SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-8538
ASCENT ASSURANCE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State of Other Jurisdiction of Incorporation or Organization) |
73-1165000
(I.R.S. Employer Identification No.) |
||||
3100 Burnett Plaza, 801 Cherry Street, Unit 33,
Fort Worth, Texas (Address of Principal Executive Offices) |
76102
(Zip Code) |
Registrant's Telephone Number, including Area Code
(817) 878-3300
Securities
Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock (par value $.01)
Indicate, by check mark, whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
Indicate, by check mark, whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES NO X
Common Stock — Par value $0.01; 50,531,876 shares outstanding at August 2, 2004.
| PART I — FINANCIAL INFORMATION | Page No. | |||
| Item 1 – | Financial Statements | |||
| Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at June 30, 2004 and December 31, 2003 | 3
| |||
| Ascent Assurance, Inc. Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003 | 4
| |||
| Ascent Assurance, Inc. Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2004 and 2003 | 5
| |||
| Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2004 | 6
| |||
| Ascent Assurance, Inc. Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2004 and June 30, 2003 | 7
| |||
| Notes to Condensed Consolidated Financial Statements | 8 | |||
| Item 2 – | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||
| General | 13 | |||
| Business Overview | 13 | |||
| Forward – Looking Statements | 14 | |||
| Operating Results | 15 | |||
| Financial Condition | 18 | |||
| Liquidity, Capital Resources and Statutory Capital and Surplus | 20 | |||
| Item 3 – | Quantitative and Qualitative Disclosures About Market Risk | 21 | ||
| Item 4 – | Controls and Procedures | 22 | ||
| PART II — OTHER INFORMATION | ||||
| Item 6 – | Exhibits and Reports on Form 8-K | 22 | ||
June 30, 2004 (Unaudited) |
December 31, 2003 | |||||||
| Assets | (in thousands, except share data) | |||||||
| Investments: | ||||||||
| Fixed Maturities: | ||||||||
| Available-for-sale, at market value (amortized cost $97,789 | ||||||||
| and $93,922) | $ | 98,484 | $ | 96,968 | ||||
| Short-term investments | 4,252 | 5,631 | ||||||
| Other investments, at market value (cost $403 and $383) | 420 | 396 | ||||||
| Total Investments | 103,156 | 102,995 | ||||||
| Cash | 1,207 | 2,244 | ||||||
| Accrued investment income | 1,351 | 1,309 | ||||||
| Receivables from agents, net of allowance for doubtful | ||||||||
| accounts of $3,552 and $3,439 | 3,863 | 4,484 | ||||||
| Deferred policy acquisition costs, net | 21,509 | 21,819 | ||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| of $5,520 and $5,000 | 2,601 | 3,084 | ||||||
| Other assets | 7,559 | 7,994 | ||||||
| Total Assets | $ | 141,246 | $ | 143,929 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities: | ||||||||
| Policy liabilities and accruals: | ||||||||
| Future policy benefits | $ | 54,299 | $ | 54,872 | ||||
| Claim reserves | 26,148 | 26,196 | ||||||
| Total Policy Liabilities and Accruals | 80,447 | 81,068 | ||||||
| Accounts payable and other liabilities | 8,763 | 9,760 | ||||||
| Notes payable to bank | 250 | 500 | ||||||
| Notes payable to related party | 15,739 | 15,270 | ||||||
| Total Liabilities | 105,199 | 106,598 | ||||||
| Stockholders' Equity: | ||||||||
| Redeemable convertible Series B preferred stock ($1,000 | ||||||||
| stated value, 40,000 shares authorized, 37,504 shares | ||||||||
| issued and outstanding at December 31, 2003) | - | 37,504 | ||||||
| Common stock ($0.01 par value, 75,000,000 and 30,000,000 | ||||||||
| shares authorized; 50,531,876 and 6,532,100 shares | ||||||||
| issued and outstanding) | 505 | 65 | ||||||
| Capital in excess of par value | 66,580 | 29,143 | ||||||
| Accumulated other comprehensive income | 712 | 3,059 | ||||||
| Retained Deficit | (31,750 | ) | (32,440 | ) | ||||
| Total Stockholders' Equity | 36,047 | 37,331 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 141,246 | $ | 143,929 | ||||
See the Notes to the Condensed Consolidated Financial Statements.
ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
| (in thousands, except per share data) | |||||||||||||||
| Revenues: | |||||||||||||||
| Premiums: | |||||||||||||||
| First-year premium | $ | 3,995 | $ | 4,891 | $ | 8,002 | $ | 10,277 | |||||||
| Renewal premium | 19,043 | 20,549 | 38,829 | 41,472 | |||||||||||
| Total premiums | 23,038 | 25,440 | 46,831 | 51,749 | |||||||||||
| Net investment income | 1,329 | 1,555 | 2,731 | 3,235 | |||||||||||
| Fee and service income | 1,909 | 3,134 | 3,890 | 5,785 | |||||||||||
| Other insurance revenues | 481 | 630 | 967 | 1,247 | |||||||||||
| Net realized (loss) gain on investments | (3 | ) | 168 | (5 | ) | 277 | |||||||||
| Total revenues | 26,754 | 30,927 | 54,414 | 62,293 | |||||||||||
| Benefits, claims and expenses: | |||||||||||||||
| Benefits and claims | 14,933 | 17,227 | 31,170 | 35,173 | |||||||||||
| Change in deferred policy acquisition costs | 68 | (137 | ) | 311 | 22 | ||||||||||
| Commissions | 2,517 | 3,033 | 5,195 | 6,268 | |||||||||||
| General and administrative expenses | 5,104 | 5,930 | 10,402 | 11,522 | |||||||||||
| Fee and service operating expenses | 1,863 | 3,006 | 3,825 | 5,683 | |||||||||||
| Taxes, licenses and fees | 967 | 895 | 1,886 | 1,854 | |||||||||||
| Interest expense on notes payable | 253 | 611 | 505 | 1,220 | |||||||||||
| Total expenses | 25,705 | 30,565 | 53,294 | 61,742 | |||||||||||
| Income before income taxes | 1,049 | 362 | 1,120 | 551 | |||||||||||
| Federal income taxes | - | - | - | - | |||||||||||
| Net income | 1,049 | 362 | 1,120 | 551 | |||||||||||
| Preferred stock dividends | - | 891 | 430 | 1,759 | |||||||||||
| Income (loss) applicable to common | |||||||||||||||
| stockholders | $ | 1,049 | $ | (529 | ) | $ | 690 | $ | (1,208 | ) | |||||
| Basic and diluted earnings (loss) per | |||||||||||||||
| common share | $ | .02 | $ | (.08 | ) | $ | .02 | $ | (.18 | ) | |||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 50,532 | 6,532 | 32,643 | 6,530 | |||||||||||
| Diluted | 50,758 | 6,532 | 32,867 | 6,530 | |||||||||||
See the Notes to the Condensed Consolidated Financial Statements.
ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2004 | 2003 | 2004 | 2003 | ||||||||||||
| (in thousands) | |||||||||||||||
| Net income | $ | 1,049 | $ | 362 | $ | 1,120 | $ | 551 | |||||||
| Other comprehensive (loss) income: | |||||||||||||||
| Unrealized holding (loss) gain arising during period | (4,226 | ) | 1,728 | (2,352 | ) | 2,113 | |||||||||
| Reclassification adjustment of loss (gain) on sales | |||||||||||||||
| of investments included in net income | 3 | (168 | ) | 5 | (277 | ) | |||||||||
| Comprehensive (loss) income | $ | (3,174 | ) | $ | 1,922 | $ | (1,227 | ) | $ | 2,387 | |||||
See the Notes to the Condensed Consolidated Financial Statements.
ASCENT ASSURANCE, INC.
CONSOLIDATED STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except
share data)
| Redeemable Convertible Series B Preferred Stock |
Common Stock | Capital in Excess of Par | Accumulated Other Comp. |
Retained (Deficit) |
Total Stockholders' | |||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Value |
Income(Loss) |
Earnings |
Equity |
|||||||||||||||||||
| Balance at January 1, 2004 | 37,504 | $ | 37,504 | 6,532,100 | $ | 65 | $ | 29,143 | $ | 3,059 | $ | (32,440 | ) | $ | 37,331 | |||||||||||
| Net income | 1,120 | 1,120 | ||||||||||||||||||||||||
| Series B preferred stock dividends | 430 | (430 | ) | - | ||||||||||||||||||||||
| Other comprehensive loss | (2,347 | ) | (2,347 | ) | ||||||||||||||||||||||
| Amortization of unearned compensation | 1 | 1 | ||||||||||||||||||||||||
| Common stock issued | 4,750 | - | - | |||||||||||||||||||||||
| Conversion of Series B redeemable convertible preferred stock to common stock | (37,504 | ) | (37,504 | ) | 43,995,026 | 440 | 37,006 | (58 | ) | |||||||||||||||||
| Balance at June 30, 2004 | - | $ | - | 50,531,876 | $ | 505 | $ | 66,580 | $ | 712 | $ | (31,750 | ) | $ | 36,047 | |||||||||||
See the Notes to the Condensed Consolidated Financial Statements.
ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30, |
Six Months Ende June 30, |
||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
| (in thousands) | |||||||||||||||
| Cash Flows From Operating Activities: | |||||||||||||||
| Net income | $ | 1,049 | $ | 362 | $ | 1,120 | $ | 551 | |||||||
| Adjustments to reconcile net income to cash | |||||||||||||||
| provided by (used for) operating activities | |||||||||||||||
| Decrease (increase) in accrued investment income | 18 | 39 | (42 | ) | (7 | ) | |||||||||
| Decrease (increase) in deferred policy acquisition costs | 67 | (137 | ) | 310 | 22 | ||||||||||
| Decrease in receivables from agents | 138 | 236 | 508 | 622 | |||||||||||
| Provision for uncollectible agent receivables | 40 | 167 | 113 | 325 | |||||||||||
| Decrease in other assets | 183 | 587 | 435 | 557 | |||||||||||
| Decrease in policy liabilities and accruals | (1,022 | ) | (2,559 | ) | (621 | ) | (4,415 | ) | |||||||
| (Decrease) increase in accounts payable and | |||||||||||||||
| other liabilities | (214 | ) | 151 | (997 | ) | 1,436 | |||||||||
| Interest expense on note payable to related party | 238 | 591 | |||||||||||||