PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
November 6, 2001
(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 November 6, 2001, the Registrant issued a press release announcing its results for the third quarter of 2001. 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 November 6, 2001.
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 November 6, 2001.
VESTA INSURANCE GROUP, INC.
By: /s/ Donald W. Thornton
Its: Senior Vice President --
General Counsel and Secretary
EXHIBIT 99.1
FOR IMMEDIATE RELEASE Contact: Charles R. Lambert
Manager – Investor Relations
(205) 970-7030
CLambert@vesta.com
VESTA ANNOUNCES THIRD QUARTER RESULTS
Strengthens Reserves for Discontinued Operations;
Maintains Profitability, Excluding One-Time Charges
BIRMINGHAM, Ala., - November 6, 2001 - Vesta Insurance Group, Inc. (NYSE: VTA) reported profitable results from continuing operations for the third quarter of 2001, excluding one-time charges. Vesta recorded a pre-tax charge of $30 million related to the settlement of securities litigation and the Company strengthened reserves for discontinued operations by $30 million.
Excluding the charge for settlement of securities litigation, Vesta reported net operating earnings from continuing operations of $1.3 million, or $0.04 per diluted share, for the quarter ending September 30, 2001 compared to operating earnings of $4.2 million, or $0.17 per diluted share, for the corresponding period in 2000. For the nine months ended September 30, Vesta reported a net operating earnings from continuing operations of $8.8 million or $0.35 per diluted share compared to net operating earnings of $7.9 million or $0.32 per diluted share for the first nine months of 2000.
With the settlement of the securities litigation, the Company reported a net loss from continuing operations of $18.2 million or $0.57 per diluted share in the third quarter of 2001 compared to earnings of $3.0 million or $0.12 per diluted share in the corresponding period in 2000. For the nine months ended September 30, the net loss from continuing operations was $8.3 million, or $0.33 per diluted share compared to earnings of $6.4 million or $0.26 per diluted share for the first nine months of 2000.
The securities litigation settlement is proceeding as expected as Vesta and its excess insurers have funded the cash settlement. The derivative action lawsuit in state court will be dismissed and the federal court has granted preliminary approval in the class action securities case. Final court approval is expected before the end of the year.
Recent adverse development on both commercial lines and assumed reinsurance was the impetus for strengthening the reserves for discontinued operations. Vesta annually performs a full analysis of its reserves at September 30.
"Following a scheduled annual review, we have determined that strengthening the reserves for our discontinued operations appropriately addresses recent and future claims from prior operations," said James E. Tait, Chairman of Vesta. "Vesta remains a solid financial company. While we will fall short of our 12% return on equity target for 2001, we believe that the strengthening of our discontinued operations reserves and the settlement of the securities litigation positions Vesta for future earnings growth."
Standard Property - Casualty
Net written premium in Vesta's standard property-casualty segment increased 31% to $69.9 million for the quarter ending September 30, 2001 compared to the same period in 2000. The increase in net written premium is primarily related to the acquisition of Florida Select. The standard property-casualty segment's combined ratio was 98.5% in the third quarter of 2001.
Although certain books of business in our standard property and casualty business performed well as expected, Vesta experienced an increase in the frequency and severity of losses in the homeowners line driven by storms in several states as well as increased frequency and large losses in our largest automobile market. In addition, premium has not increased as much as anticipated. The Company is continuing to take aggressive action to address these trends, including appropriate premium rate increases, re-inspection programs and evaluating expense reductions.
Life and Health Insurance
Results from Vesta's life and health segment remained strong by reporting a 35% increase in net operating earnings from continuing operations compared to the third quarter of 2000.
Vesta's life insurance subsidiary, American Founders, continues to grow by acquiring blocks of business and leveraging its administrative capabilities. American Founders has agreed to acquire Teton National Insurance Company and Imperial General Life Insurance Company from Woodmen of the World, located in Colorado. These combined companies have statutory assets of $9 million and premium revenue of $.7 million. This transaction is expected to close by the end of the first quarter of 2002. In addition, American Founders has also reached an agreement to be the third-party administrator for Valley Forge Life Insurance Company. American Founders expects to begin administering the Valley Forge business at the beginning of December 2001.
