approved the Company's request to
include Excess Interest and Spreads, as well as dividends to participating
policyholders, in its calculation of the estimate of statutory profits on
participating life insurance business allocable to stockholders on both a
prospective and retrospective basis. Accordingly, the Company's calculation of
the estimate of profits on participating life insurance business allocable to
stockholders has been revised to include Excess Interest and Spreads on a
retrospective and prospective basis.
The impact of including Excess Interest and Spreads in the Company's estimate of
the profits on participating life insurance business allocable to stockholders
increased the profits allocable to stockholders and is included in participating
policyholders' interest on the accompanying Consolidated Statements of Income
and Comprehensive Income. The effect of retroactively including Excess Interest
and Spreads in the Company's calculation of its estimate of profits on
participating life insurance business allocable to stockholders for periods
through December 31, 1999 increased net income for the three months ended March
31, 2000 by $12.7 million (after tax expense of $6.3 million) or $2.07 per
common share on a fully diluted basis.
6
3. Earnings Per Share
The following table presents a reconciliation of the numerators and denominators
of the basic and diluted earnings per share computations.
Three months ended
March 31,
2000 1999
------------------------------------------------------------------------------------------------------
Net income available to common stockholders $16,409,000 $3,743,000
======================================================================================================
Weighted-average number of shares in basic earnings per share 6,111,119 5,253,813
Effect of stock options 56,175 42,330
------------------------------------------------------------------------------------------------------
Weighted-average number of shares in diluted earnings per share 6,167,294 5,296,143
======================================================================================================
Basic net income per share $2.69 $0.71
======================================================================================================
Diluted net income per share $2.66 $0.71
======================================================================================================
4. Future Application of Accounting Standards
In September 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). This statement, which is
effective for the Company for the year beginning January 1, 2001, establishes
accounting and reporting standards for derivative instruments and for hedging
activities. Statement 133 requires the recognition of all derivatives as either
assets or liabilities in the statement of financial position and the measurement
of those instruments at fair value. Management believes that Statement 133 will
not have a material impact on the Company's consolidated financial statements.
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
the Codification of Statutory Accounting Principles guidance (the
"Codification"), which will replace the current Accounting Practices and
Procedures Manual as the NAIC's primary guidance on statutory accounting.
Statutory accounting is a comprehensive basis of accounting based on prescribed
accounting practices, which include state laws, regulations and general
administrative rules, as well as a variety of publications of the NAIC. The
Codification provides guidance for the areas where statutory accounting has been
silent and changes current statutory accounting in some areas. The NAIC has
established January 1, 2001 as the effective date of the Codification. The New
York Insurance Department has advised that it intends to proceed with
implementation of the Codification, subject to any provisions in New York
statute which conflict with particular points in the Codification rules. The
Company has not estimated the potential effect of adopting the Codification.
5. Contingencies
The Company is party to numerous legal actions arising in the normal course of
business. Management believes that resolution of these legal actions will not
have a material adverse effect on the Company's consolidated financial
condition.
Catastrophes are an inherent risk in the property and casualty insurance
industry and could produce significant adverse fluctuations in the Company's
results of operations and financial condition. The Company is subject to a
concentration of risk within the Northeastern United States. For each of the
three-month periods ended March 31, 2000 and 1999, approximately 60% and 62%,
respectively, of the Company's property and casualty direct premiums were
written in the states of New York and New Jersey. As a result of the
concentration of the Company's business in the states of New York and New
Jersey, and more generally, in the Northeastern United States, the Company's
results of operations may be significantly affected by weather conditions,
catastrophic events and regulatory developments in these two states and in the
Northeastern United States, despite the Company's property and casualty
reinsurance program designed to mitigate the impact of adverse weather and
catastrophic events on the Company's operating results.
7
5. Contingencies - Continued
As a condition of its license to do business in various states, the Company is
required to participate in a variety of mandatory residual market mechanisms
(including mandatory pools) which provide certain insurance (most notably
automobile insurance) to consumers who are otherwise unable to obtain such
coverages from private insurers. The amount of future losses or assessments from
residual market mechanisms can not be predicted with certainty and could have a
material adverse effect on the Company's future results of operations.
