UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
March 15, 2004
(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 and 12. Results of Operations and Financial Condition.
On March 15, 2004, the Registrant reported its earnings for the quarter and
year-ended December 31, 2003. Attached to this Current Report on Form 8-K is a
copy of the Company's press release dated March 15, 2004. This release is being
furnished to the Securities and Exchange Commission under Item 12.
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 March 15, 2004.
VESTA INSURANCE GROUP, INC.
By: /s/ Donald W. Thornton
------------------------------
Its: Senior Vice President --
General Counsel and Secretary
Vesta Reports Fourth Quarter Results
Incurs Primarily Non-Cash GAAP Charge for Arbitrations and Deferred Tax Asset;
Enters Definitive Agreement to Sell its Life Insurance Business for
$63.5 Million
BIRMINGHAM, Ala., March 15 /PRNewswire-FirstCall/ -- Vesta Insurance
Group, Inc. (NYSE: VTA) today reported results for its fourth quarter and full
year ended December 31, 2003 that included a $118.8 million charge - $28.9
million cash and $89.9 million non-cash -- to write-off recoverables
associated with a reinsurance arbitration ruling, and to establish a full
valuation allowance for its entire net deferred tax asset in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The Company also announced that its Board of Directors has
deferred consideration of cash dividends on its common stock until the
Company's upcoming capital initiatives have been completed.
In addition, Vesta announced that it has entered into a definitive
agreement to sell American Founders Financial Corporation for approximately
$63.5 million dollars. The transaction is subject to regulatory approval and
is expected to close in the second quarter. The closing of the sale of
American Founders will result in an estimated GAAP gain of $5 million and a
statutory gain of approximately $19.5 million.
On a statutory basis, the impact of writing down the reinsurance
recoverables associated with the arbitration rulings is approximately
$55.8 million. Including the impact of the potential sale of American
Founders, statutory capital is estimated to be approximately $165 million at
March 31, 2004, which is approximately 7% below the statutory capital level as
of September 30, 2003.
"While we are obviously disappointed with the write down of these
recoverables, the negative exposure to these matters is now behind us and we
can focus on the growing profitability of our continuing operations which
produced excellent results in the fourth quarter and the second half of 2003
and in the first two months of 2004," said Norman W. Gayle, III, President and
CEO.
"The Board of Directors determined that deferring the payment of a cash
dividend on our common stock is prudent, and we expect our current annual
dividend rate of $0.10 per share per year to resume after our capital
initiatives are completed.
"Our insurance company strength is sound and we believe our financial
position will improve dramatically with the sale of American Founders and the
planned initial public offering of our non-standard auto insurance subsidiary,
Affirmative Insurance Holdings, Inc. We expect to file a registration
statement on Form S-1 in the next few days," said Gayle.
As disclosed on March 2, 2004, an arbitration panel ruled against Vesta in
a 6-year reinsurance dispute with NRMA Insurance, Ltd. concerning the 1997 20%
whole account quota share contract. As a result of the ruling, Vesta incurred
a previously announced $33.5 million pre-tax charge to fourth quarter earnings
associated with the NRMA ruling. Vesta considered the NRMA ruling in the
evaluation of the recoverability of other amounts due from the other
participants on the same reinsurance treaty as well as another, unrelated
treaty. Although there are distinct facts and circumstances underlying and
affecting our disputes with those other participants, for financial reporting
purposes, the Company concluded that those amounts may not ultimately be
collected. Accordingly, we recorded an additional pre-tax charge of
$32.4 million in the fourth quarter of 2003, $30.1 million of which was
related to other balances recoverable from other participants in the 20% whole
account quota share contract. The total after-tax charge related to the
reinsurance recoverables write-down in the fourth quarter is $43.4 million.
The recording of this charge does not impact Vesta's intention to actively
arbitrate with the other participants on the 20% whole account quota share
contract. Additionally, the Company has filed a motion to vacate the NRMA
arbitration award in U.S. District Court on the grounds of the evident
partiality of the umpire.
In connection with the filing of the annual report on Form 10-K for 2003,
Vesta updated its SFAS No. 109 income tax analysis, to evaluate the
recoverability of its deferred tax asset. In making this evaluation, the
Company considered all available positive and negative evidence, including our
past results, the existence of significant cumulative losses in recent years,
and our estimate of future taxable income. While we anticipate being
profitable in future periods, the combination of significant cumulative losses
in recent years and uncertainty with respect to our ability to achieve
sufficient taxable income to fully realize our year-end deferred tax asset
balances within a reasonable timeframe, warrants the recording of a valuation
allowance under SFAS No. 109. Accordingly, we incurred a $75.4 million dollar
charge to earnings to reflect this valuation allowance.
