-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GOLy+m6JYb6Uy/IG98GBxhOcNONc+oFA7LZ1a6EjFbxj1kV5hAFplQZv5qKuZ6QM kiCnK6Mv6e5+8AIGkDOKXw== /in/edgar/work/0000109747-00-000013/0000109747-00-000013.txt : 20001115 0000109747-00-000013.hdr.sgml : 20001115 ACCESSION NUMBER: 0000109747-00-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN SECURITY LIFE INSURANCE CO CENTRAL INDEX KEY: 0000109747 STANDARD INDUSTRIAL CLASSIFICATION: [6311 ] IRS NUMBER: 591231733 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-35669 FILM NUMBER: 763521 BUSINESS ADDRESS: STREET 1: 755 RINEHART RD CITY: LAKE MARY STATE: FL ZIP: 32746-8402 BUSINESS PHONE: 8012641060 MAIL ADDRESS: STREET 1: 755 RINEHART RD CITY: LAKE MARY STATE: FL ZIP: 32746 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA LIFE INSURANCE CO OF FLORIDA DATE OF NAME CHANGE: 19790501 10-Q 1 0001.txt FDS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 2000 Commission File Number: 2-35669 - ------------------------------------ ------------------------------- SOUTHERN SECURITY LIFE INSURANCE COMPANY ---------------------------------------- Exact Name of Registrant. FLORIDA 59-1231733 - ------------------------------- ------------------------- (State or other jurisdiction of IRS Identification Number incorporation or organization) 755 Rinehart Road, Lake Mary, Florida 32746 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including Area Code (407) 321-7113 --------------- 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 XX NO ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock, $1.00 par value 1,907,989 - ------------------------------------- ------------------------------- Title of Class Number of Shares Outstanding as of September 30, 2000 SOUTHERN SECURITY LIFE INSURANCE COMPANY FORM 10Q QUARTER ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1 Financial Statements Page No. - ------ Statements of Income - Nine and Three Months ended September 30, 2000 and 1999 (unaudited).......................3 Balance Sheets - September 30, 2000 (unaudited) and December 31, 1999.......................................4-5 Statements of Cash Flows - Nine months ended September 30, 2000 and 1999 (unaudited).....................................6 Notes to Condensed Financial Statements.......................7 Item 2 - ------ Management's Discussion and Analysis....................... 7-9 Item 3 - ------ Quantitative and Qualitative Disclosure of Market Risk........9 PART II - OTHER INFORMATION Other Information.........................................10-11 Signature Page...............................................12 2
SOUTHERN SECURITY LIFE INSURANCE COMPANY Statements of Income (Unaudited) Nine Months Ended September 30, Three Months Ended September 30, 2000 1999 2000 1999 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues: Net insurance revenues $5,043,640 $5,224,546 $1,657,732 $2,048,276 Net investment income 2,918,690 2,903,288 948,429 779,650 Other -- 760,143 -- 38,239 ---------- ---------- ---------- ---------- 7,962,330 8,887,977 2,606,161 2,866,165 ---------- ---------- ---------- ---------- Benefits, claims and expenses: Benefits and claims 3,118,400 3,448,452 908,264 679,563 Amortization of deferred policy acquisition costs 2,144,805 2,189,984 770,850 715,578 Operating expenses 2,487,807 2,572,349 849,218 1,048,292 ---------- ---------- ---------- ---------- 7,751,012 8,210,785 2,528,332 2,443,433 ---------- ---------- ---------- ---------- Income before income taxes 211,318 677,192 77,829 422,732 Income tax expense 43,097 261,396 17,000 162,920 ---------- ---------- ---------- ---------- Net income $168,221 $415,796 $60,829 $259,812 ========= ======== ========== ========== Basic and diluted net income (loss) per share of common stock $0.09 $0.22 $0.03 $0.14 ===== ===== ===== ===== Weighted average outstanding common shares 1,907,989 1,907,989 1,907,989 1,907,989 ========= ======== ========== ==========