During the third quarter of 1998, the Company modified the agreements with its
agents to include revised conditions under which eligible agents may receive
extended earnings payments. In addition to length of service, confidentiality,
and non-competition conditions, extended earnings will be paid only if a
successor agent(s) assumes the right to service the book of business of the
eligible former agent and agrees to become primarily responsible for making the
extended earnings payments. In the event that no successor agent(s) assumes the
right to service the book of business of an eligible former agent, the Company
has no obligation to make the extended earnings payments. The Company has no
intention to waive this provision of its agreements with its agents. As a
result, the successor agent(s), not the Company, is the primary obligor
responsible for extended earnings payments. Since the inception of the Program
in 1986, the Company has always been able to identify successor agents willing
to assume the rights to service such books of business. The Company acts as
guarantor of the amounts payable to eligible former agents who have terminated
their association with the Company by successor agents who agree to make the
extended earnings payments. At March 31, 2000, the Company was guarantor of $1.3
million for such payments. The Company expects to enforce the terms of the
guarantee in the event of default by a successor agent.
The Company's liability for funds on deposit from policyholders includes amounts
subject to discretionary withdrawal. Withdrawal characteristics as of March 31,
2000 are as follows:
($ in thousands) Amount % of Total
------------------------------------------------------------------------------------------------------
Surrender charge rate:
Greater than or equal to 5% $85,581 20.8%
Less than 5%, but still subject to surrender charge 67,459 16.4%
Not subject to surrender charge 250,484 60.8%
Not subject to discretionary withdrawal 8,400 2.0%
------------------------------------------------------------------------------------------------------
Total funds on deposit from policyholders $411,924 100.0%
======================================================================================================
8
6. Segment Information
The Company has two reportable segments: property and casualty insurance and
life insurance, which offer different products and services. The property and
casualty insurance segment includes activities related to the sale of the
Special Farm Package, a flexible multi-line package of insurance coverages, and
other insurance products covering personal and commercial automobiles,
businessowners and homeowners. The life insurance segment includes the sale of
individual whole life, term and universal life products, single and flexible
premium deferred annuity products, single premium immediate annuity products and
disability income insurance products. The Company uses operating income (net
income excluding realized investment gains (losses) and nonrecurring charges,
net of taxes) to measure the financial results of its segments.
"Corporate and other" includes holding company activities and operations not
directly related to the reportable segments.
Summarized segment financial information is as follows:
Three months ended
March 31,
($ in thousands) 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Premium revenues
Property and casualty insurance $47,522 $48,334
Life insurance 9,563 ----
- ---------------------------------------------------------------------------------------------------------------
Total premium revenues $57,085 $48,334
===============================================================================================================
Net investment income
Property and casualty insurance $5,556 $4,727
Life insurance 12,859 ----
Corporate and other 78 107
- ---------------------------------------------------------------------------------------------------------------
Total net investment income $18,493 $4,834
===============================================================================================================
Amortization expense
Property and casualty insurance
Amortization of deferred acquisition costs $8,435 $8,996
Life insurance
Amortization of deferred acquisition costs 279 ----
Amortization of present value of future profits 37 ----
- ---------------------------------------------------------------------------------------------------------------
Total amortization expense $8,751 $8,996
===============================================================================================================
Other operating costs and expenses
Property and casualty insurance
Underwriting expenses $2,723 $2,524
Dividends to policyholders ---- 70
Life insurance
Other operating costs and expenses 2,734 ----
Corporate and other 447 242
Intersegment eliminations (230) ----
- ---------------------------------------------------------------------------------------------------------------
Total other operating costs and expenses $5,674 $2,836
===============================================================================================================
9
6. Segment Information - Continued
Three months ended
March 31,
($ in thousands) 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Net income
Operating Income
Property and casualty insurance $2,818 $3,633
Life insurance 1,182 ----
Corporate and other (311) (71)
- ---------------------------------------------------------------------------------------------------------------
Total consolidated operating income 3,689 3,562
Effect of retroactively including Excess Interest
and Spreads, net of tax 12,746 ----
Realized investment gains (losses), net of tax (26) 181
- ---------------------------------------------------------------------------------------------------------------
Net income $16,409 $3,743
===============================================================================================================
Federal income tax expense (benefit)
Property and casualty insurance $979 $1,700
Life insurance 6,908 ----
Corporate and other (118) (37)
- ---------------------------------------------------------------------------------------------------------------
Total federal income tax expense $7,769 $1,663
===============================================================================================================
March 31, December 31,
2000 1999
- ---------------------------------------------------------------------------------------------------------------
Assets
Property and casualty insurance $461,648 $446,721
Life insurance 813,282 812,106
Corporate and other 72,241 71,014
Intersegment eliminations (70,198) (68,043)
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,276,973 $1,261,798
===============================================================================================================
10
Report of Independent Accountants
To the Shareholders and Board of Directors
Farm Family Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Farm Family
Holdings, Inc. and its subsidiaries as of March 31, 2000, and the related
consolidated statements of income and comprehensive income and of cash flows for
each of the three-month periods ended March 31, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1999, and the related
consolidated statements of income and comprehensive income, of stockholders'
equity and of cash flows for the year then ended (not presented herein), and in
our report dated February 11, 2000 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 1999, is fairly
stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Albany, New York
April 24, 2000
11
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
The following discussion includes the operations of Farm Family Holdings, Inc.
