PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
August 8, 2002
(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 5. Other Events.
On August 8, 2002, the Registrant issued a press release announcing its results for the second quarter of 2002. A
copy of this press release is attached as Exhibit 99.1 and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Press Release dated August 8, 2002.
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 August 8, 2002.
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
Manager – Investor Relations
(205) 970-7030
CLambert@vesta.com
VESTA REPORTS SECOND QUARTER RESULTS
2nd Quarter Revenue Increased by 80% Compared to Prior Year Period
BIRMINGHAM, Ala. - August 8, 2002 - Vesta Insurance Group, Inc. (NYSE: VTA) today reported, primarily as a result of previously announced catastrophe losses, an operating loss from continuing operations of $1.0 million, or $0.03 per diluted share, for the quarter ending June 30, 2002 compared to operating earnings of $5.8 million, or $0.24 per diluted share, for the corresponding period in 2001. Net premiums written for the quarter were $155.9 million compared to $74.3 million in the second quarter of 2001, a 110% increase. On July 18, Vesta announced that it expected to report an operating loss between $0.02 and $0.05 per share.
For the six months ended June 30, Vesta reported a net operating loss from continuing operations of $0.6 million, or $0.02 per diluted share, compared to earnings of $7.5 million or $0.33 per diluted share for the first six months of 2001.
Including non-operating items, the Company reported a net loss from continuing operations of $2.0 million, or $0.06 per diluted share, in the second quarter of 2002 compared to earnings of $7.2 million, or $0.30 per diluted share, in the corresponding period in 2001. For the six months ended June 30, Vesta reported a net loss from continuing operations of $1.1 million or $0.03 per diluted share compared to earnings of $9.8 million or $0.43 per diluted share.
Vesta incurred a previously announced after-tax charge of $9.5 million in discontinued operations primarily due to the completion of an arbitration with F&G Re and recorded $1.0 million in realized losses, partially due to the Company's $1.0 million pre-tax exposure to WorldCom bonds.
"Our underlying segment fundamentals improved compared to the first quarter of 2002 and we continued to achieve significant growth," said Norman W. Gayle, III, President. "We are optimistic that these trends will continue and we will begin to achieve our targeted annual run rate of a 10% return on equity from continuing operations in the 3rd or 4th quarters of 2002."
Segment Results
Vesta's non-standard automobile business continued to grow and produced excellent results. Operating earnings from continuing operations for the non-standard automobile agency and specialty underwriting segments rose by 21% and 33%, respectively, compared to the first quarter of 2002. Both of these segments have grown significantly in the past 9 months and management anticipates continued growth and profitability.
Vesta's standard property-casualty business reported net written premium of $104.9 million in the first quarter of 2002 compared to $64.8 million in the same period of 2001, a 62% increase. The Company's GAAP combined ratio for its residential property business was 106.6%. Excluding catastrophe losses, the residential property combined ratio was 98.3%. The standard auto combined ratio improved 16 points compared to the first quarter of 2002 to 103.1%. Excluding catastrophes, the standard property-casualty ratio was 98.3% for the quarter and 99.8% for the six months ended June 30, 2002.
"We are very pleased with the turnaround and improvement of the standard auto results," said Gayle. "As we indicated in the previous quarter, the residential property business is growing significantly and we expect continued attractive underwriting results, barring excessive catastrophes."
Vesta's life and health segment posted net income of $1.6 million in the quarter. The segment's results were lower than expectations due primarily to higher than anticipated mortality that began in the first quarter and ran into April. The mortality returned to expected levels in May and June.
During the second quarter, Vesta repurchased 30,100 shares of its common stock at a price between $4.18 and $4.35.
Vesta's CEO and CFO intend to certify the Company's financial results in the 10-Q that will be filed on or before August 14 as required by the Sarbanes-Oxley Act of 2002.
