PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
April 28, 2003
(Date of earliest event reported)
VESTA INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 63-1097283 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| 3760 River Run Drive | 35243 |
| Birmingham, Alabama | (Zip Code) |
| (Address of principal executive offices) |
(205) 970-7000
(Registrant's telephone number, including area code)
Item 9. Regulation FD Disclosure
On April 28, 2003, the Registrant issued a press release announcing its results for the first quarter of 2003. A copy of this press release is attached as Exhibit 99.1 and incorporated herein by reference.
The registrant is furnishing this information under Items 9 and 12 of Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Press Release dated April 28, 2003.
SIGNATURE
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, thereto duly authorized.
Dated as of April 28, 2003.
VESTA INSURANCE GROUP, INC.
By: /s/ Donald W. Thornton
Its: Senior Vice President --
General Counsel and Secretay
EXHIBIT 99.1
FOR IMMEDIATE RELEASE Contact: Charles R. Lambert
Vice President – Investor Relations
(205) 970-7030
CLambert@vesta.com
VESTA REPORTS FIRST QUARTER RESULTS
Non-Standard Auto Generates $4.9 Million in Net Income;
Standard Auto Improves to a 95.6% Combined Ratio
BIRMINGHAM, Ala. - April 28, 2003 - Vesta Insurance Group, Inc. (NYSE: VTA) today reported net operating earnings of $2.6 million, or $0.08 per share in the first quarter compared to net operating earnings of $.4 million, or $0.01 per share for the corresponding period in 2002. Net income from continuing operations was $4.9 million, or $0.14 per share for the quarter ending March 31, 2003 compared to net income from continuing operations of $1.7 million, or $0.05 per share in the first quarter of 2002. Net operating earnings is a non-GAAP measure which excludes certain items, such as realized gains and losses and gains on debt extinguishments. (A reconciliation of net operating earnings to net income from continuing operations is included herein.) Net earned premium for the quarter was $118.9 million compared to $106.8 million in the first quarter of 2002.
"The centerpiece of our first quarter results is the growth and performance of our non-standard auto business - both in the agency and underwriting operations," said Norman W. Gayle, III, President and CEO.
The first quarter is typically the strongest for the non-standard auto business, and Vesta's non-standard agency and underwriting businesses generated $4.9 million of net income from continuing operations combined in the first quarter of 2003 compared to $3.1 million in the same period in 2002. The non-standard auto underwriting segment posted a 95.2% combined ratio for the first quarter of 2003.
"Tom Mangold and our non-standard auto team have done an excellent job staying focused on execution while integrating various aspects of the companies that we acquired over the past 18 months," said Gayle.
The Company's life insurance operations posted net income from continuing operations of $1.2 million on improved mortality compared to the corresponding period in 2002, partially offset by reduced investment rates and increased amortization of acquisition costs.
Vesta's standard property-casualty segment posted a net loss from continuing operations of $2.1 million in the first quarter of 2003 compared to a net loss from continuing operations of $1.6 million in the first quarter of 2002. The standard property-casualty segment GAAP combined ratio was 104.3% for the first quarter of 2003 compared to 103.6% for the same period in 2002. The standard auto business GAAP combined ratio was 95.6% for the first quarter of 2003 compared to 119.1% in the first quarter of 2002. The residential property GAAP combined ratio was 106.9% in the first quarter of 2003 compared to 98% in the corresponding period last year.
"Our standard auto results have shown consistent improvement since the first quarter of 2002 with three consecutive quarters of profitability," said Gayle. "Our residential property business experienced abnormally high loss severity related to fires and winter weather in the Mid-Atlantic and Northeast. While our standard property-casualty business is subject to volatility from weather events, we remain optimistic about the improving fundamentals for profitability in this business."