("Farm Family Holdings") and its wholly-owned subsidiaries (collectively
referred to as the "Company" or "we") and should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere
within this document. On April 6, 1999, Farm Family Holdings acquired all of the
outstanding capital stock of Farm Family Life. As a result of the acquisition,
Farm Family Life became a wholly-owned subsidiary of Farm Family Holdings. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the financial results of Farm Family Life and Farm Family Life's
wholly-owned property and casualty subsidiary, United Farm Family, were included
in these consolidated financial statements of Farm Family Holdings subsequent to
April 6, 1999.
Our operating results are subject to significant fluctuations from period to
period depending upon, among other factors, the frequency and severity of losses
from weather related and other catastrophic events, the effect of competition
and regulation on the pricing of products, changes in interest rates, the impact
on reserves and reserving policy caused by property and casualty claims
development and variations of actual experience from that assumed for life
insurance business as to expected morbidity, lapse rates and other factors used
in the development of product pricing, general economic conditions, tax laws and
the regulatory environment. As a condition of our license to do business in
various states, we are required to participate in a variety of mandatory
residual market mechanisms (including mandatory pools) which provide certain
insurance (most notably automobile insurance) to consumers who are otherwise
unable to obtain such coverages from private insurers. In all such states,
residual market premium rates are subject to the approval of the state insurance
department and have generally been inadequate. The amount of future losses or
assessments from residual market mechanisms cannot be predicted with certainty
and could have a material adverse effect on our results of operations.
For the three-month periods ended March 31, 2000 and 1999, 36.3% and 33.3%,
respectively, of our property and casualty direct written premiums were derived
from policies written in New York and, for the same periods, 23.5% and 28.6%,
respectively, were derived from policies written in New Jersey. For these same
periods, no other state accounted for more than 10.0% of our property and
casualty direct written premiums. As a result, our results of operations may be
significantly affected by weather conditions, catastrophic events and regulatory
developments in these two states and in the Northeastern United States
generally.
12
Safe Harbor Statement under The Private Securities Litigation Reform Act of
1995:
With exception of historical information, the matters discussed or incorporated
by reference in this Report on Form 10-Q are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that are
based on management's current knowledge, expectations, estimates, beliefs and
assumptions. The forward-looking statements in this Form 10-Q include, but are
not limited to, statements concerning our exposure to interest rate and market
risk, statements regarding the adequacy of the Company's capital resources,
liquidity, and other financial items, statements of the plans and objectives of
the Company or its management, and statements of future economic performance and
assumptions underlying statements regarding the Company or its business. Readers
are hereby cautioned that certain events or circumstances could cause actual
results to differ materially from those estimated, projected or predicted. The
forward-looking statements in this Form 10-Q are not guarantees of future
performance and are subject to a number of important risks and uncertainties,
many of which are outside the Company's control, that could cause actual results
to differ materially. These risks and uncertainties include, but are not limited
to, exposure to catastrophic loss, the frequency and severity of weather related
losses, geographic concentration of loss exposure in New York, New Jersey and
the Northeastern United States generally, the effect of regulatory changes
governing personal automobile insurance in New Jersey and the impact thereof on
the Company's direct written premium, losses and loss adjustment expenses, the
risks associated with the legislative, regulatory and competitive environments
in the states in which the Company currently operates, heightened competition,
including specifically the intensification of competition, failure to obtain new
customers or to retain existing customers, the effect of the uncertainties
related to the Year 2000 issue, the Company's primary reliance, as a holding
company, on dividends from its subsidiaries and the applicable regulatory
restrictions on the ability of the Company's subsidiaries to pay such dividends,
and conditions specific to the insurance industry, including its cyclical
nature, regulatory changes and conditions, rating agency policies and practices,
competitive factors, claims development and the impact thereof on loss reserves
and the Company's reserving policy, the adequacy of the Company's reinsurance
programs, developments in the securities markets and the impact thereof on the
Company's investment portfolio, tax law changes and other risk factors listed
from time to time in the Company's Securities and Exchange Commission filings
including the Company's Form 10-K filed for the fiscal year ended December 31,
1999. Accordingly, there can be no assurance that actual results will conform to
the forward-looking statements in this Form 10-Q.
