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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 2001 Commission File Number 0-11773
- --------------------------------------- -------
ALFA CORPORATION
----------------
(Exact name of registrant as specified in its charter)
Delaware 63-0838024
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2108 East South Boulevard
P.O. Box 11000, Montgomery, Alabama 36191-0001
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(Address of principal executive offices) (Zip-Code)
Registrant's Telephone Number including Area Code (334) 288-3900
----------------------------
Securities registered pursuant to Section 12 (b) of the Act:
None
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $1.00 per share
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- -----------
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of February 28, 2002, was $509,317,389.
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the close of the period covered by this report.
Class Outstanding December 31, 2001
- ----------------------------- -----------------------------
Common Stock, $1.00 par value 39,179,678 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's annual report to security holders for the fiscal year
ended December 31, 2001, and proxy statement for the annual meeting of
stockholders to be held April 25, 2002, are incorporated by reference into Part
II and Part III.
Part I
Item 1. Business.
---------
Alfa Corporation is a financial services holding company which operates
predominantly in the insurance industry through its wholly-owned subsidiaries
Alfa Life Insurance Corporation (Life), Alfa Insurance Corporation (AIC), Alfa
General Insurance Corporation (AGIC), Alfa Agency Mississippi, Inc. and Alfa
Agency Georgia, Inc. Other wholly-owned noninsurance subsidiaries include Alfa
Financial Corporation (Financial), Alfa Investment Corporation, Alfa Builders,
Inc. (Builders), Alfa Realty, Inc. (Realty) and Alfa Benefits Corporation (ABC),
which are engaged in consumer financing, commercial leasing, real estate
investments, residential and commercial construction, real estate sales and
benefit services for the Alfa Group.
Alfa Corporation is affiliated with Alfa Mutual Insurance Company, Alfa
Mutual Fire Insurance Company, and Alfa Mutual General Insurance Company
(collectively, the Mutual Group). The Mutual Group owns 52.3% of Alfa
Corporation's common stock, their largest single investment. Alfa Corporation
and its subsidiaries (the Company) together with the Mutual Group comprise the
Alfa Group (Alfa). The Company's common stock is traded on the NASDAQ Stock
Market's National Market under the symbol ALFA.
Alfa Corporation's insurance subsidiaries write life insurance in Alabama,
Georgia and Mississippi and property and casualty insurance in Georgia and
Mississippi. Its property and casualty business is pooled with that of the Alfa
Mutual Insurance Companies which write property and casualty business in
Alabama. Approximately 81.2% of the Company's property and casualty premium
income and 71.1% of its total premium income for 2001 was derived from the
Company's participation with the Mutual Group in a Pooling Agreement. Effective
August 1, 1987, the Company entered into a property and casualty insurance
Pooling Agreement (the "Pooling Agreement") with Alfa Mutual Insurance Company
(Mutual), and other members of the Mutual Group. On January 1, 2001, Alfa Mutual
Fire Insurance Company and Alfa Specialty Insurance Corporation (Specialty), a
subsidiary of Mutual, became participants in the Pooling Agreement. The Mutual
Group is a direct writer primarily of personal lines of property and casualty
insurance in Alabama. The Company's subsidiaries similarly are direct writers in
Georgia and Mississippi. Both the Mutual Group and the Company write preferred
risk automobile, homeowner, farmowner and mobile home insurance, fire and allied
lines, standard risk automobile and homeowner insurance, and a limited amount of
commercial insurance, including church and businessowner insurance. Specialty is
a direct writer primarily of nonstandard risk automobile insurance. Under the
terms of the Pooling Agreement, the Company cedes to Mutual all of its property
and casualty business. Substantially all of the Mutual Group's direct property
and casualty business (together with the property and casualty business ceded by
the Company) is included in the pool. Mutual currently retrocedes 65% of the
pool to the Company and retains 35% within the Mutual Group including Specialty.
On October 1, 1996, the Pooling Agreement was amended in conjunction with the
restructuring of the Alfa Insurance Group's catastrophe protection program.
Effective November 1, 1996, the allocation of catastrophe costs among the
members of the pool was changed to better reflect the economics of catastrophe
finance. The amendment limited Alfa Corporation's participation in any single
catastrophic event or series of disasters to its pool share (65%) of a lower
catastrophe pool limit unless the loss exceeded an upper catastrophe pool limit.