In the first week of April, a severe hailstorm caused approximately $1.2 billion of total losses to the industry, including an estimated $540 million of residential property losses in Texas, according to the Insurance Services Office. Texas Select, Vesta's residential property subsidiary in Texas, is currently estimated to have approximately $10 to $12 million in pre-tax losses, net of its 50% Texas quota share, in the second quarter as a result of this storm. Texas Select, which reported a 42% direct loss ratio in the first quarter, is expected to report a direct loss ratio in excess of 80% in the second quarter and barring additional catastrophes, the Company forecasts a direct loss ratio less than 60% in Texas for the entire year.
"Although this storm will adversely impact earnings for the second quarter, our losses from this event are estimated to be approximately 20% less than our 6% market share would indicate. This is reflective of our disciplined underwriting, geographic dispersion of risk, and the use of wind and hail deductibles," said Gayle.
As previously discussed, Vesta is in arbitration with three reinsurers related to a 20 percent whole account quota share treaty. Vesta announced today that its hearing, scheduled for May 13, 2003, with ALFA Mutual Insurance Company has been delayed indefinitely due to a lawsuit recently filed by ALFA in Alabama state court concerning procedural issues related to the ongoing arbitration. Also, in the Dorinco Reinsurance Company arbitration, a preliminary hearing is scheduled for April 29, 2003 regarding coverage for developmental losses under the treaty.
Vesta management will hold its quarterly conference call to discuss first quarter 2003 results on April 29, 2003 at 10 AM EST. The conference call will be simultaneously webcast live online through Vesta's corporate website, www.vesta.com and http://www.firstcallevents.com/service/ajwz379639578gf12.html.
About Vesta Insurance Group, Inc.
Vesta, headquartered in Birmingham, Ala., is a holding company for a group of insurance and financial services companies that offer a wide range of consumer-based products.
This news release contains statements concerning management's beliefs, plans or objectives for Vesta's future operations or financial performance, including segment growth and profitability, an estimate of losses related to a Texas hail storm and forecast losses for the remainder of 2003. These statements, whether expressed or implied, are only predictions and should be considered "forward-looking statements" under applicable securities laws. You should be aware that Vesta's actual operations and financial performance may differ materially from those reflected in these forward-looking statements. The main factors that could affect the forward-looking statements contained herein are that frequency and severity of insured losses in our standard property-casualty segment or that an arbitration panel issues a formal ruling that causes us to adjust our estimates of reinsurance recoverables. Please refer to the documents Vesta files from time to time with the Securities and Exchange Commission, specifically Vesta's most recent Form 10-K and Exhibit 99.1 attached thereto, which contains and identifies additional important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements.
# # #
Vesta Insurance Group, Inc
1st Quarter 2003 Segment Comparison
(amounts in thousands)
Life Insurance Standard Non-Standard Non-Standard Corp & Other Eliminations Consolidated
Property-Casualty Agency Underwriting
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
--------------- ----------------- ----------------- --------------- ---------------- -------------- ----------------
Revenues:
Net premiums written $ 2,410 $ 3,057 $ 82,980 $ 97,720 -- -- $46,96 $45,303 $132,35 $146,080
(Increase) decrease in unearned premiums -- -- (5,161) (29,877) -- -- (8,292) (9,429) (13,453) (39,306)
--------------- ------------------ ---------------- ---------------- -------------- ----------------
Net premiums earned 2,410 3,057 77,819 67,843 -- -- 38,671 35,874 118,900 106,774