Non-Standard Automobile
Vesta also reported that Instant Auto, a non-standard auto agency operation in which Vesta has an approximate 52% ownership interest, continues to execute its growth strategy. Through a series of transactions, Instant Auto has acquired control of approximately $56 million of annual non-standard auto insurance premium, approximately $30 million of which is produced through Spacecoast agencies in Florida, Pennsylvania, Virginia and California and approximately $26 million of which is produced through A-Affordable Insurance agency in Texas. We expect Instant Auto to become profitable in 2002 with the fee and commission income generated through agency operations.
Corporate and Other Developments
Vesta has announced the appointment of T. Owen Vickers, Sr. to the Company's Board of Directors. Vickers serves as Chairman, CEO and President of Birmingham Hide and Tallow Co., Inc., a diversified private company.
During the third quarter, Vesta engaged in debt for equity swaps and issued 568,644 shares of common stock in exchange for $7 million face value of the Company's 8.75% Senior Debentures due 2025. Subsequent to September 30, Vesta issued 115,782 shares of common stock in exchange for $2 million face value of the Company's 8.525% Deferrable Capital Securities due 2027 and the Company funded its portion of the securities litigation settlement. As a result of these transactions, Vesta's pro forma debt to total capital ratio is 34.3% as of September 30, 2001.
Vesta's management will hold its quarterly conference call to discuss the third quarter results on November 7, 2001 at 10:00 a.m. EST. The conference call will be simultaneously webcast live online through Vesta's corporate website, www.vesta.com and http://www.videonewswire.com/event.asp?id=1893.
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 reserve adequacy on discontinued operations, earnings growth, and segment 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, including its combined ratio for the fiscal year ended December 31, 2001, may differ materially from those reflected in these forward-looking statements. Some of the factors that could affect the forward-looking statements contained herein include, without limitation: that further adverse development occurs in discontinued operations; that competitors may decide to target the Company's customer base by offering lower priced insurance; that the Company's independent agents may decide to discontinue sales of the Company's insurance to the individuals they represent; that new policy application levels may not rise to levels necessary to generate sufficient premium volume to achieve its financial performance goals; that A.M. Best may downgrade the Company's rating; that Vesta's securities litigation settlement may not receive court approval; and that Vesta may ultimately be unable to recover a significant amount of paid losses currently reflected on its published financial statements as recoverable under a reinsurance treaty. 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 and the Prospectus dated June 20, 2001, 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.
3rd Quarter 2001 Segment Comparison
(amounts in thousands)
Life and Health Standard Non-Standard Specialty Lines Corp & Other Consolidated
Insurance Property-Casualty
2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000
---------------- -------------------- ------------------ ---------------- ---------------- -------------------
Revenues:
Net premiums written $ 7,365 $ 1,578 $ 69,980 $ 53,487 -- -- $ 2,807 $ 366 $80,152 $55,431
(Increase) decrease in unearned premiums -- -- (6,090) (1,904) -- -- (365) (225) (6,455) (2,129)
---------------- -------------------- ------------------ ---------------- -------------------
Net premiums earned 7,365 1,578 63,890 51,583 -- -- 2,442 141 73,697 53,302
Net investment income 10,348 10,618 -- -- $ 49 -- -- -- $ 5,053 $6,236 15,450 16,854
Policy fees 976 1,174 1,254 264 -- -- -- -- -- -- 2,230 1,438
Other 314 511 166 -- 299 -- 1,346 158 1,058 229 3,183 898
---------------- -------------------- ------------------ ---------------- ---------------- -------------------
Total revenues 19,003 13,881 65,310 51,847 348 -- 3,788 299 6,111 6,465 94,560 72,492
Expenses:
Policyholder benefits 8,436 4,302 -- -- -- -- -- -- -- -- 8,436 4,302
Loss and LAE expenses incurred -- -- 41,896 29,366 -- -- 2,000 55 -- -- 43,896 29,421
Policy acquisition expenses 2,034 1,091 14,519 12,407 -- -- 586 34 -- -- 17,139 13,532
Operating expenses 3,248 3,024 7,738 7,566 1,573 -- 54 -- 4,962 1,779 17,575 12,369
Interest on debt 2,067 2,497 -- -- -- -- -- -- 1,987 1,691 4,054 4,188
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 935 351 935 351
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Total expenses 15,785 10,914 64,153 49,339 1,573 -- 2,640 89 7,884 3,821 92,035 64,163
Income (loss) from continuing operations before income
taxes, deferrable capital securities,
and minority interest 3,218 2,967 1,157 2,508 (1,225) -- 1,148 210 (1,773) 2,644 2,525 8,329
Income taxes (benefit) 968 831 405 891 (429) -- 402 71 (621) 925 725 2,718
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 387 571 387 571
Minority interest in subsidiary, net of tax 526 858 -- -- (382) -- -- -- -- -- 144 858
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Net operating earnings (loss) from
continuing operations 1,724 1,278 $ 752 $ 1,617 $ (414) -- $ 746 $ 139 $(1,539) $1,148 $1,269 $ 4,182
================ ==================== ================== =============== ================ ===================
Securities litigation settlement charge, net of tax (19,500) (19,500)
Realized gains (losses), net of tax and
minority interest 136 (67) (1,189) 69 (1,189)
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Net income (loss) from continuing operations $1,860 $ 1,278 $ 752 $ 1,617 $ (414) -- $ 746 $ 139 $(21,106) $(41) $(18,162) $ 2,993
================ ==================== ================== =============== ================ ===================
*Excludes realized investment gains and losses
Vesta Insurance Group, Inc.
