PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
February 27, 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 5. Other Events.
On February 27, 2003, the Registrant issued a press release announcing its results for the fourth 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 February 27, 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 February 27, 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
Manager – Investor Relations
(205) 970-7030
CLambert@vesta.com
VESTA REPORTS FOURTH QUARTER RESULTS
Written Premiums Grow by 30% Over Prior-Year Period;
Hopson B. Nance Named Chief Financial Officer
BIRMINGHAM, Ala. - February 27, 2003 - Vesta Insurance Group, Inc. (NYSE: VTA) today reported net operating earnings of $4.5 million, or $0.13 per share in the fourth quarter compared to a loss of $2.3 million, or $(0.07) per share for the corresponding period in 2001. Net income from continuing operations was $1.1 million, or $0.03 per share for the quarter ending December 31, 2002 compared to a net loss of $1.6 million, or $(0.05) per share in the fourth quarter of 2001. Net operating earnings is a non-GAAP measure which excludes certain items, such as realized gains and losses, litigation and arbitration awards and charges, gains on debt extinguishments, and severance charges. Net premiums written for the quarter were $110.3 million compared to $85.1 million in the fourth quarter of 2001, a 30% increase. (A reconciliation of operating earnings to net loss is included herein.)
For the full year, net operating earnings were $7.2 million, or $0.21 per share compared to $5.3 million, or $0.20 per share in 2001. For the full year, the Company reported a net loss from continuing operations of $9.7 million, or $(0.29) per share compared to a loss of $10.2 million or $(0.38) per share in 2001. Net premiums written for the full year were $552 million compared to $286 million in 2001, a 93% increase. (A reconciliation of operating earnings to net income is included herein.)
"We are very pleased with the growth and continuing improvement in our core operations," said Norman W. Gayle, III, President and CEO. "Just as important, we have eliminated a number of uncertainties and enter 2003 with improving trends of earnings growth."
Fourth Quarter Segment Results
American Founders posted net operating earnings of $1.4 million. The Company also wrote down $27 million of non-performing collateral loans held as an investment and recently engaged William Blair & Company to assist management in assessing capital raising alternatives for the life insurance operations. As one step to stabilize its capital for the life insurance operations following the write down, American Founders increased its quota share reinsurance and ended 2002 with $30.7 million in statutory capital.
vesta's standard property-casualty business reported net operating earnings of $1.3 million. Effective December 1, 2002, Vesta entered a 50% quota share reinsurance agreement for residential property business in Texas. During 2002, Vesta's subsidiary, Texas Select Lloyds, wrote approximately $184 million of gross written premiums. The Company's GAAP combined ratio for its residential property business and standard auto business was 96.8% and 99.6%, respectively. Overall, the standard property-casualty combined ratio was 97.7% for the fourth quarter compared to 109.9% for the same period in 2001. For the full year, the standard property-casualty combined ratio was 102.1% compared to 99.4% for 2001.
"For 2003, we expect increased standard lines profitability with an annualized targeted combined ratio of 98% in 2003 on the strength of our growing residential property business and improving auto business," said Gayle. "We are pleased with the placement of the quota share agreement with top-rated reinsurers further affirming our positive outlook for our Texas operations."
Vesta's non-standard automobile businesses produced another strong quarter. Net operating earnings from the agency segment were $1.2 million. The specialty underwriting segment, which includes our underwriting risk on non-standard automobile insurance, added $1.6 million in net operating earnings.
The Company also recorded an after-tax charge of $12 million in the quarter related to its discontinued operations. The charge included $6.2 million relating to the decision made in the fourth quarter to exit the health insurance lines, and $4.7 million for commercial and reinsurance assumed businesses, which were discontinued in 1999.
Hopson B. Nance, CPA, who has served as Interim Chief Financial Officer since October 2002, has been elected the permanent Chief Financial Officer and Treasurer. A graduate of Auburn University, Nance joined Vesta in 2000 as vice president and controller following seven years in the Assurance and Business Advisory Services practice at PricewaterhouseCoopers, LLP.
"Hopson's financial expertise and knowledge of the insurance industry make him an excellent choice to assume the CFO responsibilities," said Gayle. "We look forward to his continued contributions."