Also, based on the charges that the Company recorded in the fourth
quarter, Vesta updated its goodwill evaluation, in connection with SFAS No.
142, "Goodwill and Other Intangible Assets." Based on this updated analysis,
the Company concluded there was no indication of impairment as of December 31,
2003.
In addition to its regularly scheduled conference call for March 16, Vesta
management will hold a conference call today, Monday, March 15, at 10:30 am
EST to discuss this press release. The conference call will be simultaneously
webcast live online through Vesta's corporate website, www.vesta.com and
http://www.firstcallevents.com/service/ajwz402091381gf12.html. To access this
call via telephone, call 1-877-847-5345 and enter passcode 664731.
Financial Results
For the fourth quarter of 2003, the Company reported net operating
earnings from continuing operations of $7.3 million, or $0.21 per share in the
fourth quarter of 2003 compared to net operating earnings from continuing
operations of $4.3 million, or $0.13 per share for the corresponding period in
2002. Net operating earnings from continuing operations is a non-GAAP measure
which excludes certain items, such as realized gains and losses, severance
payments, losses and awards from arbitration and litigation, deferred tax
asset charge as well as gains on debt extinguishments. Net earned premiums for
the quarter were $108.8 million compared to $132.9 million in the fourth
quarter of 2002, which is reflective of Vesta's increased use of reinsurance.
The net loss from continuing operations was $109.7 million, or $(3.13) per
share for the quarter ending December 31, 2003 compared to net income from
continuing operations of $1.0 million, or $0.03 per share in the fourth
quarter of 2002. (A reconciliation of net operating earnings from continuing
operations to net income from continuing operations is included herein.)
For the twelve months ended December 31, 2003, net operating earnings from
continuing operations were $10.4 million, or $0.30 per share compared to net
operating earnings from continuing operations of $6.8 million, or $0.20 per
share in 2002. For the year, the Company reported a net loss from continuing
operations of $102.9 million, or $(2.95) per share compared to a net loss from
continuing operations of $10.2 million or $(0.30) per share in 2002. (A
reconciliation of the net operating earnings from continuing operations to net
income from continuing operations is included herein.)
Operational Results
Vesta's standard property-casualty segment, which includes the residential
property and standard auto businesses, posted net income from continuing
operations of $4.3 million in the fourth quarter of 2003. Below are the
standard property-casualty segment GAAP operational ratios for the three and
twelve months ended December 31, 2003 and 2002.
3 Months Ended 12 Months Ended
December 31, December 31,
2003 2002 2003 2002
Residential property combined ratio 88.6% 97.1% 102.4% 101.7%
Standard auto combined ratio 94.8% 99.6% 96.7% 104.2%
Standard property-casualty combined
ratio 90.2% 98.1% 101.2% 102.5%
Total catastrophe losses incurred (in
millions) $4.6 $2.8 $32.4 $13.4
Impact of catastrophes on standard
property-casualty combined ratio 7.0% 3.2% 10.4% 4.1%
"Profitability in the standard property-casualty segment continues to
improve," said Gayle. "Our decline in revenues is by design as we entered
into a 50% quota share reinsurance agreement effective September 30, 2003 on
our property business in our continuing states," said Gayle.
The Company's non-standard auto underwriting business generated a GAAP
combined ratio of 97.9% in the fourth quarter and 96.6% for 2003 compared to a
96.3% and a 97.0% combined ratio for the respective corresponding periods in
2002. The non-standard underwriting segment recognized approximately a
$1.0 million in contingent commission expense in the fourth quarter due to
consistently low loss ratio results. The non-standard agency operations
produced a 17.0% pre-tax margin in the quarter, and a 12.7% margin for the
full year 2003. The agency segment was positively impacted by approximately
$3.0 million of contingent commissions that were recognized in the fourth
quarter.
Vesta incurred a net loss of $4.4 million for the full year for its
discontinued health insurance and consulting businesses. In addition, the
Company incurred an after-tax loss of $11.5 million to its discontinued
assumed reinsurance and commercial lines, primarily due to a previously
announced $6.1 million net loss in the second quarter from an arbitration with
CIGNA Property and Casualty Insurance Company.