Net investment income 7,695 9,306 -- -- -- -- -- -- $3,920 $4,382 $ - $ (120) 11,615 13,568
Policy fees 493 983 2,062 1,302 5,083 1,133 -- -- -- -- 7,638 3,418
Agents fees and commissions -- -- -- -- $ 38,922$ 32,562 -- -- -- -- (18,045(14,182) 20,877 18,380
Other 642 337 242 - -- -- 912 1,608 147 190 -- -- 1,943 2,135
--------------- ------------------ ---------------- --------------- ---------------- -------------- ----------------
Total revenues 11,240 13,683 80,123 69,145 38,922 32,562 44,666 38,615 4,067 4,572 (18,045(14,302) 160,973 144,275
Expenses:
Policyholder benefits 5,090 7,828 -- -- -- -- -- -- -- -- -- -- 5,090 7,828
Loss and LAE expenses incurred -- -- 53,445 47,079 -- -- 26,512 23,615 -- -- -- -- 79,957 70,694
Policy acquisition expenses 369 143 18,800 15,415 -- -- 14,752 9,318 -- -- (8,446)(5,208) 25,475 19,668
Operating expenses 2,452 2,458 11,104 9,172 33,969 29,710 388 3,296 3,904 5,218 (9,599)(8,974) 42,218 40,880
Interest on debt 1,453 1,576 -- -- -- 120 -- -- 1,705 2,375 -- (120) 3,158 3,951
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 84 84 -- -- 84 84
--------------- ------------------ ---------------- ---------------- --------------- -------------- ----------------
Total expenses 9,364 12,005 83,349 71,666 33,969 29,830 41,652 36,229 5,693 7,677 (18,045(14,302) 155,982 143,105
Income (loss) from continuing operations before
income taxes, deferrable capital securities,
and minority interest 1,876 1,678 (3,226) (2,521) 4,953 2,732 3,014 2,386 (1,626)(3,105) -- -- 4,991 1,170
Income tax expense (benefit) 657 587 (1,129) (882) 1,734 956 1,055 835 (569)(1,087) -- -- 1,748 409
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 311 129 -- -- 311 129
Minority interest in subsidiary, net of tax - 36 -- -- 286 245 -- -- -- -- -- -- 286 281
--------------- ------------------ ---------------- ---------------- --------------- -------------- ----------------
Net operating earnings (loss) from
continuing operations $1,219 $1,055 $(2,097) $(1,639) $2,933 $1,531 $1,959 $1,551 $(1,368)$(2,147) -- -- $2,646 $351
=============== ================= ================= ================ =============== ============== ================
Realized gains (loss), net of tax (4) 343 2,285 93 2,281 436
Gain on debt extinguishments, net of tax - 897 - 897
--------------- ----------------- ----------------- ---------------- --------------- -------------- ----------------
Net income from continuing operations $ 1,215 $ 1,398 $ (2,097)$ (1,639) $2,933 $1,531 $1,959 $1,551 $917 $(1,157) -- -- $ 4,927 $ 1,684
=============== ================= ================= ================ =============== ============== ================
Vesta Insurance Group, Inc
First Quarter Results
(amounts in thousands, except share data)
3 Months Ended March 31,
2003 2002
---------------- ----------------
Revenues:
Net premiums written $ 132,353 $ 146,080
(Increase) decrease in unearned premiums (13,453) (39,306)
---------------- ----------------
Net premiums earned 118,900 106,774
Net investment income 11,615 13,568
Policy fees 7,638 3,418
Agents fees and commissions 20,877 18,380
Other 1,943 2,135
---------------- ----------------
Total revenues 160,973 144,275
Expenses:
Policyholder benefits 5,090 7,828
Loss and LAE expenses incurred 79,957 70,694
Policy acquisition expenses 25,475 19,668
Operating expenses 42,218 40,880
Interest on debt 3,158 3,951
Goodwill and other intangible amortization 84 84
---------------- ----------------
Total expenses 155,982 143,105
Income (loss) from continuing operations before income taxes,
deferrable capital securities, and minority interest 4,991 1,170
Income taxes 1,748 409
Deferrable capital securities, net of tax 311 129
Minority interest in subsidiary, net of tax 286 281
---------------- ----------------
Net operating earnings (loss) from continuing operations 2,646 351
Realized gains (losses), net of tax and minority interest 2,281 436
Gain on debt extinguishments, net of tax - 897
---------------- ----------------
Net income (loss) from continuing operations 4,927 1,684
Gain (loss) from health insurance discontinued operations, net of tax (598) 3