In cases
I-1
where the upper catastrophe limit is exceeded on a 100% basis, the Company's
share in the loss would be based upon its amount of surplus relative to other
members of the group. Lower and upper catastrophe pool limits are adjusted
periodically due to increases in insured property risks. The limits and
participation levels since inception of the program are summarized below:
Lower Upper Coinsurance Allocation
Catastrophe Catastrophe of Catastrophes
Pool Limit Pool Limit Exceeding Upper
(millions) (millions) Catastrophe Pool Limit
- -----------------------------------------------------------------------------------------------------
November 1, 1996 $10.0 $249.0 13%
July 1, 1999 11.0 284.0 13%
January 1, 2001 11.4 284.0 14%
January 1, 2002 11.6 289.0 16%
The Boards of Directors of the Mutual Group and of the Company's property
and casualty insurance subsidiaries have established the pool participation
percentages and must approve any changes in such participation. The Alabama
Insurance Department reviewed the Pooling Agreement and the Department
determined that the implementation of the Pooling Agreement did not require the
Department's approval.
A committee consisting of two members of the Boards of Directors of the
Mutual Group, two members of the Board of Directors of the Company and Jerry A.
Newby, as chairman of each such Board, has been established to review and
approve any changes in the Pooling Agreement. The committee is responsible for
matters involving actual or potential conflicts of interest between the Company
and the Mutual Group and for attempting to ensure that, in operation, the
Pooling Agreement is equitable to all parties. Conflicts in geographic markets
are currently minimal because the Mutual Group writes property and casualty
insurance only in Alabama and at present all of such insurance written by the
Company is outside of Alabama. The Pooling Agreement is intended to reduce
conflicts which could arise in the selection of risks to be insured by the
participants by making the results of each participant's operations dependent on
the results of all of the Pooled Business. Accordingly, the participants should
have substantially identical underwriting ratios for the Pooled Business
excluding catastrophes as long as the Pooling Agreement remains in effect. See
"Property and Casualty Business" section regarding impact of catastrophes.
The participation of the Company in the Pooling Agreement may be changed or
terminated without the consent or approval of the shareholders, and the Pooling
Agreement may be terminated by any party thereto upon 90 days notice. Any such
termination, or a change in the Company's allocated share of the Pooled
Business, inclusion of riskier business or certain types of reinsurance assumed
in the pool, or other changes to the Pooling Agreement, could have a material
adverse impact on the Company's earnings. Participants' respective abilities to
share in the Pooled Business are subject to regulatory capital requirements.
I-2
The Company reports operating segments based on the Company's legal
entities, which are organized by line of business, with property and casualty
insurance as one segment, life insurance as one segment, non-insurance business
composed of consumer financing, commercial leasing, residential and commercial
construction and real estate sales as one segment, and corporate operations as
one segment. All investing activities are allocated to the segments based on the
actual assets, investments and cash flows of each segment.
Segment profit or loss for the property and casualty operating segment is
measured by underwriting profits and losses as well as by total net profit.
Segment profit or loss for the life insurance segment, the noninsurance segment
and the corporate segment is measured by total net profit. Segment expenses are
borne by the segment which directly incurred such expense or are allocated based
on the Management and Operating Agreement discussed in Note 3 of the Company's
annual report to security holders for the year ended December 31, 2001 as
included in Exhibit 13. Presented below is summarized financial information for
the Company's four business segments as of and for the years ended December 31,
2001, 2000 and 1999:
Years Ended December 31,
-------------------------------------------------------------------------------
2001 2000 1999
-------------------------------------------------------------------------------
(in thousands, except share and per share data)
Premiums and other
revenues
Property and casualty
insurance $427,425 $406,628 $388,495
Life insurance 109,356 99,128 88,883
Noninsurance operations 12,420 9,163 7,917
Corporate (2,401) (4,266) (2,752)
---------------------------------------------------------------------
Premiums and revenues
before eliminations $546,800 $510,653 $482,543
Eliminations (504) (340) (282)
---------------------------------------------------------------------
Total premiums and
other revenues $546,296 $510,313 $482,261
=====================================================================
Net income
Insurance operations
Property and casualty
insurance $ 45,989 $ 49,551 $ 49,492
Life insurance 19,792 17,977 11,597
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Total insurance operations $ 65,781 $ 67,528 $ 61,089
Noninsurance operations 3,552 1,550 3,092
Net realized investment gains 4,191 3,424 3,289
Corporate expenses (3,562) (5,681) (2,913)
Cumulative effect of changes
in accounting principles (456) 0 0
---------------------------------------------------------------------
Net income $ 69,506 $ 66,821 $ 64,557
=====================================================================
Net income per share
Basic $1.78 $1.71 $1.61
=====================================================================
Diluted $1.76 $1.70 $1.60
=====================================================================
Weighted average
shares outstanding
Basic 39,158,056 39,168,102 39,980,880
=====================================================================
Diluted 39,481,641 39,407,152 40,235,690
=====================================================================
I-3
Property and Casualty Business:
The Alfa Insurance Group's primary business is personal lines property and
casualty insurance, which accounts for over 75% of total premiums and
approximately 70% of total revenues. Automobile and homeowners insurance account