Other Information
In December 2003, Vesta completed a debt for equity swap and issued
approximately 402,000 shares of common stock in exchange for $2.2 million face
value of the Company's 8.525%, Deferrable Capital Securities due 2027.
In addition, Vesta announced that David W. Lacefield has been elected to
Senior Vice President of Vesta Insurance Group, in charge of the company's
standard property-casualty operations. Lacefield joined Vesta in 2001 as
president of TexasSelect. He began his insurance career in 1977 as a pricing
analyst at USAA and is heavily experienced in product pricing and design, loss
reserving, strategic planning, financial analysis, claims and insurance
operations. Lacefield is a member of the Casualty Actuarial Society and the
American Academy of Actuaries.
Vesta also announced that Timothy A. Bienek, CFA, has joined Affirmative
Insurance Holdings, Vesta's non-standard automobile agency and underwriting
subsidiary, as Chief Financial Officer. Previously, Bienek was President,
Chief Operating Officer and a Director of Hallmark Financial Services, a
publicly traded insurance holding company. Bienek is a 20-year veteran of the
property-casualty insurance industry having served in executive positions for
Benfield Blanch, Allstate Insurance Company and TIG Holdings.
The conference call on Tuesday, March 16, at 10:00 am EST will also be
simultaneously webcast live online through Vesta's corporate website,
www.vesta.com and
http://www.firstcallevents.com/service/ajwz400350274gf12.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 anticipated transactions, dividend payments and continued 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 these forward-
looking statements are that the planned sale of American Founders Financial
Corporation does not receive regulatory approval, that the planned public
offering of securities of Affirmative Insurance Holdings, Inc. does not price
and close on the terms and schedule that we expect, we may experience
catastrophic losses in excess of what we expect; we may experience frequency
and severity of non-catastrophic losses in excess of what we expect; we may
experience unfavorable developments in various litigation and in arbitrations
with reinsurers which could cause us to adjust our estimates of reinsurance
recoverables; or we may experience deterioration in premium volume in our
standard property and casualty segment as a result of rating actions taken by
A.M. Best. 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 2003 Segment Comparison
(amounts in thousands)
Standard Property- Non-Standard
Life Insurance Casualty Agency
2003 2002 2003 2002 2003 2002
Revenues:
Net premiums written $2,030 $2,338 $61,532 $59,091 -- --
(Increase) decrease
in unearned premiums -- -- 1,660 28,433 -- --
Net premiums earned 2,030 2,338 63,192 87,524 -- --
Net investment
income 6,862 7,759 -- -- -- --
Policy fees 605 622 2,974 1,369
Agents fees and
commissions -- -- -- -- $38,089 $40,902
Other 625 581 139 58 -- --
Total revenues 10,122 11,300 66,305 88,951 38,089 40,902
Expenses:
Policyholder
benefits 5,526 4,048 -- -- -- --
Loss and LAE
expenses incurred -- -- 39,386 54,902 -- --
Policy acquisition
expenses 325 1,221 9,054 21,158 -- --
Operating expenses 2,110 1,912 11,215 11,112 31,402 38,299
Interest on debt 1,357 1,548 -- -- 206 151
Deferrable capital
security
distributions -- -- -- -- -- --
Total expenses 9,318 8,729 59,655 87,172 31,608 38,450
Income (loss) from
continuing operations
before income taxes,
deferrable capital
securities, and
minority interest 804 2,571 6,650 1,779 6,481 2,452
Income tax expense
(benefit) 281 900 2,328 623 2,268 858
Deferrable capital
security distributions,
net of tax -- -- -- -- -- --
Minority interest in
subsidiary, net of tax -- 236 -- -- 112 355
Net operating
earnings (loss)
from continuing
operations $523 $1,435 $4,322 $1,156 $4,101 $1,239
Realized gains(loss),
net of tax and
minority interest 847 (15,629)
Litigation settlement
and arbitration award,
net of tax
Severance payment
Deferred tax asset charge
Gain on debt extinguishments,
net of tax
Net income (loss)