13
Results of Operations
The Three Months Ended March 31, 2000 Compared to the Three Months Ended March
31, 1999
Insurance Premiums and Contract Charges
Premium revenue increased to $57.1 million for the three months ended March 31,
2000 from $48.3 million for the same period in 1999.
Premium revenue for property and casualty insurance decreased $0.8 million
during the three months ended March 31, 2000 to $47.5 million from $48.3 million
for the same period in 1999. The decrease in premium revenue for the first
quarter of 2000 was primarily attributable to an increase of $2.0 million in
premium revenue ceded to Farm Family Casualty's reinsurers and a decrease of
$0.4 million in premium revenue from Farm Family Casualty's voluntary assumed
reinsurance business. The increase in premium revenue ceded to reinsurers was
primarily attributable to an increase in premiums ceded pursuant to Farm Family
Casualty's aggregate stop loss reinsurance program, which also reduced losses
and loss adjustment expenses for the first quarter of 2000. These decreases in
premium revenue were partially offset by an increase in premium revenue derived
from Farm Family Casualty's direct writings of $1.2 million and premium revenue
of $0.6 million from United Farm Family.
The $1.2 million increase in earned premiums on additional business directly
written by Farm Family Casualty was primarily attributable to an increase of
$0.7 million, or 1.9%, in earned premiums from Farm Family Casualty's primary
products (personal and commercial automobile products other than assigned risk
automobile business, the Special Farm Package, businessowners products,
homeowners products, and Special Home Package) and an increase of $0.5 million,
or 6.1%, in earned premiums from other products. Farm Family Casualty had
approximately 175,000 total policies in force at March 31, 2000. The number of
policies in force related to Farm Family Casualty's primary products increased
by 3.9% to approximately 144,000 as of March 31, 2000 from approximately 138,600
as of March 31, 1999.
Property and casualty net written premiums increased $8.6 million to $57.3
million for the three months ended March 31, 2000 compared to $48.7 million for
the same period in 1999. The increase in net written premiums was primarily
attributable to an increase of $10.6 million in Farm Family Casualty's direct
writings (excluding assigned risk automobile business premiums) and the
inclusion of United Farm Family's net written premiums of $1.4 million. Premiums
from direct writings increased primarily as a result of the conversion of our
personal and commercial automobile policies in certain states from six-month to
twelve-month policies. Excluding the impact of converting personal and
commercial automobile policies from six-month to twelve-month policies in
certain states and premiums from assigned risk automobile business, Farm Family
Casualty's direct written premiums increased approximately $2.9 million or 6.3%
to $49.0 million for the first quarter of 2000 compared to $46.1 million for the
same period in 1999. These increases were partially offset by an increase of
$2.1 million in premiums ceded to Farm Family Casualty's reinsurers and a
decrease of $0.4 million in premiums assumed by Farm Family Casualty. Excluding
premiums from personal automobile business in New Jersey, premiums from assigned
risk automobile business, and the effects of converting personal and commercial
automobile policies in certain states from six-month to twelve-month policies,
Farm Family Casualty's direct writings increased $3.5 million or 9.0% for the
first quarter of 2000 compared to the same period in 1999. The reduction in
premiums from personal automobile business in New Jersey was primarily
attributable to the New Jersey legislation mandating a rate roll back for
personal automobile business in New Jersey, effective March 22, 1999.
14
Geographically, the increase in Farm Family Casualty's direct writings,
excluding the effects of converting personal and commercial automobile policies
in certain states from six-month to twelve-month policies, came from New York,
New Jersey, Massachusetts, West Virginia, New Hampshire, Vermont and Rhode
Island. In addition, excluding the effects of converting personal and commercial
automobile policies in certain states from six-month to twelve-month policies,
direct writings of our primary products by Farm Family Casualty increased during
the first quarter of 2000, except for direct writings of personal automobile and
Special Farm Package policies. Personal automobile direct writings decreased
primarily as a result of the rate roll back in New Jersey effective March 22,
1999. Excluding premiums from personal automobile business in New Jersey,
premiums from assigned risk automobile business, and the effects of converting
personal and commercial automobile policies in certain states from six-month to
twelve-month policies, premiums from direct writings of personal automobile
business increased 5.4%. Direct writings of the Special Farm Package decreased
1.4%, however, Special Farm Package policies in force increased 2.2%. The
property and casualty segment's direct writings of the Special Farm Package
increased 0.7% during the first quarter of 2000, due to the inclusion of United
Farm Family.