for approximately 85% of property and casualty premiums. In Alabama, the Alfa
Insurance Group enjoys a 20% share of the personal automobile and homeowners
markets, second only to State Farm. The Company is a direct writer and
distributes its products utilizing the employee/agent sales force of Mutual. The
following table shows the Company's premium distribution by product in property
and casualty insurance for 2001:
Automobile 64.6%
Homeowner 20.4%
Farmowner 5.3%
Commercial 4.6%
Manufactured Home 3.2%
Other 1.9%
------
100.0%
======
The following table sets forth the components of property and casualty
insurance earned premiums, net underwriting income (loss), GAAP basis loss,
expense and combined ratios, underwriting margin, net investment income and
operating income for the years ended December 31, 2001, 2000 and 1999:
Years Ended December 31,
------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------
(in thousands)
Earned premiums
Personal lines $ 379,933 $359,862 $341,248
Commercial lines 14,062 13,589 13,044
Pools, associations
and fees 4,363 4,012 3,908
Reinsurance ceded (1,496) (1,344) (1,230)
------------------------------------------------------------
Total $396,862 $376,119 $356,970
============================================================
Net underwriting income $ 31,368 $ 38,046 $ 41,040
============================================================
Loss ratio 61.7% 61.2% 60.2%
LAE ratio 3.6% 4.7% 4.8%
Expense ratio 26.8% 24.0% 23.5%
------------------------------------------------------------
GAAP basis combined ratio 92.1% 89.9% 88.5%
============================================================
Underwriting margin 7.9% 10.1% 11.5%
============================================================
Net investment income $ 31,278 $ 29,645 $ 27,601
============================================================
Operating income before tax $ 62,362 $ 68,050 $ 70,064
============================================================
Operating income, net of tax $ 45,989 $ 49,551 $ 49,492
============================================================
I-4
The Company's strategy in property and casualty business has been to
operate primarily in its niche, personal lines insurance, and to strive to be
the low-cost producer, thereby attracting and underwriting to achieve a
preferred, profitable book of business. The Company's objective is to operate
with an underwriting profit. Historically, this objective has been met except
for five years, which were primarily impacted by catastrophic weather. In the
wake of Hurricanes Opal and Erin, Alfa initiated intense studies of its
catastrophe management strategy. Effective November 1, 1996, Alfa restructured
the catastrophe program and amended the intercompany pooling agreement to
allocate catastrophe losses among the members of the pool in a fashion that more
equitably reflects the realities of catastrophe finance. As a result, Alfa
Corporation's share of the Alfa Group's storm-related losses has been
substantially reduced, thus providing much greater earnings stability and growth
potential. The lower exposure also means a substantial reduction in reinsurance
costs. Alfa Group pooled catastrophe losses for 2001 and 2000 totaled
approximately $39 million and $26 million, respectively. The Company's share of
such losses totaled $7.4 million and $7.2 million in 2001 and 2000,
respectively. No catastrophe losses were incurred in 1999.
The Company's business is concentrated geographically in Alabama, Georgia
and Mississippi. Accordingly, unusually severe storms or other disasters in
these contiguous states might have a more significant effect on the Company than
on a more geographically diversified insurance company. Unusually severe storms,
other natural disasters and other events could have an adverse impact on the
Company's financial condition and operating results. However, the Company
believes that its current catastrophe protection program, which began November
1, 1996, will reduce the earnings volatility caused by such catastrophe
exposures.
Life Insurance:
- --------------
Life directly writes individual life insurance policies consisting
primarily of ordinary whole life, term life, interest sensitive whole life and
universal life products in Alabama, Georgia and Mississippi and distributes
these products utilizing the same employee/agent sales force used in the
property and casualty business. In the highly fragmented life insurance market
in Alabama, Alfa ranks second in market share.
Life offers several different types of whole life and term insurance
products. As of December 31, 2001, Life had in excess of $15.2 billion of life
insurance in force. As of December 31, for each year indicated, the Company had
insurance in force as follows:
2001 2000 1999
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(in thousands)
Ordinary life $15,116,190 $13,557,381 $11,970,328
Credit life $ 9,161 $ 8,217 $ 6,853
Group life $ 41,957 $ 38,835 $ 38,354
I-5
The following table sets forth life insurance premiums and policy charges, by
type of policy, net investment income, benefits and expenses and life insurance
operating income for the years ended December 31, 2001, 2000, and 1999:
Years Ended December 31,
---------------------------------------------------------
2001 2000 1999
---------------------------------------------------------
(in thousands)
Premiums and Policy Charges
Universal life policy charges $16,279 $15,014 $13,607
Universal life policy charges- COLI 2,677 2,488 2,234
Interest sensitive life policy charges 10,105 10,509 9,518
Traditional life insurance premiums 26,682 24,743 22,678
Group life insurance premium 264 324 323
---------------------------------------------------------
Total $56,007 $53,078 $48,360
=========================================================
Net investment income $46,623 $41,958 $37,873
=========================================================
Benefits and expenses $66,929 $62,966 $64,286
=========================================================
Operating income before tax $27,653 $24,841 $15,200
=========================================================
Operating income, net of tax $19,792 $17,977 $11,597
=========================================================
A discussion of the Company's operating results shown above is included on
page 5 of Exhibit 13 representing page 15 of the Company's annual report to
security holders for the year ended December 31, 2001.