See accompanying notes to financial statements. 3 SOUTHERN SECURITY LIFE INSURANCE COMPANY BALANCE SHEETS September 30, 2000 December 31, (Unaudited) 1999 ------------------ ------------ Assets: - ------ Investments: Fixed maturities held-to-maturity $5,427,042 $3,978,871 Securities available-for-sale, at fair value: Fixed maturities 22,993,613 23,951,111 Equity securities 369,369 378,440 Mortgage loans 2,304,475 1,497,688 Policy and student loans 8,277,083 8,458,972 Short-term investments 8,272,099 8,595,093 ----------- ----------- 47,643,681 46,860,175 Cash and cash equivalents 1,441,421 4,080,484 Accrued investment income 797,604 582,908 Deferred policy acquisition costs 12,520,520 12,874,219 Policyholders' account balances on deposit with reinsurer 7,489,264 7,806,866 Reinsurance receivable 337,143 373,459 Receivables: Agent balances 1,335,740 1,215,756 Other 705,825 193,506 Refundable income taxes 34,951 34,951 Property and equipment, net, at cost 2,562,267 2,435,565 Investment in affiliate at cost 1,566,173 751,052 ----------- ----------- Total assets $76,434,589 $77,208,941 =========== =========== See accompanying notes to financial statements. 4 SOUTHERN SECURITY LIFE INSURANCE COMPANY BALANCE SHEETS (Continued) September 30, 2000 December 31, (Unaudited) 1999 ------------------- -------------- Liabilities and Shareholders' Equity: - ------------------------------------ Liabilities: Policy liabilities and accruals $1,919,167 $1,648,976 Future policy benefits: Policyholders' account balances 48,905,655 50,377,101 Unearned revenue 4,756,905 5,323,954 Other policy claims and benefits payable 978,132 540,407 Other policyholders' funds, dividend and endowment accumulations 74,033 69,789 Funds held related to reinsurance treaties 1,524,487 1,475,512 Note payable to related party 1,000,000 1,000,000 Due to affiliated companies 119,109 195,785 General expenses accrued 131,415 137,884 Unearned investment income 342,089 324,750 Other liabilities 154,278 63,753 Income taxes 496,135 413,710 ----------- ----------- Total liabilities 60,401,405 61,571,621 Shareholders' equity: Common stock, $1 par, authorized 3,000,000 shares; issued and out- standing, 1,907,989 shares 1,907,989 1,907,989 Capital in excess of par 4,011,519 4,011,519 Accumulated other comprehensive loss (248,944) (476,583) Retained earnings 10,362,616 10,194,395 ----------- ----------- Total shareholders' equity 16,033,184 15,637,320 Commitments and contingencies -- -- ----------- ----------- Total liabilities and shareholders' equity $76,434,589 $77,208,941 =========== =========== See accompanying notes to financial statements. 5 SOUTHERN SECURITY LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2000 1999 Net cash provided by operating activities $1,489,353 $(1,266,923) ----------- ----------- Cash flows (used in) provided by investing activities: Purchase of investments held-to-maturity (2,606,749) (405,349) Purchase of investments equity securities (815,121) -- Proceeds from maturity of held-to-maturity securities 1,157,574 130,301 Proceeds from maturity of available for-sale securities 1,220,543 2,833,129 Purchase of mortgage loans (825,000) -- Mortgage loan repayments 18,213 -- Net change in short-term investments 322,994 835,584 Net change in policy and student loans 181,889 210,784 Acquisition of property and equipment (216,523) -- ----------- ----------- Net cash (used in) provided by investing activities (1,562,180) 3,604,449 Cash flow used in financing activities: Receipts from universal life and certain annuity policies credited to policyholder account balances 4,391,476 5,030,285 Return of policyholder balances on universal life and certain annuity policies (6,957,712) (4,968,735) ----------- ----------- Net cash used in financing activities (2,566,236) 61,550 ----------- ----------- (Decrease) increase in cash and cash equivalents (2,639,063) 2,399,076 Cash and cash equivalents at beginning of period 4,080,484 682,389 ----------- ----------- Cash and cash equivalents at end of period $1,441,421 $3,081,465 ========== ========== See accompanying notes to financial statements. 6 SOUTHERN SECURITY LIFE INSURANCE COMPANY Notes to Condensed Financial Statements September 30, 2000 (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed financial statements have been prepared by management in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. All adjustments and accruals considered necessary for fair presentation of financial information have been included in the opinion of management, and are of a normal recurring nature. Quarterly results of operations are not necessarily indicative of annual results. These statements should be read in conjunction with the financial statements and the notes thereto included in the Southern Security Life Insurance Company 1999 Annual Report on Form 10- K for the fiscal year ended December 31, 1999 (file number 2-35669). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The estimates susceptible to significant change are those used in determining the liability for future policy benefits and claims. Although some variability is inherent in these estimates, management believes the amounts provided are adequate. 