Vesta management will hold its quarterly conference call to discuss fourth quarter 2002 results on February 28, 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/ajwz374631450gf12.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. 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 specialty underwriting segment could increase beyond expected levels and policyholder benefits in our life insurance 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
4th Quarter 2002 Segment Comparison
(amounts in thousands)
Life Insurance Standard Property- Agency Specialty Corp & Other Eliminations Consolidated
Casualty Underwriting
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
----------------- ------------------- ------------------ ---------------- ----------------- ---------------- -------------------
Revenues:
Net premiums written $ 2,338 $ 2,625 $ 60,491 $ 76,984 -- -- $ 47,477 $ 5,460 -- $ 110,306 $ 85,069
(Increase) decrease in unearned premiums -- -- 28,433 (16,364) -- -- (4,425) (819) -- 24,008 (17,183)
----------------- ------------------- ------------------ ---------------- ---------------- -------------------
Net premiums earned 2,338 2,625 88,924 60,620 -- -- 43,052 4,641 -- 134,314 67,886
Net investment income 7,759 11,199 -- -- -- $ 16 -- -- $ 4,238 $ 4,383 $ (151) -- 11,846 15,598
Policy fees 622 1,045 1,369 1,262 3,736 -- -- -- -- -- 5,727 2,307
Agents fees and commissions -- -- -- -- $ 40,902 4,795 -- -- -- -- (18,183) -- 22,719 4,795
Other 581 614 58 132 -- -- 758 1,243 263 709 -- -- 1,660 2,698
----------------- ------------------- ------------------ ---------------- ----------------- ---------------- -------------------
Total revenues 11,300 15,483 90,351 62,014 40,902 4,811 47,546 5,884 4,501 5,092 (18,334) -- 176,266 93,284
Expenses:
Policyholder benefits 4,048 5,776 -- -- -- -- -- -- -- -- -- -- 4,048 5,776
Loss and LAE expenses incurred -- -- 55,457 44,228 -- -- 26,395 3,700 -- -- -- -- 81,852 47,928
Policy acquisition expenses 1,221 1,295 21,465 13,699 -- -- 12,954 1,127 -- -- (5,317) -- 30,323 16,121
Operating expenses 1,912 1,577 11,396 10,213 38,299 4,687 5,713 65 3,695 3,540 (12,866) -- 48,149 20,082
Interest on debt 1,548 1,889 -- -- 151 83 -- -- 1,952 2,394 (151) -- 3,500 4,366
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 84 964 -- -- 84 964
----------------- ------------------- ------------------ ---------------- ----------------- ---------------- -------------------
Total expenses 8,729 10,537 88,318 68,140 38,450 4,770 45,062 4,892 5,731 6,898 (18,334) -- 167,956 95,237
Income (loss) from continuing operations before income taxes,
deferrable capital securities, and minority interest 2,571 4,946 2,033 (6,126) 2,452 41 2,484 992 (1,230) (1,806) -- -- 8,310 (1,953)
Income tax expense (benefit) 900 1,732 712 (2,144) 858 14 869 347 (431) (630) -- -- 2,908 (681)
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 308 241 -- -- 308 241
Minority interest in subsidiary, net of tax 236 711 -- -- 355 37 -- -- -- -- -- -- 591 748
----------------- ------------------- ------------------ ---------------- ----------------- ---------------- -------------------
Net operating earnings (loss) from continuing operations $ 1,435 $ 2,503 $ 1,321 $ (3,982) $ 1,239 $ (10) $ 1,615 $ 645 $ (1,107)$ (1,417) -- -- $ 4,503 $ (2,261)
================= =================== ================== ================ ================= ================ ===================
Vesta Insurance Group, Inc
2002 Segment Comparison
(amounts in thousands)
Life Insurance Standard Property- Agency Specialty Corp & Other Eliminations Consolidated
Casualty Underwriting
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
----------------- -------------------- ----------------- ------------------------------------- ---------------- -------------------
Revenues:
Net premiums written $ 10,506 $ 9,769 $ 360,309 $ 263,962 -- -- $ 181,349 $ 11,789 -- $ 552,164$ 285,520
(Increase) in unearned premiums -- -- (34,335) (17,899) -- -- (19,872) (1,620) -- (54,207) (19,519)
----------------- -------------------- ----------------- ------------------ ---------------- ------------------- ----------------- -------------------- ----------------- ------------------ ---------------- -------------------
Net premiums earned 10,506 9,769 325,974 246,063 -- -- 161,477 10,169 -- 497,957 266,001
Net investment income 36,020 42,987 -- -- -- $ 325 -- -- $ 18,392 $ 20,099 $ (1,012) -- 53,400 63,411
Policy fees 3,536 3,971 5,306 3,547 -- -- 11,090 156 -- -- -- -- 19,932 7,674
Agents fees and commissions -- -- -- -- $ 150,584 5,892 -- -- -- -- (67,486) -- 83,098 5,892