Life insurance premium revenue was $9.6 million for the three months ended March
31, 2000. This amount includes premiums and contract charges primarily from the
sale of individual whole life, term and universal life products, and disability
income insurance products.
Net Investment Income
Net investment income increased $13.7 million to $18.5 million for the three
months ended March 31, 2000 from $4.8 million for the same period in 1999.
Net investment income for the property and casualty insurance segment increased
$0.8 million, or 17.5%, to $5.6 million for the three months ended March 31,
2000 from $4.7 million for the same period in 1999. The taxable equivalent yield
on the property and casualty insurance segment's investment portfolio was 7.0%
and 6.9% for the three months ended March 31, 2000 and 1999, respectively. The
increase in net investment income for the property and casualty insurance
segment was primarily the result of an increase in the average cash and invested
assets (at amortized cost) of $22.6 million, or 7.4%, for Farm Family Casualty
and the inclusion of United Farm Family, which accounted for $0.4 million of the
increase in investment income and an additional $24.3 million in average cash
and invested assets (at amortized cost).
Net investment income for the life insurance segment was $12.9 million for the
three months ended March 31, 2000. The yield on fixed maturity investments (at
amortized cost) was 7.0% for that period.
Losses and Loss Adjustment Expenses
Losses and loss adjustment expenses on property and casualty insurance increased
$2.0 million, or 5.6%, to $38.5 million for the three months ended March 31,
2000 from $36.5 million for the same period in 1999. Losses and loss adjustment
expenses were 81.1% of premium revenue for the three months ended March 31, 2000
compared to 75.5% of premium revenue for the same period in 1999. United Farm
Family's losses and loss adjustment expenses were $0.5 million for the three
months ended March 31, 2000. The increase in the loss and loss adjustment
expense ratio was primarily attributable to an increase in the severity of
losses incurred on certain of our businessowners, umbrella, and personal
automobile (bodily injury coverage) policies. In addition, we incurred
significant weather-related property losses on two of our voluntary assumed
reinsurance contracts during the first quarter of 2000.
15
Other Operating Costs and Expenses
Other operating costs and expenses increased $2.8 million to $5.7 million for
the three months ended March 31, 2000 from $2.9 million for the same period in
1999. The increase was primarily due to the inclusion of Farm Family Life's
other operating costs and expenses of $2.7 million. For the three months ended
March 31, 2000, property and casualty insurance underwriting expenses (including
amortization expenses) were 23.5% of premium revenue compared to 23.8% for the
same period in 1999. Excluding United Farm Family, for the three months ended
March 31, 2000, property and casualty insurance underwriting expenses (including
amortization expenses) were 23.0% of premium revenue.
Participating Policyholders' Interest
Participating policyholders' interest of $15.9 million reduced losses, benefits
and expenses for the three months ended March 31, 2000. This amount includes
$19.0 million, which reduced losses, benefits and expenses, representing the
pre-tax effect of retroactively including Excess Interest and Spreads in our
calculation of the estimate of profits on participating life insurance business
allocable to stockholders for periods through December 31, 1999, as discussed in
Note 2 to the accompanying Consolidated Financial Statements.
Federal Income Tax Expense
Federal income tax expense increased $6.1 million to $7.8 million for the three
months ended March 31, 2000 from $1.7 million for the same period in 1999. The
increase includes $6.3 million relating to deferred income taxes on the effect
of retroactively including Excess Interest and Spreads in our calculation of the
estimate of profits on participating life insurance business allocable to
stockholders for periods through December 31, 1999, as discussed in Note 2 to
the accompanying Consolidated Financial Statements. Federal income tax expense
was 32.0% of income before federal income tax expense and preferred stock
dividends for the three months ended March 31, 2000 compared to 30.8% for the
same period in 1999.
Net Income Attributable to Common Stockholders
Net income increased $12.7 million to $16.4 million for the three months ended
March 31, 2000 from $3.7 million for the same period in 1999 primarily due to
the effect of retroactively including Excess Interest and Spreads in our
calculation of the estimate of profits on participating life insurance business
allocable to stockholders for periods through December 31, 1999, which increased
net income for the three months ended March 31, 2000 by $12.7 million. The
impact of including these amounts in our calculations for the three months ended
March 31, 2000 was to increase net income by $136,000.