from continuing
operations $1,370 $(14,194) $4,322 $1,156 $4,101 $1,239
Non-Standard
Underwriting Corp & Other Eliminations
2003 2002 2003 2002 2003 2002
Revenues:
Net premiums
written $40,114 $47,477
(Increase) decrease
in unearned
premiums 3,488 (4,425)
Net premiums earned 43,602 43,052
Net investment income -- -- $2,296 $4,238 -- $(151)
Policy fees 5,657 3,736 -- -- -- --
Agents fees and
commissions -- -- -- -- $(24,596)(18,183)
Other 538 758 306 263 -- --
Total revenues 49,797 47,546 2,602 4,501 (24,596) (18,334)
Expenses:
Policyholder
benefits -- -- -- -- -- --
Loss and LAE
expenses incurred 29,501 26,395 -- -- -- --
Policy acquisition
expenses 13,889 12,954 -- -- (9,265) (5,317)
Operating expenses 4,816 5,713 4,704 3,779 (15,331) (12,866)
Interest on debt -- -- 1,682 1,952 -- (151)
Deferrable capital
security
distributions -- -- 392 -- -- --
Total expenses 48,206 45,062 6,778 5,731 (24,596) (18,334)
Income (loss) from
continuing operations
before income taxes,
deferrable capital
securities, and
minority interest 1,591 2,484 (4,176) (1,230) -- --
Income tax expense
(benefit) 557 869 (1,462) (431) -- --
Deferrable capital
security distributions,
net of tax -- -- -- 308 -- --
Minority interest in
subsidiary, net of tax -- -- -- -- -- --
Net operating earnings
(loss) from continuing
operations $1,034 $1,615 $(2,714) $(1,107) -- --
Realized gains (loss),
net of tax and
minority interest 578 2,209
Litigation settlement
and arbitration award,
net of tax (43,365) 9,471
Severance payment (2,714)
Deferred tax asset
charge (75,399)
Gain on debt
extinguishments,
net of tax 393 3,301
Net income (loss)
from continuing
operations $1,034 $1,615 $(120,507) $11,160 -- --
Consolidated
2003 2002
Revenues:
Net premiums written $103,676 $108,906
(Increase) decrease in unearned
premiums 5,148 24,008
Net premiums earned 108,824 132,914
Net investment income 9,158 11,846
Policy fees 9,236 5,727
Agents fees and commissions 13,493 22,719
Other 1,608 1,660
Total revenues 142,319 174,866
Expenses:
Policyholder benefits 5,526 4,048
Loss and LAE expenses incurred 68,887 81,297
Policy acquisition expenses 14,003 30,016
Operating expenses 38,916 47,949
Interest on debt 3,245 3,500
Deferrable capital security distributions 392 --
Total expenses 130,969 166,810
Income (loss) from continuing
operations before income taxes,
deferrable capital securities,
and minority interest 11,350 8,056
Income tax expense (benefit) 3,972 2,819
Deferrable capital security
distributions, net of tax -- 308
Minority interest in subsidiary, net
of tax 112 591
Net operating earnings (loss)
from continuing operations $7,266 $4,338
Realized gains (loss), net of
tax and minority interest 1,425 (13,420)
Litigation settlement and arbitration award,
net of tax (43,365) 9,471
Severance payment - (2,714)
Deferred tax asset charge (75,399) -
Gain on debt extinguishments, net of tax 393 3,301
Net income (loss) from
continuing operations $(109,680) $976
Vesta Insurance Group, Inc
2003 Year-to-Date Segment Comparison
(amounts in thousands)
Standard Property-
Life Insurance Casualty
2003 2002 2003 2002
Revenues:
Net premiums written $8,806 $10,506 $260,378 $354,618
(Increase) decrease in unearned
premiums -- -- 40,483 (34,351)
Net premiums earned 8,806 10,506 300,861 320,267
Net investment income 28,330 36,020 -- --
Policy fees 2,295 3,536 11,448 5,201
Agents fees and commissions -- -- -- --
Other 2,830 1,602 750 509
Total revenues 42,261 51,664 313,059 325,977
Expenses:
Policyholder benefits 21,080 23,283 -- --
Loss and LAE expenses incurred -- -- 207,800 221,549
Policy acquisition expenses 1,021 2,720 63,637 72,208
Operating expenses 9,517 9,757 44,480 39,933
Interest on debt 5,631 6,304 -- --
Deferrable capital security
distributions -- -- -- --
Total expenses 37,249 42,064 315,917 333,690
Income (loss) from continuing
operations before income taxes,
deferrable capital securities,
and minority interest 5,012 9,600 (2,858) (7,713)
Income tax expense (benefit) 1,754 3,360 (1,000) (2,700)
Deferrable capital security
distributions, net of tax -- -- -- --
Minority interest in subsidiary,
net of tax -- 742 -- --