Life generally reinsures all life insurance risks in excess of $350,000 on
any one life for the purpose of limiting the liability of Life with respect to
any one risk and providing greater diversification of its exposure. When Life
reinsures a portion of its risk it must cede the premium income to the reinsurer
who reinsures the risk, thereby decreasing the income of Life.
Life performs various underwriting procedures and blood testing for AIDS
and other diseases before issuance of insurance.
Investments:
- -----------
The Company's income is directly affected by its investment income or loss
from its investment portfolio. The capital and reserves of the Company are
invested in assets comprising its investment portfolio. The insurance laws
prescribe the nature and quality of investments that may be made, and included
in its investment portfolio. Such investments include qualified state, municipal
and federal obligations, high quality corporate bonds and stocks,
mortgage-backed securities, mortgages, consumer loans, commercial leases and
certain other assets.
The Company's investment philosophy is long-term and value oriented with
focus on total return for both yield and growth potential. During the past ten
years, invested assets have grown from $511.9 million to almost $1.5 billion at
the end of 2001, a compound annual growth rate of 11.3%. During that same period
investment income has more than doubled, growing from $34.8 million to over
$84.7 million. At year end, the value of unrealized gains in Alfa's portfolio
was $34.0 million, net of tax. The portfolio was invested 64.5% in fixed income
securities, 5.0% in equities, 10.1% in short-term marketable securities and
20.2% in other investments which include consumer loans, commercial leases,
partnerships and 0.2% in real estate and mortgage loans.
I-6
The rating of the Company's portfolio of fixed maturities using the
Standard & Poor's rating categories is as follows at December 31, 2001 and 2000:
December 31,
---------------------
2001 2000
---------------------
AAA to A- 88.8% 90.6%
BBB+ to BBB- 10.8% 8.3%
BB+ and below (below investment grade) .4% 1.1%
---------------------
100.0% 100.0%
=====================
For more information about the Company's investments, see the investment
section of Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 16 through 18 of the Company's annual report to
security holders for the fiscal year ended December 31, 2001, which is
incorporated herein by reference in Item 7.
Reserves:
- --------
The Company's property and casualty insurance subsidiaries are required to
maintain reserves to cover their estimated ultimate liability for losses and
loss adjustment expenses with respect to reported and unreported claims
incurred. The Company's life insurance subsidiary is required to maintain
reserves for future policy benefits. To the extent that reserves prove to be
inadequate in the future, the Company would have to increase such reserves and
incur a charge to earnings in the period such reserves are increased which could
have a material adverse effect on the Company's results of operations and
financial condition. The establishment of appropriate reserves is an inherently
uncertain process and there can be no assurance that ultimate losses will not
materially exceed the Company's loss reserves. Reserves are estimates involving
actuarial and statistical projections at a given time of what the Company
expects to be the cost of the ultimate settlement and administration of claims
based on facts and circumstances then known, estimates of future trends in
claims severity and other variable factors.
Property and Casualty Reserves: With respect to reported claims, reserves
are established on a case-by-case basis. The reserve amounts on each reported
claim are determined by taking into account the circumstances surrounding each
claim and policy provision relating to the type of loss. Loss reserves are
reviewed on a regular basis and, as new data becomes available, appropriate
adjustments are made to reserves.
For incurred but not reported ("IBNR") losses, a variety of methods have
been developed in the insurance industry for determining estimates of loss
reserves. One common method of actuarial evaluation, which is used by the
Company, is the loss development method. This method uses the pattern by which
losses have been reported over time and assumes that each accident year's
experience will develop in the same pattern as the historical loss development.
Reserves are computed by the Company based upon actuarial principles and
procedures applicable to the lines of business written by the Company. These
reserve calculations are reviewed regularly by management and as required by
state law, the Company periodically engages an independent actuary to render an
opinion as to the adequacy of statutory reserves established by management,
whose opinions are filed with the various jurisdictions in which the Company is
licensed. Based upon practice and procedures employed by the Company, without
regard to independent actuarial opinions, management believes that the Company's
reserves are adequate.