2001 YTD Segment Comparison
(amounts in thousands)
Life and Health Standard Non-Standard Specialty Lines Corp & Other Consolidated
Insurance Property-Casualty
2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000
---------------- -------------------- ------------------ ----------------- ---------------- -------------------
Revenues:
Net premiums written $22,312 $1,578 $186,978 $158,510 -- -- $6,329 $366 $215,619 $160,454
(Increase) decrease in unearned premiums -- -- (1,535) 1,776 -- -- (801) (225) (2,336) 1,551
---------------- -------------------- ------------------ ----------------- -------------------
Net premiums earned 22,312 1,578 185,443 160,286 -- -- 5,528 141 213,283 162,005
Net investment income 32,138 10,618 -- -- $ 309 -- -- -- $15,716 $18,497 48,163 29,115
Policy fees 2,926 1,174 2,285 503 -- -- -- -- -- -- 5,211 1,677
Other 549 511 586 -- 1,097 -- 3,150 158 2,543 2,133 7,925 2,802
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Total revenues 57,925 13,881 188,314 160,789 1,406 -- 8,678 299 18,259 20,630 274,582 195,599
Expenses:
Policyholder benefits 25,431 4,302 -- -- -- -- -- -- -- -- 25,431 4,302
Loss and LAE expenses incurred -- -- 117,371 94,960 -- -- 4,297 55 -- -- 121,668 95,015
Policy acquisition expenses 6,058 1,091 41,096 36,844 -- -- 1,229 34 -- -- 48,383 37,969
Operating expenses 9,815 3,024 22,143 20,693 4,400 -- 211 -- 10,895 7,578 47,464 31,295
Interest on debt 6,695 2,497 -- -- -- -- -- -- 6,504 7,857 13,199 10,354
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 2,430 1,105 2,430 1,105
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Total expenses 47,999 10,914 180,610 152,497 4,400 5,737 89 19,829 16,540 258,575 180,040
Income (loss) from continuing operations before income
taxes deferrable capital securities,
and minority interest 9,926 2,967 7,704 8,292 (2,994) -- 2,941 210 (1,570) 4,090 16,007 15,559
Income taxes (benefit) 3,018 831 2,982 2,800 (1,048) -- 1,029 71 (550) 1,372 5,431 5,074
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 1,153 1,713 1,153 1,713
Minority interest in subsidiary, net of tax 1,596 858 -- -- (934) -- -- -- -- -- 662 858
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Net operating earnings (loss) from
continuing operatins $5,312 $1,278 $4,722 $5,492 $(1,012) -- $1,912 $139 $(2,173) $1,005 $8,761 $7,914
================ ==================== ================== =============== ================ ===================
Securities litigation settlement charge, net of tax (19,500) (19,500)
Realized gains (loss), net of tax and
minority interest 1,772 (1,509) 2,421 (1,509)
---------------- -------------------- ------------------ --------------- ---------------- -------------------
Net income (loss) from continuing operations $5,961 $1,278 $4,722 $5,492 $(1,012) -- $1,912 $139 $(19,901 $(504) $(8,318) $6,405
================ ==================== ================== =============== ================ ===================
*Excludes realized investment gains and losses
Vesta Insurance Group, Inc.