Vesta management will hold its quarterly conference call to discuss second quarter 2002 results on August 9, 2002 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/ajwz362385012gf12.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 return on equity, segment growth and profitability. 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 factor that could affect the forward-looking statements contained herein is that frequency and severity of insured losses in our standard property-casualty segment or specialty underwriting segment could increase beyond expected levels. 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
2nd Quarter 2002 Segment Comparison
(amounts in thousands)
Life and Health Standard Property- Specialty
Insurance Casualty Agency Underwriting Corp & Other Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
--------------- ------------------ --------------- ---------------- ------------- -------------- ----------------
Revenues:
Net premiums written $7,562 $7,482 $104,907 $64,773 -- -- $43,384 $2,000 -- $155,85 $74,255
(Increase) decrease in unearned premiums -- -- (24,394) (67) -- -- (2,818) 3 -- (27,212) (64)
--------------- ------------------ ---------------- --------------- -------------- ----------------
Net premiums earned 7,562 7,482 80,513 64,706 -- -- 40,566 2,003 -- 128,641 74,191
Net investment income 9,338 11,010 -- -- -- $103 -- -- $4,915 $5,997 $(454) -- 13,799 17,110
Policy fees 1,133 1,052 1,290 676 3,082 -- -- -- -- -- 5,505 1,728
Agents fees and commissions -- -- -- -- $26,172 356 -- -- -- -- (5,441) -- 20,731 356
Other 320 183 225 420 -- -- 1,628 961 1,626 676 -- -- 3,799 2,240
--------------- ------------------ ---------------- -------------- --------------- -------------- ----------------
Total revenues 18,353 19,727 82,028 65,802 26,172 459 45,276 2,964 6,541 6,673 (5,895) -- 172,475 95,625
Expenses:
Policyholder benefits 11,104 8,938 -- -- -- -- -- -- -- -- -- -- 11,104 8,938
Loss and LAE expenses incurred -- -- 60,046 37,573 -- -- 24,190 1,498 -- -- -- -- 84,236 39,071
Policy acquisition expenses 863 1,934 16,717 14,519 -- -- 12,153 421 -- -- (5,441) -- 24,292 16,874
Operating expenses 3,551 2,806 10,092 8,043 22,671 1,438 5,757 96 7,450 2,853 -- -- 49,521 15,236
Interest on debt 1,588 2,198 -- -- 454 -- -- -- 2,307 2,289 (454) -- 3,895 4,487
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 84 969 -- -- 84 969
--------------- ------------------ ---------------- --------------- -------------- -------------- ----------------
Total expenses 17,106 15,876 86,855 60,135 23,125 1,438 42,100 2,015 9,841 6,111 (5,895) -- 173,132 85,575
Income (loss) from continuing operations before income taxes
deferrable capital securities,
and minority interest 1,247 3,851 (4,827) 5,667 3,047 (979) 3,176 949 (3,300) 562 -- -- (657) 10,050
Income taxes (benefit) 436 1,062 (1,689) 2,210 1,066 (343) 1,112 332 (1,155) 196 -- -- (230) 3,457
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 322 383 -- -- 322 383
Minority interest in subsidiary, net of tax 115 717 -- -- 182 (305) -- -- -- -- -- -- 297 412
--------------- ------------------ ---------------- --------------- -------------- -------------- ----------------
Net operating earnings (loss)* $696 $2,072 $(3,138) $3,457 $1,799 $(331) $2,064 $617 $(2,467) $(17) -- -- $(1,046 $5,798
=============== ================== ================ =============== ============== ============== ================
Realized gains (loss), net of tax
and minority interest 919 296 (1,892) 1,121 $ (973) $1,417
--------------- ----------------- ----------------- ------------------------------ -------------- ----------------
Net income (loss) from continuing
