PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
November 5, 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 November 5, 2002, the Registrant issued a press release announcing its results for the third 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 November 5, 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 November 5, 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 THIRD QUARTER RESULTS
Operating Earnings Increase by $1.8 Million;
Written Premiums Grow by 87% Over Prior-Year Period
BIRMINGHAM, Ala. - November 5, 2002 - Vesta Insurance Group, Inc. (NYSE: VTA) today reported net operating earnings of $3.1 million, or $0.09 per diluted share for the quarter ending September 30, 2002 compared to net operating earnings of $1.3 million, or $0.04 per diluted share for the corresponding period in 2001. Net premiums written for the quarter were $149.9 million compared to $80.2 million in the third quarter of 2001, an 87% increase.
For the nine months ended September 30 2002, Vesta reported net operating earnings of $2.5 million, or $0.08 per diluted share, compared to net operating earnings of $8.8 million or $0.35 per diluted share for the first nine months of 2001.
Including non-operating items such as realized gains and losses on investments and gains from debt extinguishments, the Company reported net income from continuing operations of $4.4 million, or $0.13 per diluted share, in the third quarter of 2002 compared to a loss of $17.3 million, or $0.57 per diluted share, in the corresponding period in 2001. For the nine months ended September 30, Vesta reported net income from continuing operations of $4.2 million or $0.12 per diluted share compared to a loss of $7.4 million or $0.33 per diluted share in 2001. In the third quarter of 2002, the Company adopted SFAS 145, which allows Vesta to classify gains or losses from extinguishments of debt as ordinary income and include the gains or losses in continuing operations. Vesta recorded after-tax gains of $1.9 million, or $0.06 per share in the third quarter of 2002 and $2.8 million, or $0.09 per share for the nine months ended September 30, 2002 from the extinguishments of debt.
"We are pleased with the third quarter results and the positive trends in our businesses," said Norman W. Gayle, III, President and CEO. "We expect continued improvement in our standard-property casualty segment in the 4th quarter and believe that our continuing operations are on track to produce an annual 10% return on equity in 2003."
Segment Results
Vesta's non-standard automobile businesses produced strong earnings in the third quarter. Net operating earnings from the agency segment were $2.2 million, an increase of 21% compared to the previous quarter. The specialty underwriting segment, which includes the underwriting risk on non-standard automobile insurance, added $1.7 million in net operating income.
Vesta's life and health segment posted net operating earnings of $2.2 million in the quarter due to improved mortality levels and improvement in the health insurance results. The Company has been informed by A.M. Best that the financial strength ratings of American Founders Life Insurance Company and States General Life Insurance Company have been changed to B (Fair) and B-, respectively. Management expects the rating actions to cause minimal impact to American Founders financial results for the remainder of 2002 and 2003. This rating action does not affect Vesta's property-casualty ratings, which were affirmed at B+ (secure) in June 2002.
Vesta's standard property-casualty business reported a net operating loss of $1.1 million from net written premium of $97.2 million in the third quarter of 2002 compared to $70.0 million in the same period of 2001. The Company's GAAP combined ratio for its residential property business and standard auto business was 103.7% and 95.4%, respectively, for the third quarter for an overall 102.0% combined ratio for the segment.
"We are very pleased with the continued improvement in the standard auto business, which accounts for approximately 25% of the total revenues in the standard property-casualty segment," said Gayle. "In addition, the residential property business in Florida, Hawaii and Texas, which represents approximately 50% of the standard property-casualty segment, is maintaining its strong performance with a 94.6% combined ratio in the third quarter and a 93.6% combined ratio year to date. The remaining portfolio is predominantly a Midwest and Mid-Atlantic book of residential property business that ran a 124% combined ratio for the third quarter. We believe that the corrective re-underwriting measures taken previously on this portfolio -- including reducing new business, inspection programs, and rate increases -- will lessen this portfolio's impact on the overall results going forward."
Michael J. Gough, 63, a consultant with extensive insurance industry experience, has been elected to Vesta's Board of Directors effective November 5. Mr. Gough, a Fellow of the Institute of Chartered Accountants in the United Kingdom, spent 15 years with Alexander & Alexander, a major insurance holding company, prior to its acquisition by Aon Corporation. With Mr. Gough's election to the Board, the total number of Directors remains at eight with seven being non-executive Directors. Mr. Gough is replacing James E. Tait, who resigned as a Director to focus his energies full-time on Vesta's consulting subsidiary, Tait Advisory Services. Ehney A. Camp, III, a Director since 1993, has been elected to replace Mr. Tait as Chairman of the Board.