I-7
Life Reserves: The life insurance policy reserves reflected in the
Company's financial statements as future policy benefits are calculated based on
generally accepted accounting principles. These reserves, with the addition of
premiums to be received and the interest thereon compounded annually at assumed
rates, must be sufficient to cover policy and contract obligations as they
mature. Generally, the mortality and persistency assumptions used in the
calculation of reserves are based on company experience. A list of the
assumptions used in the calculation of Life's reserves are reported in the
financial statements (See Note 6 - Future Policy Benefits, Losses and Loss
Adjustment Expenses in the Notes to Consolidated Financial Statements on page 37
of the Company's annual report to security holders for the year ended December
31, 2001, incorporated herein by reference).
Activity in the liability for unpaid losses and loss adjustment expenses,
prepared in accordance with generally accepted accounting principles, is
summarized as follows:
2001 2000 1999
--------------------------------------------------------------------------------------------------
Property and Property and Property and
Casualty Life Casualty Life Casualty Life
------------ ---------- ------------ ----------- ------------ -----------
Balance at January 1, $145,077,064 $4,694,823 $143,148,690 $ 3,290,410 $138,030,306 $ 2,812,704
Less Reinsurance recoverables
on unpaid losses (1,681,098) (1,251,651) (1,828,994) (295,000) (759,568) (353,195)
---------------------------------------------------------------------------------------------------
Net balance at January 1, 143,395,966 3,443,172 141,319,696 2,995,410 137,270,738 2,459,509
---------------------------------------------------------------------------------------------------
Incurred related to:
Current year 281,868,794 18,912,632 266,087,327 16,022,555 249,992,384 14,512,337
Prior years (22,713,788) 95,565 (18,427,579) 65,933 (17,849,537) (298,357)
---------------------------------------------------------------------------------------------------
Total incurred 259,155,006 19,008,197 247,659,748 16,088,488 232,142,847 14,213,980
---------------------------------------------------------------------------------------------------
Paid related to:
Current year 203,950,000 17,032,871 188,870,000 13,916,158 169,943,000 12,957,553
Prior years 60,626,736 1,547,303 56,713,478 1,724,568 58,150,889 720,526
---------------------------------------------------------------------------------------------------
Total paid 264,576,736 18,580,174 245,583,478 15,640,726 228,093,889 13,678,079
---------------------------------------------------------------------------------------------------
Net balance at December 31, 137,974,236 3,871,195 143,395,966 3,443,172 141,319,696 2,995,410
Plus reinsurance recoverables
on unpaid losses 2,199,926 954,204 1,681,098 1,251,651 1,828,994 295,000
---------------------------------------------------------------------------------------------------
Balance at December 31, $140,174,162 $ 4,825,399 $145,077,064 $ 4,694,823 $143,148,690 $ 3,290,410
===================================================================================================
The liability for estimated unpaid losses and loss adjustment expenses is based
on a detail evaluation of reported losses and of estimates of incurred but not
reported losses. Adjustments to the liability based on subsequent developments
are included in current operations. Because the Company is primarily an insurer
of private passenger motor vehicles and of single family homes, it has limited
exposure for environmental, product and general liability claims. The Company
does not believe that any such claims will have a material impact on the
Company's liquidity, results of operations, cash flows or financial condition.
I-8
Other Business:
- --------------
The Company operates seven other subsidiaries which are not considered to
be significant by SEC Regulations for purposes of separate disclosure. These
subsidiaries are Alfa Financial Corporation (Financial), a lending and leasing
institution, Alfa Investment Corporation, a real estate investment business and
its wholly owned subsidiary, Alfa Builders, Inc., a construction company, Alfa
Realty, Inc., a real estate sales agency, Alfa Agency Georgia, Inc., Alfa Agency
Mississippi, Inc. and Alfa Benefits Corporation, a provider of benefit services
for the Alfa Group.
Financial is an institution engaged principally in making consumer loans
and originating commercial leases. Loans are available through substantially all
agency offices of the Company. These loans and leases are collateralized by
automobiles and other property. The Company considers an account to be
delinquent if it is thirty or more days late in its scheduled payments. At
December 31, 2001, the delinquency ratio on the loan portfolio was 1.78%, or
$1.3 million. Loans charged off in 2001 totaled $428,426 or 0.6% of the average
outstanding loan portfolio. At December 31, 2001, the Company maintained an
allowance for loan losses of $892,076 or approximately 1.1% of the outstanding
loan balance. At December 31, 2001, the delinquency ratio on the lease portfolio
was 4.37%, or $2.7 million. Leases charged off in 2001 were $441,438 or 0.8% of
the average outstanding lease portfolio. At December 31, 2001, the Company
maintained an allowance for lease losses of $1,310,041 or approximately 1.8% of
the outstanding lease balance.