operations $1,615 $2,368 $(3,138) $ 3,457 $1,799 $ (331) $ 2,064 $ 617 $ (4,359$ 1,104 -- -- $ (2,019 $7,215
=============== ================ ================== ============== =============== ============== ================
*Excludes realized investment gains and losses
Vesta Insurance Group, Inc
2002 YTD Segment Comparison
(amounts in thousands)
Life and Health Standard Property- Specialty
Insurance Casualty Agency Underwriting Corp & Other Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
--------------- ------------------ --------------- ---------------- ------------- -------------- ----------------
Revenues:
Net premiums written $15,636 $14,947 $202,627 $116,998 -- -- $88,687 $3,522 -- $306,950 $135,467
(Increase) decrease in unearned premiums -- -- (54,271) 4,555 -- -- (12,247) (436) -- 66,518) 4,119
--------------- ------------------ ---------------- --------------- -------------- -----------------
Net premiums earned 15,636 14,947 148,356 121,553 -- -- 76,440 3,086 -- 240,432 139,586
Net investment income 18,757 21,790 -- -- -- $ 260 -- -- $ 9,297 $10,663 $ (574) -- 27,480 32,713
Policy fees 2,116 1,950 2,592 1,031 4,215 -- -- -- -- -- 8,923 2,981
Agents fees and commissions -- -- -- -- $49,760 798 -- -- -- -- (10,649) -- 39,111 798
Other 657 235 225 420 -- -- 3,236 1,804 3,055 1,485 -- -- 7,173 3,944
--------------- ----------------- ----------------- --------------- --------------- -------------- -----------------
Total revenues 37,166 38,922 151,173 123,004 49,760 1,058 83,891 4,890 12,352 12,148 (11,223) -- 323,119 180,022
Expenses:
Policyholder benefits 21,749 16,995 -- -- -- -- -- -- -- -- -- -- 21,749 16,995
Loss and LAE expenses incurred -- -- 107,125 75,475 -- -- 47,805 2,297 -- -- -- -- 154,930 77,772
Policy acquisition expenses 2,486 4,024 32,132 26,577 -- -- 21,471 643 -- -- (10,649) -- 45,440 31,244
Operating expenses 6,837 6,567 19,264 14,405 43,407 2,827 9,053 157 13,713 5,933 -- -- 92,274 29,889
Interest on debt 3,164 4,628 -- -- 574 -- -- -- 4,682 4,517 (574) -- 7,846 9,145
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 168 1,495 -- -- 168 1,495
--------------- ----------------- ----------------- --------------- --------------- -------------- -----------------
Total expenses 34,236 32,214 158,521 116,457 43,981 2,827 78,329 3,097 18,563 11,945 (11,223) -- 322,407 166,540
Income (loss) from continuing operations before income taxes
deferrable capital securities,
and minority interest 2,930 6,708 (7,348) 6,547 5,779 (1,769) 5,562 1,793 (6,211) 203 -- -- 712 13,482
Income taxes (benefit) 1,025 2,050 (2,571) 2,577 2,022 (619) 1,947 628 (2,174) 70 -- -- 249 4,706
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 451 766 -- -- 451 766
Minority interest in subsidiary, net of tax 151 1,108 -- -- 427 (552) -- -- -- -- -- -- 578 556
--------------- ----------------- ----------------- --------------- --------------- -------------- -----------------
Net operating earnings (loss)* $ 1,754 $ 3,550 $ (4,777) $ 3,970 $ 3,330 $ (598) $ 3,615 $ 1,165 $ (4,488) $(633) -- -- $ (566)$ 7,454
=============== ================= ================= =============== =============== ============== =================
Realized gains (loss),
net of tax and minority interest 1,262 551 (1,799) 1,840 $ (537)$ 2,391
--------------- ----------------- ----------------- --------------- --------------- -------------- -----------------
Net income (loss) from continuing
operations $3,016 $4,101 $(4,777) $ 3,970 $ 3,330 $ (598) $ 3,615 $ 1,165 $(6,287) $1,207 -- -- $ (1,103)$ 9,845
=============== ================= ================= =============== =============== ============== =================
*Excludes realized investment gains and losses
Vesta Insurance Group, Inc