Additionally, Vesta announced that the Company's Board of Directors declared a quarterly cash dividend for the period ending September 30, 2002 of $0.025 per share on the Company's common stock at its meeting on November 5, 2002. The dividend is payable on December 3, 2002 to shareholders of record on November 18, 2002.
Vesta management will hold its quarterly conference call to discuss third quarter 2002 results on November 6, 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/ajwz368495189gf12.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
3rd Quarter 2002 Segment Comparison
(amounts in thousands)
Life and Health Standard Property- Specialty
Insurance Casualty Agency Undewriting Corp & Other Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
--------------- ------------------ ---------------- --------------- ---------------- --------------- -----------------
Revenues:
Net premiums written $ 7,537 $ 7,365 $ 97,191 $ 69,980 -- -- $ 45,185 $ 2,807 -- $ 149,91$ 80,152
(Increase) decrease in unearned premiums -- -- (8,497) (6,090) -- -- (3,200) (365) -- (11,697) (6,455)
--------------- ------------------ ---------------- ---------------- --------------- -----------------
Net premiums earned 7,537 7,365 88,694 63,890 -- -- 41,985 2,442 -- 138,216 73,697
Net investment income 9,827 10,348 -- -- -- $ 49 -- -- $ 4,857 $ 5,053 $ (287) -- 14,397 15,450
Policy fees 798 976 1,345 1,254 3,129 -- -- -- -- -- 5,272 2,230
Agents fees and commissions -- -- -- -- $ 26,745 299 -- -- -- -- (5,477) -- 21,268 299
Other 367 314 122 166 -- -- 1,369 1,346 1,132 1,058 -- -- 2,990 2,884
--------------- ------------------ ---------------- ---------------- --------------- --------------- -----------------
Total revenues 18,529 19,003 90,161 65,310 26,745 348 46,483 3,788 5,989 6,111 (5,764) -- 182,143 94,560
Expenses:
Policyholder benefits 8,082 8,436 -- -- -- -- -- -- -- -- -- -- 8,082 8,436
Loss and LAE expenses incurred -- -- 61,446 41,896 -- -- 26,078 2,000 -- -- -- -- 87,524 43,896
Policy acquisition expenses 1,482 2,034 19,881 14,519 -- -- 11,787 586 -- -- (5,477) -- 27,673 17,139
Operating expenses 3,470 3,248 10,551 7,738 22,922 1,573 6,064 54 6,208 4,962 -- -- 49,215 17,575
Interest on debt 1,592 2,067 -- -- 287 -- -- -- 1,984 1,987 (287) -- 3,576 4,054
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 84 935 -- -- 84 935
--------------- ------------------ ---------------- ---------------- --------------- --------------- -----------------
Total expenses 14,626 15,785 91,878 64,153 23,209 1,573 43,929 2,640 8,276 7,884 (5,764) -- 176,154 92,035
Income (loss) from continuing operations
before income taxes, deferrable capital
securities, and minority interest 3,903 3,218 (1,717) 1,157 3,536 (1,225) 2,554 1,148 (2,287) (1,773) -- -- 5,989 2,525
Income tax expense (benefit) 1,366 968 (601) 405 1,238 (429) 894 402 (800) (621) -- -- 2,097 725
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 322 387 -- -- 322 387
Minority interest in subsidiary, net of tax 355 526 -- -- 112 (382) -- -- -- -- -- -- 467 144
--------------- ------------------ ---------------- ---------------- --------------- --------------- -----------------
Net operating earnings (loss)* $ 2,182 $1,724 $ (1,116) $ 752 $ 2,186 $ (414) $ 1,660 $ 746 $(1,809)$(1,539) -- -- $ 3,103 $ 1,269
=============== ================== ================ ================ =============== =============== =================
Securities litigation settlement
charge, net of tax (19,500) (19,500)
Gain on debt extinguishments, net of tax 1,949 910 1,949 910
Realized gains (loss), net of tax and
minority interest (575) 136 (92) (67) $ (667) $ 69
--------------- ------------------ ---------------- ---------------- --------------- --------------- -----------------
Net income (loss) from continuing
opererations $1,607 $1,860 $ (1,116) $ 752 $ 2,186 $ (414) $ 1,660 $ 746 $ 48 $ (20,196) -- -- $4,385 $(17,252)