Other 1,602 1,020 405 718 -- -- 5,363 4,237 907 1,828 -- -- 8,277 7,803
----------------- -------------------- ----------------- ------------------------------------- ---------------- -------------------
Total revenues 51,664 57,747 331,685 250,328 150,584 6,217 177,930 14,562 19,299 21,927 (68,498) -- 662,664 350,781
Expenses:
Policyholder benefits 23,283 24,092 -- -- -- -- -- -- -- -- -- -- 23,283 24,092
Loss and LAE expenses incurred -- -- 224,028 161,599 -- -- 100,278 7,997 -- -- -- -- 324,306 169,596
Policy acquisition expenses 2,720 1,937 73,478 54,795 -- -- 46,222 2,356 -- -- (21,443) -- 100,977 59,088
Operating expenses 9,721 9,350 41,211 32,356 137,805 9,087 20,830 276 19,921 13,466 (46,043) -- 183,445 64,535
Interest on debt 6,304 8,584 -- -- 1,012 83 -- -- 8,618 8,898 (1,012) -- 14,922 17,565
Goodwill and other intangible amortization -- -- -- -- -- -- -- -- 336 3,394 -- -- 336 3,394
----------------- -------------------- ----------------- ------------------------------------- ---------------- -------------------
Total expenses 42,028 43,963 338,717 248,750 138,817 9,170 167,330 10,629 28,875 25,758 (68,498) -- 647,269 338,270
Income (loss) from continuing operations before income taxes,
deferrable capital securities, and minority interest 9,636 13,784 (7,032) 1,578 11,767 (2,953) 10,600 3,933 (9,576) (3,831) -- -- 15,395 12,511
Income tax expense (benefit) 3,420 4,824 (2,461) 552 4,118 (1,035) 3,710 1,376 (3,352) (1,341) -- -- 5,435 4,376
Deferrable capital securities, net of tax -- -- -- -- -- -- -- -- 1,081 1,394 -- -- 1,081 1,394
Minority interest in subsidiary, net of tax 742 2,307 -- -- 894 (896) -- -- -- -- -- -- 1,636 1,411
----------------- -------------------- ----------------- ------------------------------------- ---------------- -------------------
Net operating earnings (loss) from continuing operations $ 5,474 $ 6,653 $ (4,571) $ 1,026 $ 6,755 $ (1,022) $ 6,890 $ 2,557 $ (7,305) $ (3,884) -- -- $ 7,243 $ 5,330
================= ==================== ================= ===================================== ================ ===================
Vesta Insurance Group, Inc
Fourth Quarter Results
(amounts in thousands, except share data)
3 Months Ended December 31, 12 Months Ended December 31,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Revenues:
Net premiums written $ 110,306 $ 85,069 $ 552,164 $ 285,520
(Increase) decrease in unearned premiums 24,008 (17,183) (54,207) (19,519)
-------------- -------------- -------------- --------------
Net premiums earned 134,314 67,886 497,957 266,001
Net investment income 11,846 15,598 53,400 63,411
Policy fees 5,727 2,307 19,932 7,674
Agents fees and commissions 22,719 4,795 83,098 5,892
Other 1,660 2,698 8,277 7,803
-------------- -------------- -------------- --------------
Total revenues 176,266 93,284 662,664 350,781
Expenses:
Policyholder benefits 4,048 5,776 23,283 24,092
Loss and LAE expenses incurred 81,852 47,928 324,306 169,596
Policy acquisition expenses 30,323 16,121 100,977 59,088
Operating expenses 48,149 20,082 183,445 64,535
Interest on debt 3,500 4,366 14,922 17,565
Goodwill and other intangible amortization 84 964 336 3,394
-------------- -------------- -------------- --------------
Total expenses 167,956 95,237 647,269 338,270
Income (loss) from continuing operations before income taxes,
deferrable capital securities, and minority interest 8,310 (1,953) 15,395 12,511
Income taxes 2,908 (681) 5,435 4,376
Deferrable capital securities, net of tax 308 241 1,081 1,394
Minority interest in subsidiary, net of tax 591 748 1,636 1,411
-------------- -------------- -------------- --------------
Net operating earnings (loss) from continuing operations 4,503 (2,261) 7,243 5,330
Litigation settlement and arbitration award (loss), net of tax 9,471 3,250 (5,869) (16,250)
Realized gains (losses), net of tax and minority interest (13,420) (2,569) (14,567) (148)
Severance payment (2,714) - (2,714) -
Gain on debt extinguishments, net of tax 3,301 - 6,160 910
-------------- -------------- -------------- --------------
Net income (loss) from continuing operations 1,141 (1,580) (9,747) (10,158)
Gain (loss) from health insurance discontinued operations, net of tax (6,254) (597) (6,417) 278
Gain (loss) from consulting discontinued operations, net of tax (1,081) 213 (1,180) 508
Loss from assumed reinsurance and commercial lines, net of tax (4,684) - (14,867) (19,958)
-------------- -------------- -------------- --------------
Net (loss) (10,878) (1,964) (32,211) (29,330)
Gain on redemption of preferred securities, net of tax 350 1,404 560 7,068
Preferred stock dividend - - - (163)
-------------- -------------- -------------- --------------