Alfa Investment Corporation is a Florida corporation engaged in the real
estate investment business. Alfa Builders, Inc. is engaged in the construction
business in Alabama and is also engaged in real estate investments.
Alfa Realty, Inc., is engaged in the business of listing and selling real
estate in the Montgomery, Autauga and Elmore County, Alabama, areas.
Alfa Agency Georgia, Inc. and Alfa Agency Mississippi, Inc. place
substandard insurance risks with third party insurers for a commission.
Alfa Benefits Corporation serves as a record keeper by handling employee
benefits for the Alfa Group.
Relationship with Mutual Group:
- ------------------------------
The Company's business and operations are substantially integrated with and
dependent upon the management, personnel and facilities of Mutual. Under a
Management and Operating Agreement with Mutual, all management personnel are
provided by Mutual and the Company reimburses Mutual for field office expenses
and operations services rendered by Mutual in the areas of advertising, sales
administration, underwriting, legal, sales, claims, management, accounting,
securities and investment and other services rendered by Mutual to the Company.
Mutual periodically conducts time usage and related expense allocation
studies. Mutual charges the Company for its allocable and directly attributable
salaries and other expenses, including office facilities in Montgomery, Alabama.
I-9
The Board of Directors of the Company consisted at year end of eleven
members, six of whom serve on the Executive Committee of the Boards of the
Mutual Group and two of whom are Executive Officers of the Company.
At December 31, 2001, Mutual owned 16,234,988 shares, or 41.44%, Alfa
Mutual Fire Insurance Company owned 4,128,336 shares, or 10.54%, and Alfa Mutual
General Insurance Company owned 143,650 shares, or 0.37%, of the Company's
outstanding common stock.
Competition:
- -----------
Both the life and property and casualty insurance businesses are highly
competitive. There are numerous insurance companies in the Company's area of
operation and throughout the United States. Many of the companies which are in
direct competition with the Company have been in business for a much longer
period of time, have a larger volume of business, offer a more diversified line
of insurance coverage, and have greater financial resources than the Company. In
its life and property and casualty insurance businesses, the Company competes
with other insurers in the sale of insurance products to consumers and the
recruitment and retention of qualified agents. The Company believes that the
main competitive factors in its business are price, name recognition and
service. The Company believes that it competes effectively in these areas in
Alabama. In Georgia and Mississippi, however, the Company's name is not as well
recognized, but such recognition is improving.
Financial Ratings:
- -----------------
The Company's property and casualty subsidiaries have the highest A.M. Best
rating of A++ and life has an A+ rating. The Company's commercial paper program
is rated A-1+ by Standard and Poor's and P-1 by Moody's, both the highest
ratings for commercial paper.
Regulation:
- ----------
The Mutual Group and the Company's insurance subsidiaries are subject to
the Alabama Insurance Holding Company Systems Regulatory Act and are subject to
reporting to the Alabama Insurance Department and to periodic examination of
their transactions and regulation under the Act with Mutual being considered the
controlling party.
Additionally, the Company's insurance subsidiaries are subject to licensing
and supervision by the governmental agencies in the jurisdictions in which they
do business. The nature and extent of such regulation varies, but generally has
its source in State Statutes which delegate regulatory, supervisory and
administrative powers to State Insurance Commissioners. Such regulation,
supervision and administration relate, among other things, to standards of
solvency which must be met and maintained, licensing of the companies, periodic
examination of the affairs and financial condition of the Company, annual and
other reports required to be filed on the financial condition and operation of
the Company. Rates of property and casualty insurance are subject to regulation
and approval of regulatory authorities. Life insurance rates are generally not
subject to prior regulatory approval.
I-10
Restrictions on Dividends to Stockholders: The Company's insurance
subsidiaries are subject to various state statutory and regulatory restrictions,
generally applicable to each insurance company in its state of incorporation,
which limit the amount of dividends or distributions by an insurance company to
its stockholders. The restrictions are generally based on certain levels of
surplus, investment income and operating income, as determined under statutory
accounting practices. Alabama law permits dividends in any year which, together
with other dividends or distributions made within the preceding 12 months that
do not exceed the greater of (i) 10% of statutory surplus as of the end of the
preceding year or (ii) for property and casualty companies - the net income for
the preceding year, or for life companies - the net gain from operations. Larger
dividends are payable only after receipt of regulatory approval. Future
dividends from the Company's subsidiaries may be limited by business and
regulatory considerations. However, based upon restrictions presently in effect,
the maximum amount available for payment of dividends to the Company by its
insurance subsidiaries in 2002 without prior approval of regulatory authorities
is approximately $58.3 million based on December 31, 2001 financial condition
and results of operations.