2. Comprehensive Income For the nine months ended September 30, 2000 and 1999, total comprehensive income (loss) was $395,863 and $(304,693), respectively. For the three months ended September 30, 2000 and 1999, total comprehensive income was $383,323 and $227,052 respectively. Item 2. Management's Discussion and Analysis Overview This analysis of the results of operations and financial condition of Southern Security Life should be read in conjunction with the Condensed Financial Statements and Notes to the Condensed Financial Statements included in this report. In recent years, the Company has primarily issued two types of insurance products: universal life and final expense products. Universal life provides insurance coverage with flexible premiums, within limits, which allow policyholders to accumulate cash values. The accumulated cash values are credited with tax-deferred interest, as adjusted by the Company on a periodic basis. Deducted from the cash accumulations are administrative charges and mortality costs. Should a policy surrender in its early years, the Company assesses a surrender fee against the cash value accumulations based on a graded formula. Final expense products are traditional endowment type insurance policies written for the senior market. Because the products are written to a senior market they are designed to accommodate adverse health conditions. Because of the size of the policies, the products are usually issued with only limited underwriting. The coverage size of the policy is roughly equivalent to the insured's anticipated funeral costs. An additional source of income to the Company is investment income. The Company invests those funds deposited by policyholders of life and annuity products in debt and equity securities in order to earn interest and dividend income, a portion of which is credited back to the policyholders. Interest rates and maturities of the Company's investment portfolio play an important part in determining the interest rates credited to policyholders. 7 Product profitability is affected by several different factors, such as mortality experience (actual versus expected), interest rate spreads (excess interest earned over interest credited to policyholders) and controlling policy acquisition costs and other costs of operation. The results of any one reporting period may be significantly affected by the level of death claims or other policyholder benefits incurred due to the Company's relatively small size. Results of Operations Nine Months ended September 30, 2000, Compared to Nine Months Ended September 30, 1999 Total revenues decreased by $926,000, or 10.4%, to $7,962,000 for the nine months ended September 30, 2000, from $8,888,000 for the nine months ended September 30, 1999. Contributing to this reduction in revenues was a $181,000 decrease in net insurance revenues and a $760,000 decrease in other revenues. Net insurance revenues decreased by $181,000, or 3.5%, to $5,044,000 for the nine months ended September 30, 2000, from $5,225,000 for the nine months ended September 30, 1999. This decrease was primarily the result of a reduction in universal life policyholder income. Net investment income increased by $15,000, or .5%, to $2,919,000 for the nine months ended September 30, 2000, from $2,903,000 for the nine months ended September 30, 1999. This increase was primarily due to an improved yield on the Company's invested assets. Other revenues decreased by $760,000, or 100.0%, to no other revenues for the nine months ended September 30, 2000, from $760,000 for the nine months ended September 30, 1999. The other revenues for the nine months ended September 30, 1999 consisted of the proceeds from a settlement of insurance claims filed for the recovery of the litigation costs relating to a case against a former officer of the Company. Benefits and claims decreased by $330,000, or 9.6%, to $3,118,000 for the nine months ended September 30, 2000, from $3,448,000 for the comparable period in 1999. This decrease was primarily due to a reduction in interest crediting for universal life policyholder account balances. The amortization of deferred policy acquisition costs decreased by $45,000, or 2.1%, to $2,145,000, for the nine months ended September 30, 2000, from $2,190,000 for the comparable period in 1999. This decrease was primarily the result of a decline in universal life deferred policy acquisition cost balances. Operating expenses decreased by $85,000, or 3.3%, to $2,488,000 for the nine months ended September 30, 2000, from $2,573,000 for the