Liquidity and Capital Resources
Farm Family Holdings may receive dividends from subsidiaries, if declared and
paid. The New York Insurance Law regulates the distribution of dividends and
other payments to Farm Family Holdings by Farm Family Casualty and Farm Family
Life. As of December 31, 1999, the maximum amount of dividends that could be
paid by Farm Family Casualty without the prior approval of the New York State
Insurance Department (the "Department") was approximately $4.3 million. During
the three months ended March 31, 2000, Farm Family Casualty declared and paid
dividends of $0.5 million to Farm Family Holdings.
The payment of stockholder dividends by Farm Family Life is subject to the prior
approval of the Department. Under the New York Insurance Law, the Superintendent
of Insurance has broad discretion to determine whether the financial condition
of a stock life insurance company would support the payment of dividends to its
shareholders. During the three months ended March 31, 2000, Farm Family Life
declared and paid dividends of $1.0 million to Farm Family Holdings. The
Department approved this amount prior to declaration of the dividend.
We have a revolving credit agreement with three banks, which provides for
uncollateralized borrowings of up to $30.0 million. At March 31, 2000, no
amounts were outstanding.
16
On April 25, 2000, our Board of Directors adopted a stock repurchase plan that
authorizes us to repurchase shares of the Company's common stock in an aggregate
amount of up to $7.5 million. The repurchase program has been authorized for a
one-year period beginning on April 27, 2000 (the expiration of our existing
stock repurchase plan) and ending on April 26, 2001. The extent and timing of
any repurchases will depend on market conditions and other corporate
considerations. No share repurchases have been made through March 31, 2000.
Net cash provided by operating activities was $16.3 million and $4.0 million
during the three-month periods ended March 31, 2000 and 1999, respectively. The
increase in net cash provided by operating activities was primarily attributable
to the additional operating cash flow from Farm Family Life.
Net cash used in investing activities was $5.3 million during the three months
ending March 31, 2000 compared to $4.8 million for the same period in 1999. The
increase in cash used in investing activities resulted primarily from an
increase in investment purchases partially offset by an increase in proceeds
from investment sales.
Net cash used in financing activities of $11.1 million for the three months
ending March 31, 2000 was the result of contractholder fund withdrawals on
interest sensitive products exceeding the related deposits for these products.
We believe the excess of contractholder fund withdrawals over deposits is
directly related to the strength of the stock market and the prevailing interest
rate environment.
Future Application of Accounting Standards
In September 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement 133"). This statement, which is effective
for us for the year beginning January 1, 2001, establishes accounting and
reporting standards for derivative instruments and for hedging activities.
Statement 133 requires the recognition of all derivatives as either assets or
liabilities in the statement of financial position and the measurement of those
instruments at fair value. Management believes that the adoption of Statement
133 will not have a material impact on our financial statements.
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
the Codification of Statutory Accounting Principles guidance (the
"Codification"), which will replace the current Accounting Practices and
Procedures Manual as the NAIC's primary guidance on statutory accounting.
Statutory accounting is a comprehensive basis of accounting based on prescribed
accounting practices, which include state laws, regulations and general
administrative rules, as well as a variety of publications of the NAIC. The
Codification provides guidance for the areas where statutory accounting has been
silent and changes current statutory accounting in some areas. The NAIC has
established January 1, 2001 as the effective date of the Codification. The New
York Insurance Department has advised that it intends to proceed with
implementation of the Codification, subject to any provisions in New York
statute which conflict with particular points in the Codification rules. We have
not estimated the potential effect of adopting the Codification.
17
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
Our market risks of financial instruments and investment objectives have not
materially changed since December 31, 1999.
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT INDEX
FARM FAMILY HOLDINGS, INC. FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
Exhibit
Number Document Description
- --------------------------------------------------------------------------------
2.1 Plan of Reorganization and Conversion dated February 14, 1996 as
amended by Amendment No. 1, dated April 23, 1996 (Incorporated by
reference to Registration Statement No. 333-4446)
3.1 Certificate of Incorporation of Farm Family Holdings, Inc.
(Incorporated by reference to Registration Statement No. 333-4446)
3.2 Bylaws of Farm Family Holdings, Inc. (Incorporated by reference to
Registration Statement No. 333-4446)
4.1 Certificate of Designations of Junior Participating Cumulative
Preferred Stock of Farm Family Holdings, Inc. (incorporated by
reference to Exhibit 4.3 to Form S-8, Registration No. 333-80723 filed
with the Securities and Exchange Commission on June 15, 1999)
4.2 Certificate of Corrections to Certificate of Designations of Junior
Participating Cumulative Preferred Stock of Farm Family Holdings, Inc.