Risk-Based Capital Requirements: The NAIC adopted risk-based capital
requirements that require insurance companies to calculate and report
information under a risk-based formula which attempts to measure statutory
capital and surplus needs based on the risks in a company's mix of products and
investment portfolio. The formula is designed to allow state insurance
regulators to identify potential weakly capitalized companies. Under the
formula, a company determines "risk-based capital" ("RBC") by taking into
account certain risks related to the insurer's assets (including risks related
to its investment portfolio and ceded reinsurance) and the insurer's liabilities
(including underwriting risks related to the nature and experience of its
insurance business). Risk-based capital rules provide for different levels of
regulatory attention depending on the ratio of a company's total adjusted
capital to its "authorized control level" ("ACL") of RBC. Based on calculations
made by the Company, the risk-based capital levels for each of the Company's
insurance subsidiaries significantly exceed that which would require regulatory
attention.
Personnel:
- ---------
The Company has no management or operational employees. The Company and its
subsidiaries have a Management and Operating Agreement with Mutual whereby it
reimburses Mutual for salaries and expenses of employees provided to the Company
under the Agreement. Involved are employees in the areas of Life Underwriting,
Life Processing, Accounting, Sales, Administration, Legal, Files, Data
Processing, Programming, Research, Policy Issuing, Claims, Investments and
Management. At December 31, 2001, the Company was represented by 486 agents in
Alabama who are employees of Mutual. The Company's property and casualty
subsidiaries had 127 independent exclusive agents in Georgia and Mississippi at
December 31, 2001. The Company believes its employee relations are good.
Item 2. Properties.
----------
(a) Physical Properties of the Company and Its Subsidiaries. The Company
--------------------------------------------------------
leases it home office facilities in Montgomery, Alabama, from Mutual.
The Company and its subsidiaries own several investment properties, none of
which are material.
I-11
Item 3. Legal Proceedings.
-----------------
Certain legal proceedings are in process at December 31, 2001. Costs for
these and similar legal proceedings, including accruals for outstanding cases,
totaled $930,000 in 2001, $3.0 million in 2000, and $6.5 million in 1999. These
proceedings involve alleged breaches of contract, torts, including bad faith and
fraud claims, and miscellaneous other causes of action. These lawsuits involve
claims for mental anguish and punitive damages. Approximately 15 legal
proceedings against Alfa Life Insurance Corporation (Life) were in process at
December 31, 2001. Of the 15 proceedings, three were filed in 2001, four were
filed in 2000, six were filed in 1999, one was filed in 1997, and one was filed
in 1996. In a case tried in January 2001, in Barbour County, Alabama, the jury
returned a verdict for the plaintiff against Life for $500,000 in compensatory
damages and $5,000,000 in punitive damages. After Life filed post-trial motions,
the trial court reduced the punitive damage award to $1,500,000. Life has
appealed the award to the Alabama Supreme Court. In a case tried in December
2001, in Bullock County, Alabama, the jury returned a verdict for the plaintiffs
against Life for $300,000 in compensatory damages and $3,000,000 in punitive
damages. Life has filed post-trial motions asking the trial court to reverse the
verdict, or in the alternative, reduce the amount of the verdict. The trial
court has issued a post-trial order reducing the punitive damage award to
$900,000, pursuant to Alabama's tort reform law. In the event the trial court
denies Life's other post-trial motions, Life will appeal the case to the Alabama
Supreme Court. Two of the 15 pending legal proceedings against Life have been
certified as class actions by the trial court in each case. After the trial
court certified the first class action against Life, Life appealed the class
certification order to the Alabama Supreme Court. In November 2001, the Alabama
Supreme Court reversed the trial court, decertified the class, and remanded the
case to the trial court for further proceedings. The recent trial court order
certifying the second class action will be appealed to the Alabama Supreme
Court. In addition, one purported class action lawsuit is pending against both
Alfa Builders, Inc. and Alfa Mutual Fire Insurance Company. Additionally, five
purported class action lawsuits are pending against the property and casualty
mutual companies involving a number of issues and allegations which could affect
the Company because of a pooling agreement between the companies. No class has
been certified in any of these six purported class action cases. It should be
noted that in Alabama, where the Company has substantial business, the
likelihood of a judgment in any given suit, including a large mental anguish
and/or punitive damage award by a jury, bearing little or no relation to actual
damages, continues to exist, creating the potential for unpredictable material
adverse financial results.
Item 4. Submission of Matters to Vote of Security Holders. Not applicable.
-------------------------------------------------
I-12
Executive Officers of the Company:
- ---------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the following is
included as an unnumbered item in Part I of this report in lieu of being
included in the proxy statement for the annual meeting of stockholders to be
held April 25, 2002.
The following is a list of name and ages of all of the executive officers
of the Company indicating all positions and offices with the Company held by
such person and each such person's principal occupation or employment during the
past five years. No person other than those listed below has been chosen to
become an executive officer of the Company.