same period in 1999. This decrease was primarily the result of the deferral of additional acquisition expenses. Third Quarter of 2000 Compared to Third Quarter of 1999 Total revenues decreased by $260,000, or 9.1%, to $2,606,000 for the three months ended September 30, 2000, from $2,866,000 for the three months ended September 30, 1999. Contributing to this decrease was a $391,000 decrease in net insurance revenues and $38,000 decrease in other revenues. Net insurance revenues decreased by $391,000 or 19.1%, to $1,658,000 for the three months ended September 30, 2000, from $2,049,000 for the three months ended September 30, 1999. This decrease was primarily the result of a reduction in assumed group business. Net investment income increased by $169,000, or 21.6%, to $948,000 for the three months ended September 30, 2000, from $780,000 for the three months ended September 30, 1999. This increase was due to additional policy loan interest income. Other revenues decreased by $38,000, or 100.0%, to no other revenues for the three months ended September 30, 2000, from $38,000 for the three months ended September 30, 1999. The other revenues for the three months ended September 30, 1999 consisted of the proceeds from a settlement received in 1999 of insurance claims filed for the recovery of the litigation costs relating to a case against a former officer of the Company. 8 Benefits and claims increased by $229,000, or 33.7%, to $908,000 for the three months ended September 30, 2000, from $679,000 for the comparable period in 1999. This increase was primarily due to an increase in interest crediting for universal life policyholder account balances. The amortization of deferred policy acquisition costs increased by $55,000, or 7.7%, to $771,000 for the three months ended September 30, 2000, from $716,000 for the comparable period in 1999. This increase was in line with actuarial assumptions. Operating expenses decreased by $199,000, or 19.0%, to $849,000 for the three months ended September 30, 2000, from $1,048,000 for the same period in 1999. This decrease was primarily the result of the deferral of additional acquisition expenses. Liquidity and Capital Resources The Company attempts to match the duration of invested assets with its policyholder liabilities. The Company may sell investments other than those held-to-maturity in the portfolio to help in this timing; however, to date, that has not been necessary. The Company purchases short-term investments on a temporary basis to meet the expectations of short-term requirements of the Company's products. The Company's investment philosophy is intended to provide a rate of return which will persist during the expected duration of policyholder liabilities regardless of future interest rate movements. The Company's investment policy is to invest predominantly in fixed maturity securities, mortgage loans, and warehouse mortgage loans on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing life insurance companies. Bonds owned by the Company amounted to $28,421,000 as of September 30, 2000, as compared to $27,930,000 as of December 31, 1999. This represents 57.9% and 54.8% of the total investments as of September 30, 2000 and December 31, 1999, respectively. Generally, all bonds owned by the Company are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. At September 30, 2000, and at December 31, 1999, the Company did not have investments in bonds in rating categories three through six, which are considered non-investment grade. The Company has classified certain of its fixed income securities as available for sale, with the remainder classified as held to maturity. However, in accordance with Company policy, any such securities purchased in the future will be classified as held to maturity. Business conditions, however, may develop in the future which may indicate a need for a higher level of liquidity in the investment portfolio. In that event the Company believes it could sell short-term investment grade securities before liquidating higher-yielding longer term securities. The Company is subject to risk based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. At September 30, 2000 and December 31, 1999, the Company exceeded the regulatory criteria. Lapse rates measure the amount of insurance terminated during a particular period. The Company's lapse rate for life insurance in 1999 was 9.1% as compared to a rate of 17.4% for 1998. The 2000 lapse rate is approximately the same as 1999. At September 30, 2000, $8,458,000 of the Company's consolidated stockholders' equity represented the statutory stockholders' equity. The Company cannot pay a dividend to its parent company without the approval of insurance regulatory authorities. The Company has no material commitments for capital expenditures. Item 3. Quantitative and Qualitative Disclosure of Market Risk There have been no significant changes since the annual report Form 10-K filed for the year ended December 31, 1999. 