(incorporated by reference to Exhibit 4.4 to Form S-8, Registration
No. 333-80723 filed with the Securities and Exchange Commission on
June 15, 1999)
4.3 Certificate of Designations of Farm Family Holdings, Inc. Preferred
Stock, Series A (incorporated by reference to Exhibit 4.5 to Form S-8,
Registration No. 333-80723 filed with the Securities and Exchange
Commission on June 15, 1999)
4.4 Rights Agreement, dated as of July 29, 1997, between the Company and
The Bank of New York (incorporated by reference to Exhibit 4.1 to the
Company's Current Report of Form 8-K/A filed with the Securities and
Exchange Commission on June 14, 1999)
4.5 Registration Rights Agreement, dated as of April 6, 1999 by and among
Farm Family Holdings, Inc. and the Shareholders of the Farm Family
Life Insurance Company (incorporated by reference to Farm Family
Holdings, Inc. Form 10-Q for the quarter ended June 30, 1999)
10.1 Amended and Restated Option Purchase Agreement, dated February 26,
1998 among Farm Family Holdings, Inc. and the Shareholders of Farm
Family Life Insurance Company, as amended by Amendment No. 1 dated as
of April 28, 1998 and Amendment No. 2 dated as of January 14, 1999
(incorporated by reference to the Proxy Statement of Farm Family
Holdings, Inc. dated February 17, 1999)
10.2 Amended and Restated Expense Sharing Agreement, made effective as of
February 14, 1996, by and among Farm Family Mutual Insurance Company,
Farm Family Life Insurance Company and Farm Family Holdings, Inc.
(Incorporated by reference to Farm Family Holdings, Inc. Form 10-K for
the year ended December 31, 1996) 18
Exhibit
Number Document Description
- --------------- ----------------------------------------------------------------
10.3 Indenture of Lease, made the 1st day of January 1999, between Farm
Family Life Insurance Company and Farm Family Casualty Insurance
Company (incorporated by reference to Farm Family Holdings, Inc. Form
10-Q for the quarter ended March 31, 1999)
10.4 Underlying Multi-Line Per Risk Reinsurance Contract, effective January
1, 1995, issued to Farm Family Mutual Insurance Company by The
Subscription Reinsurer(s) Executing the Interests and Liabilities
Agreement(s) Attached Thereto, as amended by Addendum No. 1, effective
January 1, 1996 (Incorporated by reference to Registration Statement
No. 333-4446), Addendum No. 2, effective January 1, 1996, Addendum No.
3, effective July 26, 1996 (Incorporated by reference to Farm Family
Holdings, Inc. 1997 Form 10-K for the year ended December 31, 1996),
Addendum No. 4, effective January 1, 1997 (Incorporated by reference
to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March
31, 1997), and Termination Addendum, effective December 31, 1997
(Incorporated by reference to Farm Family Holdings, Inc. Form 10-K/A
for the year ended December 31, 1997) 10.5 Umbrella Quota Share
Reinsurance Contract, effective January 1, 1995, issued to Farm Family
Mutual Insurance Company and United Farm Family Insurance Company, as
amended by Addendum No. 1, effective January 1, 1995 (Incorporated by
reference to Registration Statement No. 333-4446), and Addendum No. 2
effective July 26, 1996 (Incorporated by reference to Farm Family
Holdings, Inc. 1997 Form 10-K for the year ended December 31, 1996),
Addendum No. 3, effective January 1, 1997 (Incorporated by reference
to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March
31, 1997), and Termination Addendum, effective January 1, 1998
(Incorporated by reference to Farm Family Holdings, Inc. Form 10-K/A
for the year ended December 31, 1997)
10.6 Form of Membership List Purchase Agreement between Farm Family Mutual
Insurance Company and each of the Farm Bureaus (incorporated by
reference to Exhibit 10.9 to Form S-1, Registration No. 333-4446 filed
with the Securities and Exchange Commission on May 3, 1996) as amended
by Amendment No. 1 to Membership List Purchase Agreements, effective
July 26, 1996 (incorporated by reference to Farm Family Holdings,
Inc.'s Form 10-Q for the quarter ended March 31, 1997) and Amendment
No. 2 to Membership List Purchase Agreements (Farm Family Casualty
Insurance Company), effective January 1, 1998 (incorporated by
reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter
ended June 30, 1999)
10.7 Form of Membership List Purchase Agreement between Farm Family Life
Insurance Company and each of the Farm Bureaus, as amended by
Amendment No. 1 to Membership List Purchase Agreements (Farm Family
Life Insurance Company), effective January 1, 1998 (incorporated by
reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter
ended June 30, 1999)
10.8 Farm Family Life Insurance Company Annual Incentive Plan, as amended
and restated as of October 27, 1998 (incorporated by reference to Farm
Family Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 1999)
as amended by Amendment No. 1 to the Farm Family Life Insurance
Company Annual Incentive Plan effective July 28, 1999 (incorporated by
reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter
ended September 30, 1999)
10.9 Farm Family Supplemental Profit Sharing and Money Purchase Plan,
effective January 1, 1997 (incorporated by reference to Farm Family
Holdings, Inc.'s Form 10-K for the year ended December 31, 1996) as
amended by Amendment No. 1 to Supplemental Profit Sharing and Money
Purchase Plan effective as of April 27, 1999 (incorporated by
reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter
ended June 30, 1999) and Amendment No. 2 to the Farm Family Holdings,
Inc. Supplemental Profit Sharing and Money Purchase Plan effective
July 28, 1999 (incorporated by reference to Farm Family Holdings,
Inc.'s Form 10-Q for the quarter ended September 30, 1999)
10.10 Service Agreement, made effective as of July 25, 1988 by and between
Farm Family Mutual Insurance Company and United Farm Family Insurance
Company (Incorporated by reference to Registration Statement No.