Quarter vs. Quarter and YTD vs. YTD
(amounts in thousands, except per share data)
3 Months Ended September 30, 9 Months Ended September 30,
2001 2000 2001 2000
------------- -------------- ------------- --------------
Revenues:
Net premiums written $ 80,152 $ 55,431 $ 215,619 $ 160,454
(Increase) decrease in unearned premiums (6,455) (2,129) (2,336) 1,551
------------- -------------- ------------- --------------
Net premiums earned 73,697 53,302 213,283 162,005
Net investment income 15,450 16,854 48,163 29,115
Policy Fees 2,230 1,438 5,211 1,677
Other 3,183 898 7,925 2,802
------------- -------------- ------------- --------------
Total revenues 94,560 72,492 274,582 195,599
Expenses:
Policyholder benefits 8,436 4,302 25,431 4,302
Loss and LAE expenses incurred 43,896 29,421 121,668 95,015
Policy acquisition expenses 17,139 13,532 48,383 37,969
Operating expenses 17,575 12,369 47,464 31,295
Interest on debt 4,054 4,188 13,199 10,354
Goodwill and other intangible amortization 935 351 2,430 1,105
------------- -------------- ------------- --------------
Total expenses 92,035 64,163 258,575 180,040
Income from continuing operations before income taxes
deferrable capital securities, and minority interest 2,525 8,329 16,007 15,559
Income taxes 725 2,718 5,431 5,074
Deferrable capital securities, net of tax 387 571 1,153 1,713
Minority interest in subsidiary, net of tax 144 858 662 858
------------- -------------- ------------- --------------
Net operating earnings from continuing operations 1,269 4,182 8,761 7,914
Securities litigation settlement charge, net of tax (19,500) - (19,500) -
Realized gains (losses), net of tax and minority interest 69 (1,189) 2,421 (1,509)
Net income (loss) from continuing operations (18,162) 2,993 (8,318) 6,405
Income (loss) from discontinued operations, net of tax (19,800) 1,003 (19,958) 1,003
Extraordinary gain on debt extinguishments, net of tax 910 - 910 5,250
Net income (loss) (37,052) 3,996 (27,366) 12,658
Gain on redemption of preferred securities 5,099 - 5,099 -
Preferred stock dividend - (1,272) (163) (2,398)
------------- -------------- ------------- --------------
Income (loss) available to common shareholders $ (31,953) $ 2,724 $ (22,430) $ 10,260
============= ============== ============= ==============
Weighted average diluted shares outstanding 31,837 24,050 24,848 24,364
Net operating earnings from continuing operations per share $ 0.04 $ 0.17 $ 0.35 $ 0.32
Realized gains per share $ 0.00 $ (0.05) $ 0.10 $ (0.06)
Net income (loss) from continuing operations per share $ (0.57) $ 0.12 $ (0.33) $ 0.26
Income (loss) available to common shareholders per share $ (1.00) $ 0.17 $ (0.90) $ 0.52
Vesta Insurance Group, Inc.
Condensed Consolidated Balance Sheet
(amounts in thousands)
--------------------------------------------------
September 30, 2001 June 30, 2001
--------------------------------------------------
Assets:
Invested assets $ 1,039,244 $ 1,016,237
Cash 33,375 76,328
Other assets 691,306 691,952
--------------------------------------------------
Total assets $ 1,763,925 $ 1,784,517
========================= ========================
Liabilities:
Future policy benefits $ 689,068 $ 664,137
Losses and loss adjustment expenses 275,856 250,614
Unearned premiums 145,259 138,804
Debt 89,405 91,427
Other liabilities 277,003 331,995
--------------------------------------------------
Total liabilities 1,476,591 1,476,977
Deferrable capital securities 29,750 29,750
Stockholders' equity 257,584 277,790
--------------------------------------------------
Total liabilites and stockholders' equity $ 1,763,925 $ 1,784,517
========================= ========================
Book value per share $ 7.57 $ 8.59
Book value per share excluding unrealized 7.14 8.36
investment gains and losses
Shares Outstanding at period end* 34,011 32,328
* Excludes shares in the Vesta Agents Stock Incentive Plan Trust