Net operating earnings (loss)
from continuing operations $3,258 $5,498 $(1,858) $(5,013)
Realized gains (loss), net of
tax 1,560 (14,355)
Litigation settlement and
arbitration award, net of tax
Severance payment
Deferred tax asset charge
Gain on debt extinguishments,
net of tax
Net income (loss) from
continuing operations $4,818 $(8,857) $(1,858) $(5,013)
Non-Standard
Non-Standard Agency Underwriting
2003 2002 2003 2002
Revenues:
Net premiums written -- -- $179,584 $181,349
(Increase) decrease in unearned
premiums -- -- (12,173) (19,872)
Net premiums earned -- -- 167,411 161,477
Net investment income -- -- -- --
Policy fees 22,036 11,090
Agents fees and commissions $145,919 $131,224 -- --
Other -- -- 2,890 5,363
Total revenues 145,919 131,224 192,337 177,930
Expenses:
Policyholder benefits -- -- -- --
Loss and LAE expenses incurred -- -- 114,426 100,278
Policy acquisition expenses -- -- 49,962 50,109
Operating expenses 126,593 118,445 18,706 16,943
Interest on debt 767 1,012 -- --
Deferrable capital security
distributions -- -- -- --
Total expenses 127,360 119,457 183,094 167,330
Income (loss) from continuing
operations before income taxes,
deferrable capital securities,
and minority interest 18,559 11,767 9,243 10,600
Income tax expense (benefit) 6,496 4,118 3,235 3,710
Deferrable capital security
distributions, net of tax -- -- -- --
Minority interest in subsidiary, net
of tax 605 894 -- --
Net operating earnings (loss)
from continuing operations $11,458 $6,755 $6,008 $6,890
Realized gains (loss), net of tax
Litigation settlement and
arbitration award, net of tax
Severance payment
Deferred tax asset charge
Gain on debt extinguishments,net
of tax
Net income (loss) from
continuing operations $11,458 $6,755 $6,008 $6,890
Corp & Other Eliminations
2003 2002 2003 2002
Revenues:
Net premiums written
(Increase) decrease in unearned
premiums
Net premiums earned
Net investment income $12,361 $18,392 -- $(1,012)
Policy fees -- -- -- --
Agents fees and commissions -- -- $(96,809) (76,078)
Other 841 907 -- --
Total revenues 13,202 19,299 (96,809) (77,090)
Expenses:
Policyholder benefits -- -- -- --
Loss and LAE expenses incurred -- -- -- --
Policy acquisition expenses -- -- (28,821) (34,100)
Operating expenses 17,920 20,257 (67,988) (41,978)
Interest on debt 6,441 8,618 -- (1,012)
Deferrable capital security
distributions 871 -- -- --
Total expenses 25,232 28,875 (96,809) (77,090)
Income (loss) from continuing
operations before income taxes,
deferrable capital securities,
and minority interest (12,030) (9,576) -- --
Income tax expense (benefit) (4,210) (3,352) -- --
Deferrable capital security
distributions, net of tax 622 1,081 -- --
Minority interest in subsidiary, net
of tax -- -- -- --
Net operating earnings (loss)
from continuing operations $(8,442) $(7,305) -- --
Realized gains (loss), net of
tax 3,494 (266)
Litigation settlement and
arbitration award, net of tax (43,365) (5,869)
Severance payment (2,714)
Deferred tax asset charge (75,399)
Gain on debt extinguishments,
net of tax 393 6,160
Net income (loss) from
continuing operations $(123,319) $(9,994) -- --
Consolidated
2003 2002
Revenues:
Net premiums written $448,768 $546,473
(Increase) decrease in unearned
premiums 28,310 (54,223)
Net premiums earned 477,078 492,250
Net investment income 40,691 53,400
Policy fees 35,779 19,827
Agents fees and commissions 49,110 55,146
Other 7,311 8,381
Total revenues 609,969 629,004
Expenses:
Policyholder benefits 21,080 23,283
Loss and LAE expenses incurred 322,226 321,827
Policy acquisition expenses 85,799 90,937
Operating expenses 149,228 163,357
Interest on debt 12,839 14,922
Deferrable capital security
distributions 871 --
Total expenses 592,043 614,326
Income (loss) from continuing
operations before income taxes,
deferrable capital securities, and
minority interest 17,926 14,678
Income tax expense (benefit) 6,275 5,136
Deferrable capital security
distributions, net of tax 622 1,081
Minority interest in subsidiary, net
of tax 605 1,636
Net operating earnings (loss)
from continuing operations $10,424 $6,825
Realized gains (loss), net of tax 5,054 (14,621)