Second Quarter Results
(amounts in thousands, except share data)
3 Months Ended June 30, 6 Months Ended June 30,
2002 2001 2002 2001
------------ ------------- ------------ -------------
Revenues:
Net premiums written $ 155,853 $ 74,255 $ 306,950 $ 135,467
(Increase) decrease in unearned premiums (27,212) (64) (66,518) 4,119
------------ ------------- ------------ -------------
Net premiums earned 128,641 74,191 240,432 139,586
Net investment income 13,799 17,110 27,480 32,713
Policy fees 5,505 1,728 8,923 2,981
Agents fees and commissions 20,731 356 39,111 798
Other 3,799 2,240 7,173 3,944
------------ ------------- ------------ -------------
Total revenues 172,475 95,625 323,119 180,022
Expenses:
Policyholder benefits 11,104 8,938 21,749 16,995
Loss and LAE expenses incurred 84,236 39,071 154,930 77,772
Policy acquisition expenses 24,292 16,874 45,440 31,244
Operating expenses 49,521 15,236 92,274 29,889
Interest on debt 3,895 4,487 7,846 9,145
Goodwill and other intangible amortization 84 969 168 1,495
------------ ------------- ------------ -------------
Total expenses 173,132 85,575 322,407 166,540
Income (loss) from continuing operations before income taxes,
deferrable capital securities, and minority interest (657) 10,050 712 13,482
Income taxes (230) 3,457 249 4,706
Deferrable capital securities, net of tax 322 383 451 766
Minority interest in subsidiary, net of tax 297 412 578 556
------------ ------------- ------------ -------------
Net operating earnings (loss) (1,046) 5,798 (566) 7,454
Realized gains (losses), net of tax and minority interest (973) 1,417 (537) 2,391
Net income (loss) from continuing operations (2,019) 7,215 (1,103) 9,845
Loss from discontinued operations, net of tax (9,464) (163) (9,528) (158)
Extraordinary gain on debt extinguishments, net of tax - - 210 -
Net income (loss) (11,483) 7,052 (10,421) 9,687
Gain on redemption of preferred securities - - - 565
Preferred stock dividend - - - (163)
------------ ------------- ------------ -------------
Income (loss) available to common shareholders $ (11,483) $ 7,052 $ (10,421) $ 10,089
============ ============= ============ =============
Weighted average diluted shares outstanding for the period 33,780 24,282 33,394 22,731
Net operating earnings (loss) from continuing operations
earnings per share $ (0.03) $ 0.24 $ (0.02) $ 0.33
Realized gains (losses) per share $ (0.03) $ 0.06 $ (0.02) $ 0.11
Net income (loss) from continuing operations per share $ (0.06) $ 0.30 $ (0.03) $ 0.43
Income (loss) available to common shareholders per share $ (0.34) $ 0.29 $ (0.31) $ 0.45
Vesta Insurance Group, Inc
Condensed Consolidated Balance Sheet
(amounts in thousands)
June 30, 2002 March 31, 2002
-------------------- ------------------------
Assets:
Invested assets $ 1,088,052 $ 1,037,229
Cash 36,566 21,781
Other assets 934,576 889,977
-------------------- ------------------------
Total assets $ 2,059,194 $ 1,948,987
==================== ========================
Liabilities:
Future policy benefits $ 681,222 $ 689,004
Losses and loss adjustment expenses 320,202 298,661
Unearned premiums 293,915 271,225
Debt 103,768 104,752
Other liabilities 385,464 304,940
-------------------- ------------------------
Total liabilities 1,784,571 1,668,582
Deferrable capital securities 22,445 22,445
Stockholders' equity 252,178 257,960
-------------------- ------------------------
Total liabilities and stockholders' equity $ 2,059,194 $ 1,948,987
==================== ========================
Equity per share $ 7.06 $ 7.22
Equity per share excluding unrealized 6.86 7.18
investment gains and losses
Shares Outstanding at period end* 35,696 35,726
* Excludes shares in the Vesta Agents Stock Incentive Plan Trust