=============== ================== ================ ================ =============== =============== =================
*Excludes realized investment gains and losses and other non-operating items
Vesta Insurance Group, Inc
2002 YTD Segment Comparison
(amounts in thousands)
Life and Health Standard Property- Specialty
Insurance Casualty Agency Undewriting Corp& Other Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
--------------- ------------------ ---------------- --------------- ---------------- --------------- -----------------
Revenues:
Net premiums written $23,173 $22,312 $299,818 $186,978 -- -- $133,872 $6,329 -- $456,863 $215,619
(Increase) decrease in unearned premiums -- -- (62,768) (1,535) -- -- (15,447) (801) -- (78,215) (2,336)
---------------- ----------------- ---------------- ---------------- -------------- -------------------
Net premiums earned 23,173 22,312 237,050 185,443 -- -- 118,425 5,528 -- 378,648 213,283
Net investment income 28,584 32,138 -- -- -- $ 309 -- -- $14,154 $15,716 $(861) -- 41,877 48,163
Policy fees 2,914 2,926 3,937 2,285 7,344 -- -- -- -- -- 14,195 5,211
Agents fees and commissions -- -- -- -- $76,505 1,097 -- -- -- -- (16,126) -- 60,379 1,097
Other 1,024 549 347 586 -- -- 4,605 3,150 4,187 2,543 -- -- 10,163 6,828
---------------- ----------------- ---------------- ----------------- --------------- -------------- ----------------------
Total revenues 55,695 57,925 241,334 188,314 76,505 1,406 130,374 8,678 18,341 18,259 (16,987) -- 505,262 274,582
Expenses:
Policyholder benefits 29,831 25,431 -- -- -- -- -- -- -- -- -- -- 29,831 25,431
Loss and LAE expenses incurred -- -- 168,571 117,371 -- -- 73,883 4,297 -- -- -- -- 242,454 121,668
Policy acquisition expenses 3,968 6,058 52,013 41,096 -- -- 33,258 1,229 -- -- (16,126) -- 73,113 48,383
Operating expenses 10,307 9,815 29,815 22,143 66,329 4,400 15,117 211 19,921 10,895 -- -- 141,489 47,464
Interest on debt 4,756 6,695 -- -- 861 -- -- -- 6,666 6,504 (861) -- 11,422 13,199
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 252 2,430 -- -- 252 2,430
---------------- ----------------- ---------------- ---------------- ----------------- -------------- --------------------
Total expenses 48,862 47,999 250,399 180,610 67,190 4,400 122,258 5,737 26,839 19,829 (16,987) -- 498,561 258,575
Income (loss) from continuing operations before
income taxes, deferrable capital securities,
and minority interest 6,833 9,926 (9,065) 7,704 9,315 (2,994) 8,116 2,941 (8,498) (1,570) -- -- 6,701 16,007
Income tax expense (benefit) 2,392 3,018 (3,173) 2,982 3,260 (1,048) 2,841 1,029 (2,974) (550) -- -- 2,346 5,431
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 773 1,153 -- -- 773 1,153
Minority interest in subsidiary, net of tax 506 1,596 -- -- 539 (934) -- -- -- -- -- -- 1,045 662
---------------- ----------------- ---------------- ---------------- ----------------- -------------- --------------------
Net operating earnings (loss)* $3,935 $5,312 $(5,892) $4,722 $5,516 $(1,012) $5,275 $1,912 $(6,297)$(2,173) -- -- $2,537 $8,761
================ ================= ================ ================ ================= ============== ====================
Securities litigation settlement charge, net of tax (19,500) (19,500)
Gain on debt extinguishments, net of tax 2,859 910 2,859 910
Realized gains (loss), net of tax
and minority interest 686 649 (1,892) 1,772 $(1,206) $2,421
---------------- ----------------- ---------------- ---------------- --------------- ------------- --------------------
Net income (loss) from
continuing operations $4,621 $5,961 $(5,892) $4,722 $5,516 $(1,012) $5,275 $1,912 $(5,330)$(18,991) -- -- $4,190 $(7,408)
=============== ================== ================ ================ ================= ============== ====================
*Excludes realized investment gains and losses and other non-operating items