Litigation settlement and arbitration award,
net of tax (43,365) (5,869)
Severance payment - (2,714)
Deferred tax asset charge (75,399)
Gain on debt extinguishments, net of tax 393 6,160
Net income (loss) from
continuing operations $(102,893) $(10,219)
Vesta Insurance Group, Inc
Fourth Quarter and Year-to-Date Results
(amounts in thousands, except share data)
3 Months Ended 12 Months Ended
December 31, December 31,
2003 2002 2003 2002
Revenues:
Net premiums written $103,676 $108,906 $448,768 $546,473
(Increase) decrease in
unearned premiums 5,148 24,008 28,310 (54,223)
Net premiums earned 108,824 132,914 477,078 492,250
Net investment income 9,158 11,846 40,691 53,400
Policy fees 9,236 5,727 35,779 19,827
Agents fees and commissions 13,493 22,719 49,110 55,146
Other 1,608 1,660 7,311 8,381
Total revenues 142,319 174,866 609,969 629,004
Expenses:
Policyholder benefits 5,526 4,048 21,080 23,283
Loss and LAE expenses incurred 68,887 81,297 322,226 321,827
Policy acquisition expenses 14,003 30,016 85,799 90,937
Operating expenses 38,916 47,949 149,228 163,357
Interest on debt 3,245 3,500 12,839 14,922
Deferrable capital securities
distributions 392 - 871 -
Total expenses 130,969 166,810 592,043 614,326
Income (loss) from continuing
operations before income taxes,
deferrable capital securities,
and minority interest 11,350 8,056 17,926 14,678
Income taxes 3,972 2,819 6,275 5,136
Deferrable capital securities
distributions, net of tax - 308 622 1,081
Minority interest in subsidiary,
net of tax 112 591 605 1,636
Net operating earnings
(loss) from continuing
operations 7,266 4,338 10,424 6,825
Litigation settlement and
arbitration award (loss), net
of tax (43,365) 9,471 (43,365) (5,869)
Realized gains (losses), net of
tax and minority interest 1,425 (13,420) 5,054 (14,621)
Severance payment - (2,714) - (2,714)
Deferred tax asset charge (75,399) - (75,399) -
Gain on debt extinguishments,
net of tax 393 3,301 393 6,160
Net income (loss) from
continuing operations (109,680) 976 (102,893) (10,219)
Gain (loss) from health insurance
discontinued operations, net of
tax (1,745) (6,254) (4,075) (6,411)
Gain (loss) from consulting
discontinued operations, net of
tax 63 (1,081) (361) (1,180)
Loss from discontinued property-
casualty operations, net of tax (3,871) (4,519) (11,489) (14,401)
Net income (loss) before
cumulative effect of
change in accounting
principle (115,233) (10,878) (118,818) (32,211)
Cumulative effect of change in
accounting principle (1,167) - (1,167) -
Net income (loss) (116,400) (10,878) (119,985) (32,211)
Gain on redemption of preferred
securities, net of tax - 350 - 560
Income (loss) available to
common shareholders $(116,400) $(10,528) $(119,985) $(31,651)
Weighted average shares
outstanding for the period 35,070 34,190 34,917 33,793
Net operating earnings (loss)
from continuing operations
earnings per share $0.21 $0.13 $0.30 $0.20
Realized gains (losses) per
share $0.04 $(0.39) $0.14 $(0.43)
Net income (loss) from
continuing operations per
share $(3.13) $0.03 $(2.95) $(0.30)
Income (loss) available to
common shareholders per share $(3.32) $(0.31) $(3.44) $(0.94)
Vesta Insurance Group, Inc
Condensed Consolidated Balance Sheet
(amounts in thousands, except per share amounts)
December 31, 2003 December 31, 2002
Assets:
Invested assets $986,072 $1,013,093
Cash 92,376 140,593
Other assets 833,966 889,172
Total assets $1,912,414 $2,042,858
Liabilities:
Future policy benefits $668,298 $678,419
Losses and loss adjustment expenses 355,555 322,320
Unearned premiums 329,773 306,782
Long term debt 75,932 55,795
Line of credit 30,000 30,000
Other liabilities 341,258 391,236
Total liabilities 1,800,816 1,784,552
Deferrable capital securities - 22,445
Stockholders' equity 111,598 235,861
Total liabilities and
stockholders' equity $1,912,414 $2,042,858
Equity per share* $3.09 $6.61
Shares outstanding at period
end 36,066 35,678
* At December 31, 2003 and December 31, 2002, unrealized gains and
losses on fixed income securities,
after-tax totaled approximately $12.0 million and $15.1 million,
respectively, which represents $0.33 and $0.42,
respectively of book value per share.