Gain (loss) from consulting discontinued operations, net of tax (392) 126
Loss from assumed reinsurance and commercial lines, net of tax (263) (64)
---------------- ----------------
Net income (loss) 3,674 1,749
Gain on redemption of preferred securities, net of tax - 210
---------------- ----------------
Income (loss) available to common shareholders $ 3,674 $ 1,959
================ ================
Weighted average shares outstanding for the period 34,907 33,842
Net operating earnings (loss) from continuing operations earnings per share $ 0.08 $ 0.01
Realized gains (losses) per share $ 0.06 $ 0.01
Net income (loss) from continuing operations per share $ 0.14 $ 0.05
Income (loss) available to common shareholders per share $ 0.11 $ 0.06
Vesta Insurance Group, Inc
Condensed Consolidated Balance Sheet
(amounts in thousands, except per share amounts)
March 31, 2003 December 31, 2002
--------------------------- --------------------------
Assets:
Invested assets $ 1,056,403 $ 1,010,590
Cash 78,641 140,593
Other assets 914,915 891,675
--------------------------- --------------------------
Total assets $ 2,049,959 $ 2,042,858
=========================== ==========================
Liabilities:
Future policy benefits $ 671,143 $ 678,419
Losses and loss adjustment expenses 323,076 322,320
Unearned premiums 336,208 306,782
Debt 85,798 85,795
Other liabilities 373,008 391,240
--------------------------- --------------------------
Total liabilities 1,789,233 1,784,556
Deferrable capital securities 22,445 22,445
Stockholders' equity 238,281 235,857
--------------------------- --------------------------
Total liabilities and stockholders' equity $ 2,049,959 $ 2,042,858
=========================== ==========================
Equity per share $ 6.68 $ 6.61
Equity per share excluding unrealized $ 6.27 $ 6.19
investment gains and losses
Shares outstanding at period end 35,678 35,678
Vesta Insurance Group, Inc
Reconciliation of Operating Earnings to Net Income
(amounts in thousands, except share data)
3 Months Ended March 31,
2003 2002
---------------- -------------
Net operating earnings (loss) $ 2,646 $ 351
Special items:
Realized gains (losses), net of tax and minority interest 2,281 436
Gain on debt extinguishments, net of tax - 897
Net income (loss) from continuing operations $ 4,927 $ 1,684
Gain (loss) from health insurance discontinued operations, net of tax (598) 3
Gain (loss) from consulting discontinued operations, net of tax (392) 126
Loss from assumed reinsurance and commercial lines, net of tax (263) (64)
---------------- -------------
Net income (loss) $ 3,674 $ 1,749
---------------- -------------
Gain on redemption of preferred securities, net of tax - 210
Income (loss) available to common shareholders $ 3,674 $ 1,959
================ =============
Diluted earnings per share:
Net operating earnings (loss) $ 0.08 $ 0.01
Special items:
Realized gains (losses), net of tax and minority interest $ 0.06 $ 0.01
Gain on debt extinguishments, net of tax $ - $ 0.03
---------------- -------------
Net income (loss) from continuing operations $ 0.14 $ 0.05
---------------- -------------
Gain (loss) from health insurance discontinued operations, net of tax $ (0.02) $ 0.00
Gain (loss) from consulting discontinued operations, net of tax $ (0.01) $ 0.00
Loss from assumed reinsurance and commercial lines, net of tax $ (0.00) $ (0.00)
---------------- -------------
Net income (loss) $ 0.11 $ 0.05
---------------- -------------
Gain on redemption of preferred securities, net of tax $ - $ 0.01
---------------- -------------
Income (loss) available to common shareholders $ 0.11 $ 0.06
================ =============
Shares used in computing per share amounts:
Weighted average shares outstanding for the period 34,907 33,842
---------------- -------------
The above table reconciles the Company's GAAP results to net operating earnings. Management believes that net operating earnings provides investors with a useful indicator to gauge possible future performance because it eliminates the effects of items that could cause significant impact to the Company's financial results from one period to another.