Vesta Insurance Group, Inc
Third Quarter Results
(amounts in thousands, except share data)
3 Months Ended September 30, 9 Months Ended September 30,
2002 2001 2002 2001
------------ ------------- ------------ ------------
Revenues:
Net premiums written $ 149,913 $ 80,152 $ 456,863 $ 215,619
(Increase) decrease in unearned premiums (11,697) (6,455) (78,215) (2,336)
------------ ------------- ------------ ------------
Net premiums earned 138,216 73,697 378,648 213,283
Net investment income 14,397 15,450 41,877 48,163
Policy fees 5,272 2,230 14,195 5,211
Agents fees and commissions 21,268 299 60,379 1,097
Other 2,990 2,884 10,163 6,828
------------ ------------- ------------ ------------
Total revenues 182,143 94,560 505,262 274,582
Expenses:
Policyholder benefits 8,082 8,436 29,831 25,431
Loss and LAE expenses incurred 87,524 43,896 242,454 121,668
Policy acquisition expenses 27,673 17,139 73,113 48,383
Operating expenses 49,215 17,575 141,489 47,464
Interest on debt 3,576 4,054 11,422 13,199
Goodwill and other intangible amortization 84 935 252 2,430
------------ ------------- ------------ ------------
Total expenses 176,154 92,035 498,561 258,575
Income from continuing operations before income taxes,
deferrable capital securities, and minority interest 5,989 2,525 6,701 16,007
Income taxes 2,097 725 2,346 5,431
Deferrable capital securities, net of tax 322 387 773 1,153
Minority interest in subsidiary, net of tax 467 144 1,045 662
------------ ------------- ------------ ------------
Net operating earnings 3,103 1,269 2,537 8,761
Securities litigation settlement charge, net of tax - (19,500) - (19,500)
Realized gains (losses), net of tax and minority interest (667) 69 (1,206) 2,421
Gain on debt extinguishments, net of tax 1,949 910 2,859 910
Net income (loss) from continuing operations 4,385 (17,252) 4,190 (7,408)
Loss from discontinued operations, net of tax (655) (19,800) (10,183) (19,958)
Net income (loss) 3,730 (37,052) (5,993) (27,366)
Gain on redemption of preferred securities, net of tax - 5,099 210 5,099
Preferred stock dividend - - - (163)
------------ ------------- ------------ ------------
Income (loss) available to common shareholders $ 3,730 $ (31,953) $ (5,783) $ (22,430)
============ ============= ============ ============
Weighted average diluted shares outstanding for the period 34,320 31,837 33,659 24,848
Net operating earnings from continuing operations
earnings per share $ 0.09 $ 0.04 $ 0.08 $ 0.35
Realized gains (losses) per share $(0.02) $ 0.00 $(0.04) $ 0.10
Net income (loss) from continuing operations per share $ 0.13 $(0.57) $ 0.12 $(0.33)
Income (loss) available to common shareholders per share $ 0.11 $(1.00) $(0.17) $(0.90)
Vesta Insurance Group, Inc
Condensed Consolidated Balance Sheet
(amounts in thousands)
September 30, 2002 June 30, 2002
--------------------------- -------------------------
Assets:
Invested assets $ 1,103,287 $ 1,088,052
Cash 32,745 36,566
Other assets 908,820 934,576
--------------------------- --------------------------
Total assets $ 2,044,852 $ 2,059,194
=========================== ==========================
Liabilities:
Future policy benefits $ 680,446 $ 681,222
Losses and loss adjustment expenses 342,210 320,202
Unearned premiums 301,245 293,915
Debt 96,982 103,768
Other liabilities 340,933 385,464
--------------------------- --------------------------
Total liabilities 1,761,816 1,784,571
Deferrable capital securities 22,445 22,445
Stockholders' equity 260,591 252,178
--------------------------- --------------------------
Total liabilities and stockholders' equity $ 2,044,852 $ 2,059,194
=========================== ==========================
Equity per share $ 7.30 $ 7.06
Equity per share excluding unrealized 6.96 6.86
investment gains and losses
Shares outstanding at period end* 35,708 35,696
* Excludes shares in the Vesta Agents Stock Incentive Plan Trust