Vesta Insurance Group, Inc
Reconciliation of Net Operating Earnings from Continuing Operations to Net
Income
(amounts in thousands, except share data)
3 Months Ended 12 Months Ended
December 31, December 31,
2003 2002 2003 2002
Net operating earnings (loss)
from continuing operations $7,266 $4,338 $10,424 $6,825
Special items:
Litigation settlement and
arbitration award (loss), net
of tax (43,365) 9,471 (43,365) (5,869)
Realized gains (losses), net of
tax and minority interest 1,425 (13,420) 5,054 (14,621)
Severance payment - (2,714) - (2,714)
Deferred tax asset charge (75,399) - (75,399) -
Gain on debt extinguishments,
net of tax 393 3,301 393 6,160
Net income (loss) from
continuing operations $(109,680) $976 $(102,893) $(10,219)
Gain (loss) from health
insurance discontinued
operations, net of tax (1,745) (6,254) (4,075) (6,411)
Gain (loss) from consulting
discontinued operations, net of
tax 63 (1,081) (361) (1,180)
Loss from discontinued property-
casualty operations, net of tax (3,871) (4,519) (11,489) (14,401)
Net income (loss) before
cumulative effect of change in
accounting principle $(115,233) $(10,878) $(118,818) $(32,211)
Cumulative effect of change in
accounting principle (1,167) - (1,167) -
Net income (loss) (116,400) (10,878) (119,985) (32,211)
Gain on redemption of preferred
securities, net of tax - 350 - 560
Income (loss) available to
common shareholders $(116,400) $(10,528) $(119,985) $(31,651)
Diluted earnings per share:
Net operating earnings (loss) $0.21 $0.13 $0.30 $0.20
Special items:
Litigation settlement and
arbitration award (loss), net
of tax $(1.24) $0.27 $(1.24) $(0.17)
Realized gains (losses), net of
tax and minority interest $0.04 $(0.39) $0.14 $(0.43)
Severance payment $- $(0.08) $- $(0.08)
Deferred tax asset charge $(2.15) $- $(2.16) $-
Gain on debt extinguishments,
net of tax $0.01 $0.10 $0.01 $0.18
Net income (loss) from
continuing operations $(3.13) $0.03 $(2.95) $(0.30)
Gain (loss) from health
insurance discontinued
operations, net of tax $(0.05) $(0.18) $(0.12) $(0.19)
Gain (loss) from consulting
discontinued operations, net of
tax $0.00 $(0.03) $(0.01) $(0.03)
Loss from discontinued property-
casualty operations, net of tax $(0.11) $(0.14) $(0.33) $(0.43)
Net income (loss) before
cumulative effect of change in
accounting principle $(3.29) $(0.32) $(3.41) $(0.95)
Cumulative effect of change in
accounting principle $(0.03) $- $(0.03) $-
Net income (loss) $(3.32) $(0.32) $(3.44) $(0.95)
Gain on redemption of preferred
securities, net of tax $- $0.01 $- $0.01
Income (loss) available to
common shareholders $(3.32) $(0.31) $(3.44) $(0.94)
Shares used in computing per
share amounts:
Weighted average shares
outstanding for the period 35,070 34,190 34,917 33,793
The above table reconciles the Company's GAAP results to net operating
earnings/ (loss). Management believes that net operating earnings/(loss)
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.
SOURCE Vesta Insurance Group, Inc.
-0- 03/15/2004
/CONTACT: Charles R. Lambert, Vice President - Investor Relations
of Vesta Insurance Group, +1-205-970-7030, CLambert@vesta.com/
/Web site: http://www.vesta.com /
(VTA)
CO: Vesta Insurance Group, Inc.
ST: Alabama
IN: INS FIN
SU: ERN CCA