9 Part II Other Information: Item 1. Legal Proceedings An action was brought against the Company in July 1999 by Dorothy Ruth Campbell in the Circuit Court of Escambia County, Alabama. The action arises out of a denial of coverage for a policy with coverage for $10,000. The claims are for breach of contract, bad faith and fraudulent misrepresentation. In the action, Campbell seeks compensatory and punitive damages plus interest. The Company intends to continue to vigorously defend the matter. An action was brought against the Company in late 1999 by Larry Boyd in the Circuit Court of Jefferson County, Alabama. The action involves the alleged purchase by Boyd and his deceased wife of two college funds with respective death benefits of $58,454 and $58,556 for Boyd's two sons. The allegations in the complaint include an alleged representation by the Company through its sales agent that when Boyd's sons, the insureds, reached college they would receive monthly payments for college. Boyd further contends that he lost the value of his deposits on the college fund policies, lost interest, does not have the college funds promised to him, and suffered mental anguish and emotional distress. The claims are based on fraud and misrepresentation and negligence by the Company in hiring, training and supervising the sales agent. Boyd seeks compensatory and punitive damages, plus costs. The complaint was responded to and discovery is in progress. The Company intends to continue to vigorously defend the action. The Company is not a party to any other legal proceedings outside the ordinary course of the Company's business or to any other legal proceedings which, if adversely determined, would have a material adverse effect on the Company or its business. Item 2. Changes in Securities NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE 10 Item 5. Other Information NONE Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3. A. Articles of Incorporation, as amended, and By-laws, as amended, dated September 1994, incorporated by reference from the Annual Report filed on Form 10-K for fiscal year ended December 31, 1994. 10.A Revolving Financing Agreement between the Company and the Student Loan Marketing Association, dated September 19, 1996, incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1997. B. Reinsurance Agreement between the Company and United Group Insurance Company, dated as of December 31, 1992 incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1992. C. Agency Agreement between the Company and Insuradyne Corporation incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1993. D. Administrative Services Agreement between the Company and Security National Financial Corporation effective December 17, 1998, incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1998. E. Agency Agreement between the Company and Security National Mortgage Company dated December 28, 1998 incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1999. F. Loan Funding and Fee Agreement between the Company and Security National Mortgage Company dated December 28, 1998, incorporated by reference from Annual Report on Form 10-K for fiscal year ended December 31, 1999. 27. Financial Data Schedule (b) Reports on Form 8-K: NONE 11 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. REGISTRANT SOUTHERN SECURITY LIFE INSURANCE COMPANY Registrant DATED: November 14, 2000 By: George R. Quist, - ------------------------ ---------------------------------- Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) DATED: November 14, 2000 By: Scott M. Quist - ------------------------ ---------------------------------- First Vice President, General Counsel and Treasurer (Principal Financial and Accounting Officer) 12 EX-27 2 0002.txt FDS --
7 9-MOS DEC-31-1999 SEP-30-2000 22,993,613 5,427,042 5,364,962 369,369 2,304,475 0 47,643,681 1,441,421 337,143 12,520,520 76,434,589 1,919,167 4,756,905 978,132 74,033 1,000,000 0 0 1,907,989 4,011,519 76,434,589 5,043,640 2,918,690 0 0 3,118,400 2,144,805 2,487,807 211,318 43,097 168,221 0 0 0 168,221 0.09 0.09 0 0 0 0 0 0 0
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