333-4446)
19
Exhibit
Number Document Description
- --------------- ----------------------------------------------------------------
10.11 Farm Family Life Insurance Company, Farm Family Casualty Insurance
Company, Farm Family Holdings, Inc. Officer Severance Pay Plan
Effective July 28, 1999 (incorporated by reference to Farm Family
Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999)
10.12 Farm Family Mutual Insurance Company Supplemental Employee
Retirement Plan, adopted as of January 1, 1994 (Incorporated by
reference to Registration Statement No. 333-4446)
10.13 Farm Family Holdings, Inc. Directors' Deferred Compensation Plan,
effective January 1, 1997 (Incorporated by reference to Farm Family
Holdings, Inc. Form 10-K for the year ended December 31, 1996) as
amended by Amendment No. 1 dated as of October 27, 1998 (incorporated
by reference to Farm Family Holdings, Inc.'s Form 10-K for the year
ended December 31, 1998) and Amendment No. 2 effective July 28, 1999
(incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q
for the quarter ended September 30, 1999) Farm Family Holdings, Inc.
Officers' Deferred Compensation Plan, effective January 1, 1997
(Incorporated by 10.14 reference to Farm Family Holdings, Inc. Form
10-K for the year ended December 31, 1996) as amended by Amendment No.
1 dated as of October 27, 1998 (incorporated by reference to Farm
Family Holdings, Inc.'s Form 10-K for the year ended December 31,
1998) and Amendment No. 2 effective July 28, 1999 (incorporated by
reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter
ended September 30, 1999) 10.15 Farm Family Holdings, Inc. Annual
Incentive Plan effective, as amended and restated as of October 27,
1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form
10-K for the year ended December 31, 1998) as amended by Amendment No.
1 effective July 28, 1999 (incorporated by reference to Farm Family
Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999)
10.16 Tax Payment Allocation Agreement effective January 1, 1996 by and
between Farm Family Holdings, Inc. and Farm Family Casualty Insurance
Company (Incorporated by reference to Farm Family Holdings, Inc. Form
10-K for the year ended December 31, 1996)
10.17 Excess Catastrophe Reinsurance Contract issued to Farm Family
Casualty Insurance Company effective January 1, 1997 (incorporated by
reference to Farm Family Holdings, Inc. Form 10-Q for the quarter
ended March 31, 1997)
10.18 Farm Family Holdings, Inc. Amended and Restated Omnibus Securities
Plan, effective as of February 29, 2000 (filed herewith)
10.19 Indenture of Lease made the 1st day of January 1999, between Farm
Family Life Insurance Company and New York Farm Bureau, Inc. (filed
herewith)
27 Financial Data Schedule (for electronic filing purposes only)
Reports on Form 8-K
A report on Form 8-K was filed on March 2, 2000 reporting a press
release issued announcing results of our operations for the fourth quarter and
the year ended December 31, 1999.
20
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.
FARM FAMILY HOLDINGS, INC.
(Registrant)
May 10, 2000 By:
- ----------------------------- ----------------------------------------------
(Date) Philip P. Weber, President & CEO
(Principal Executive Officer)
May 10, 2000 By:
- ----------------------------- ----------------------------------------------
(Date) Timothy A. Walsh, Executive VP, CFO & Treasurer
(Principal Financial & Accounting Officer)
21