SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2004
Commission File Number 0-11773
ALFA CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 063-0838024 | |
| (State of Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
2108 East South Boulevard, Montgomery, Alabama 36116
(Mail: P. O Box 11000, Montgomery, Alabama 36191-0001)
(Address and Zip Code of Principal Executive Offices)
Registrant’s Telephone Number Including Area Code (334) 288-3900
None
Former name, former address and former fiscal year if changed since last report
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 the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the close of the period covered by this report.
| Class |
Outstanding March 31, 2004 | |
| Common Stock, $1.00 par value | 80,110,151 shares |
ALFA CORPORATION
| Page No. | ||||
| Part I. |
Financial Information (Consolidated Unaudited) |
|||
| Item 1. |
Financial Statements |
|||
| 3 | ||||
| Statements of Income, Three Months ended March 31, 2004 and 2003 |
4 | |||
| Statements of Comprehensive Income, Three Months ended March 31, 2004 and 2003 |
5 | |||
| Statements of Cash Flows, Three Months ended March 31, 2004 and 2003 |
6 | |||
| 7 | ||||
| 16 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3. |
35 | |||
| Item 4. |
36 | |||
| Part II. |
Other Information |
|||
| Item 1. |
37 | |||
| Item 2. |
38 | |||
| Item 3. |
38 | |||
| Item 4. |
38 | |||
| Item 5. |
38 | |||
| Item 6. |
38 | |||
2
ALFA CORPORATION
| March 31, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Investments: |
||||||||
| Fixed Maturities Held for Investment, at amortized cost (fair value $156,602 in 2004 and $173,214 in 2003) |
$ | 143,246 | $ | 158,623 | ||||
| Fixed Maturities Available for Sale, at fair value (amortized cost $1,250,197,101 in 2004 and $1,108,673,538 in 2003) |
1,323,656,612 | 1,166,418,720 | ||||||
| Equity Securities, at fair value (cost $80,406,255 in 2004 and $116,063,831 in 2003) |
101,124,943 | 135,082,791 | ||||||
| Investment Real Estate (net of accumulated depreciation of $0 in 2004 and $1,677,073 in 2003) |
— | 2,495,534 | ||||||
| Policy Loans |
56,573,390 | 55,282,441 | ||||||
| Collateral Loans |
103,164,412 | 101,876,180 | ||||||
| Commercial Leases |
130,806,970 | 118,121,257 | ||||||
| Other Long-term Investments |
118,095,815 | 111,450,952 | ||||||
| Short-term Investments |
38,974,262 | 111,252,991 | ||||||
| Total Investments |
1,872,539,650 | 1,802,139,489 | ||||||
| Cash |
9,875,433 | 10,892,516 | ||||||
| Accrued Investment Income |
16,498,483 | 15,569,095 | ||||||
| Accounts Receivable |
16,624,306 | 16,689,765 | ||||||
| Reinsurance Balances Receivable |
5,667,284 | 5,815,682 | ||||||
| Due from Affiliates |
2,477,637 | 2,203,955 | ||||||
| Deferred Policy Acquisition Costs |
179,413,575 | 176,252,537 | ||||||
| Other Assets |
13,624,841 | 15,511,547 | ||||||
| Total Assets |
$ | 2,116,721,209 | $ | 2,045,074,586 | ||||
| Liabilities |
||||||||
| Policy Liabilities and Accruals - Property and Casualty Insurance |
$ | 149,701,035 | $ | 153,831,653 | ||||
| Policy Liabilities and Accruals - Life Insurance Interest - Sensitive Products |
532,993,094 | 508,592,148 | ||||||
| Policy Liabilities and Accruals - Life Insurance - Other Products |
170,487,034 | 165,161,507 | ||||||
| Unearned Premiums |
178,833,520 | 170,292,775 | ||||||
| Dividends to Policyholders |
10,872,201 | 10,939,667 | ||||||
| Premium Deposit and Retirement Deposit Funds |
6,166,425 | 6,296,861 | ||||||
| Deferred Income Taxes |
55,424,680 | 50,383,545 | ||||||
| Other Liabilities |
55,221,717 | 53,460,552 | ||||||
| Due to Affiliates |
16,147,649 | 16,065,895 | ||||||
| Commercial Paper |
171,008,544 | 164,443,769 | ||||||
| Notes Payable |
70,000,000 | 70,000,000 | ||||||
| Notes Payable to Affiliates |
33,904,341 | 37,093,776 | ||||||
| Total Liabilities |
1,450,760,240 | 1,406,562,148 | ||||||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity |
||||||||
| Preferred Stock, $1 par value |
— | — | ||||||
| Shares authorized: 1,000,000 |
||||||||
| Issued: None |
||||||||
| Common Stock, $1 par value |
83,783,024 | 83,783,024 | ||||||
| Shares authorized: 110,000,000 |
||||||||
| Issued: 83,783,024 |
||||||||
| Outstanding: 2004 - 80,110,151; 2003 - 80,217,316 |
||||||||
| Capital in Excess of Par Value |
10,503,898 | 8,864,064 | ||||||
| Accumulated Other Comprehensive Income |
50,478,330 | 41,351,404 | ||||||
| Retained Earnings |
556,947,723 | 537,746,631 | ||||||
| Treasury Stock: at cost (2004 - 3,672,873 shares; 2003 - 3,565,708 shares) |
(35,752,006 | ) | (33,232,685 | ) | ||||
| Total Stockholders’ Equity |
665,960,969 | 638,512,438 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 2,116,721,209 | $ | 2,045,074,586 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