Income (loss) available to common shareholders $ (10,528) $ (560) $ (31,651) $ (22,425)
============== ============== ============== ==============
Weighted average shares outstanding for the period 34,190 31,985 33,793 26,652
Net operating earnings (loss) from continuing operations earnings per share $ 0.13 $ (0.07) $ 0.21 $ 0.20
Realized (losses) per share $ (0.39) $ (0.08) $ (0.43) $ (0.01)
Net income (loss) from continuing operations per share $ 0.03 $ (0.05) $ (0.29) $ (0.38)
Loss available to common shareholders per share $ (0.31) $ (0.02) $ (0.94) $ (0.84)
Vesta Insurance Group, Inc
Condensed Consolidated Balance Sheet
(amounts in thousands)
December 31, 2002 September 30, 2002
------------------------------- -------------------------------
Assets:
Invested assets $ 962,590 $ 1,102,037
Cash 146,464 32,745
Other assets 938,874 894,346
-------------------------------- ------------------------------
Total assets $ 2,047,928 $ 2,029,128
================================ ==============================
Liabilities:
Future policy benefits $ 683,481 $ 680,446
Losses and loss adjustment expenses 322,320 342,210
Unearned premiums 306,782 301,245
Debt 85,867 96,982
Other liabilities 391,176 340,549
-------------------------------- ------------------------------
Total liabilities 1,789,626 1,761,432
Deferrable capital securities 22,445 22,445
Stockholders' equity 235,857 245,251
-------------------------------- ------------------------------
Total liabilities and stockholders' equity $ 2,047,928 $ 2,029,128
================================ ==============================
Equity per share $ 6.61 $ 6.87
Equity per share excluding unrealized $ 6.19 $ 6.96
investment gains and losses
Shares outstanding at period end 35,678 35,708
Vesta Insurance Group, Inc
Reconciliation of Operating Earnings to Net Income
(amounts in thousands, except share data)
3 Months Ended December 31, 12 Months Ended December 31,
2002 2001 2002 2001
---------------- --------------- -------------- -----------------
Net operating earnings (loss) $ 4,503 $ (2,261) $ 7,243 $ 5,330
Special items:
Litigation settlement and arbitration award (loss), net of tax 9,471 3,250 (5,869) (16,250)
Realized (losses), net of tax and minority interest (13,420) (2,569) (14,567) (148)
Severance payment (2,714) - (2,714) -
Gain on debt extinguishments, net of tax 3,301 - 6,160 910
Net income (loss) from continuing operations $ 1,141 $ (1,580) $ (9,747) $ (10,158)
Gain (loss) from health insurance discontinued operations, net of tax (6,254) (597) (6,417) 278
Gain (loss) from consulting discontinued operations, net of tax (1,081) 213 (1,180) 508
Loss from assumed reinsurance and commercial lines, net of tax (4,684) - (14,867) (19,958)
---------------- --------------- -------------- -----------------
Net (loss) $ (10,878) $ (1,964) $ (32,211) $ (29,330)
Gain on redemption of preferred securities, net of tax 350 1,404 560 7,068
Preferred stock dividend - - - (163)
---------------- --------------- -------------- -----------------
Loss available to common shareholders $ (10,528) $ (560) $ (31,651) $ (22,425)
================ =============== ============== =================
Diluted earnings per share:
Net operating earnings (loss) $ 0.13 $ (0.07) $ 0.21 $ 0.20
Special items:
Litigation settlement and arbitration award (loss), net of tax $ 0.28 $ 0.10 $ (0.17) $ (0.61)
Realized (losses), net of tax and minority interest $ (0.39) $ (0.08) $ (0.43) $ (0.01)
Severance payment $ (0.08) $ - $ (0.08) $ -
Gain on debt extinguishments, net of tax $ 0.10 $ - $ 0.18 $ 0.03
---------------- --------------- -------------- -----------------
Net income (loss) from continuing operations $ 0.03 $ (0.05) $ (0.29) $ (0.38)
---------------- --------------- -------------- -----------------
Gain (loss) from health insurance discontinued operations, net of tax $ (0.18) $ (0.02) $ (0.19) $ 0.01
Gain (loss) from consulting discontinued operations, net of tax $ (0.03) $ 0.01 $ (0.04) $ 0.02
Loss from assumed reinsurance and commercial lines, net of tax $ (0.14) $ - $ (0.44) $ (0.75)
Gain on redemption of preferred securities, net of tax $ 0.01 $ 0.04 $ 0.02 $ 0.27
Preferred stock dividend $ - $ - $ - $ (0.01)
---------------- --------------- -------------- -----------------
Loss available to common shareholders $ (0.31) $ (0.02) $ (0.94) $ (0.84)
================ =============== ============== =================
Shares used in computing per share amounts:
Weighted average shares outstanding for the period 34,190 31,985 33,793 26,652
---------------- --------------- -------------- -----------------
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.