ALFA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended March 31, |
|||||||
| 2004 |
2003 |
||||||
| Revenues |
|||||||
| Premiums - Property and Casualty Insurance |
$ | 119,942,601 | $ | 111,476,799 | |||
| Premiums - Life Insurance |
10,146,938 | 8,994,500 | |||||
| Policy Charges - Life Insurance |
8,990,197 | 8,716,040 | |||||
| Net Investment Income |
22,022,668 | 21,653,987 | |||||
| Realized Investment Gains (Losses) |
1,457,349 | (1,795,860 | ) | ||||
| Other Income |
558,875 | 595,630 | |||||
| Total Revenues |
163,118,628 | 149,641,096 | |||||
| Benefits and Expenses |
|||||||
| Benefits & Settlement Expenses |
90,495,112 | 87,971,771 | |||||
| Dividends to Policyholders |
1,042,724 | 1,022,514 | |||||
| Amortization of Deferred Policy Acquisition Costs |
22,905,299 | 21,146,389 | |||||
| Other Operating Expenses |
12,814,268 | 13,888,278 | |||||
| Total Expenses |
127,257,403 | 124,028,952 | |||||
| Income Before Provision for Income Taxes |
35,861,225 | 25,612,144 | |||||
| Provision for Income Taxes |
10,384,338 | 6,882,516 | |||||
| Net Income |
$ | 25,476,887 | $ | 18,729,628 | |||
| Earnings Per Share: |
|||||||
| Net Income |
|||||||
| - Basic |
$ | 0.32 | $ | 0.24 | |||
| - Diluted |
$ | 0.32 | $ | 0.23 | |||
| Average Shares Outstanding |
|||||||
| - Basic |
80,097,071 | 79,330,609 | |||||
| - Diluted |
80,652,201 | 79,903,268 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
4
ALFA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Net Income |
$ | 25,476,887 | $ | 18,729,628 | ||||
| Other Comprehensive Income (Loss), net of tax: |
||||||||
| Change in Fair Value of Securities Available for Sale |
11,042,257 | (1,206,321 | ) | |||||
| Unrealized (Losses) on Interest Rate Swap Contracts |
(968,054 | ) | (799,419 | ) | ||||
| Less: Reclassification Adjustment for Realized Investment Gains (Losses) |
947,277 | (1,167,342 | ) | |||||
| Total Other Comprehensive Income (Loss) |
9,126,926 | (838,398 | ) | |||||
| Total Comprehensive Income |
$ | 34,603,813 | $ | 17,891,230 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
ALFA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash Flows From Operating Activities: |
||||||||
| Net Income |
$ | 25,476,887 | $ | 18,729,628 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
||||||||
| Policy Acquisition Costs Deferred |
(27,247,151 | ) | (25,267,359 | ) | ||||
| Amortization of Deferred Policy Acquisition Costs |
22,905,299 | 21,146,389 | ||||||
| Depreciation and Amortization |
742,845 | 852,404 | ||||||
| Provision for Deferred Taxes |
1,091,971 | 102,484 | ||||||
| Interest Credited on Policyholders’ Funds |
6,743,557 | 6,495,968 | ||||||
| Net Realized Investment (Gains)/Losses |
(1,457,350 | ) | 1,795,910 | |||||
| Other |
(3,268,670 | ) | (2,587,739 | ) | ||||
| Changes in Operating Assets and Liabilities: |
||||||||
| Accrued Investment Income |
(929,388 | ) | 800,583 | |||||
| Accounts Receivable |
(226,823 | ) | (8,324,035 | ) | ||||
| Reinsurance Balances Receivable |
148,398 | (2,277,070 | ) | |||||
| Due from Affiliates |
(191,928 | ) | 2,354,813 | |||||
| Other Assets |
(1,494,822 | ) | (791,763 | ) | ||||
| Liability for Policy Reserves |
1,430,829 | 4,365,299 | ||||||
| Liability for Unearned Premiums |
8,540,745 | 6,877,366 | ||||||
| Amounts Held for Others |
(197,902 | ) | 194,538 | |||||
| Other Liabilities |
2,874,963 | 4,463,548 | ||||||
| Net Cash Provided by Operating Activities |
34,941,460 | 28,930,964 | ||||||
| Cash Flows from Investing Activities: |
||||||||
| Maturities and Redemptions of Fixed Maturities Held for Investment |
15,146 | 52,107 | ||||||
| Maturities and Redemptions of Fixed Maturities Available for Sale |
68,602,136 | 142,335,909 | ||||||
| Maturities and Redemptions of Other Investments |
445,332 | 755,746 | ||||||
| Sales of Fixed Maturities Available for Sale |
6,329,942 | 23,188,786 | ||||||
| Sales of Equity Securities |
72,324,921 | 16,984,373 | ||||||
| Sales of Other Investments |
448,497 | 503,824 | ||||||
| Purchases of Fixed Maturities Available for Sale |
(216,267,760 | ) | (150,956,432 | ) | ||||
| Purchases of Equity Securities |
(35,337,270 | ) | (27,632,750 | ) | ||||
| Purchases of Other Investments |
(10,523,312 | ) | (4,705,222 | ) | ||||
| Origination of Consumer Loans Receivable |
(14,113,658 | ) | (14,106,522 | ) | ||||
| Principal Payments on Consumer Loans Receivable |
12,752,998 | 12,612,925 | ||||||
| Origination of Commercial Leases Receivable |
(25,766,473 | ) | (11,680,335 | ) | ||||
| Principal Payments on Commercial Leases Receivable |
13,080,760 | 8,963,890 | ||||||
| Net Change in Short-term Investments |
70,486,847 | (39,471,693 | ) | |||||
| Net Change in Receivable/Payable on Securities |
216,465 | |||||||