Name Age Position Since
- ---- --- -------- -----
Jerry A. Newby 54 Chairman of the Board and President 1998
President of its Subsidiaries and associated
companies; President Alabama Farmers Federation,
and farmer.
C. Lee Ellis 50 Executive Vice President, Operations and Treasurer of 1999
Alfa Corporation and its subsidiaries since 1999
Prior to 1999, Executive Vice President, Investments.
Charles W. Hawkins 64 Executive Vice President, Marketing 2000
Prior to 2000, Senior Vice President, Marketing
North Alabama
Stephen G. Rutledge 43 Senior Vice President, CFO 2000
and Chief Investment Officer
Prior to 2000, Senior Vice President, Investments
Prior to 1999, Vice President, Investments
Al Scott 46 Senior Vice President, Secretary and General Counsel 1997
Prior to 1997, Assistant General Counsel
James R. Azar 65 Senior Vice President, Planning 1979
Thomas E. Bryant 55 Senior Vice President, Human Resources 2001
From 1996 to 2001, Vice President, Human Resources,
American General Life & Accident Insurance Company
Wyman Cabaniss 50 Senior Vice President, Underwriting 1998
Prior to 1998, Vice President, Underwriting
Bill Harper, Jr. 57 Senior Vice President, Life Operations of Alfa Life 1986
Insurance Corporation, Vice President of Alfa
Financial Corporation since 1978.
I-13
Name Age Position Since
- ---- --- -------- -----
John Jung 55 Senior Vice President, 1999
Chief Information Officer since October 1999.
From 1997 to October 1999, Senior Vice President
and Chief Information Officer of California Casualty;
prior to that time, Vice President of Chubb Group.
Terry McCollum 65 Senior Vice President, Claims 1979
Ralph Forsythe 47 Vice President, Finance and Assistant CFO, 2001
Chief Accounting Officer
Prior to 2001, Chief Financial Officer, Haights Cross
Communications, DBA The Coriolis Group
Prior to 2000, Vice President, Accounting,
The United Methodist Publishing House
Prior to 1998, Chief Accounting Officer,
The United Methodist Publishing House
I-14
Part II
-------
Item 5. Market for the Company's Common Stock and Related Security Holder
-----------------------------------------------------------------
Matters.
--------
The "Stockholder Information" section on page 39 of Exhibit 13 representing
the Inside Back Cover of the Company's annual report to security holders for the
fiscal year ended December 31, 2001, is incorporated herein by reference.
Item 6. Selected Financial Data.
------------------------
The "Selected Financial Data" section on pages 1 and 2 of Exhibit 13
representing pages 6 and 7 of the Company's annual report to security holders
for the year ended December 31, 2001, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
--------------
The "Management's Discussion and Analysis" section on pages 3 through 14 of
Exhibit 13 representing pages 13 through 24 of the Company's annual report to
security holders for the fiscal year ended December 31, 2001, is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
-----------------------------------------------------------
The "Quantitative and Qualitative Disclosures about Market Risk" section on
pages 8 through 9 of Exhibit 13 representing pages 18 through 19 of the
Company's annual report to security holders for the fiscal year ended December
31, 2001, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The Financial Statements on pages 15 through 38 of Exhibit 13 representing
pages 25 through 48 of the Company's annual report to security holders for the
fiscal year ended December 31, 2001, are incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
-----------------------------------------------------
None.
II-1
Part III
--------
Item 10. Directors and Executive Officers of the Company.
------------------------------------------------
For information with respect to the Executive Officers of the Company see
Executive Officers of the Company at the end of Part I of this Report. For
information with respect to the Directors of the Company, see Election of
Directors on Page 2 of the Proxy Statement for the annual meeting of
stockholders to be held April 25, 2002 which is incorporated herein by
reference.
Item 11. Executive Compensation.
-----------------------
The information set forth under the caption "Executive Compensation" on
Page 5 of the Proxy Statement for the annual meeting of stockholders to be held
April 25, 2002, except for the report of the Compensation Committee and
Performance Graph, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The information appearing on Pages 2 through 4 of the Proxy Statement for
the annual meeting of stockholders to be held April 25, 2002, relating to the
security ownership of certain beneficial owners and management is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
The information set forth under the caption "Executive Compensation" on
Page 5 of the Proxy Statement for the annual meeting of stockholders to be held
April 25, 2002, is incorporated herein by reference.
III-1
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules, Reports on Form 8-K.
-------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements. (incorporated by reference from pages 15
---------------------
through 38 of Exhibit 13 representing pages 25 through 48
of the Company's annual report to security holders for the year ended
December 31, 2001)
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 2001 and 2000.
Consolidated Statements of Income for the years ended
December 31, 2001, 2000 and 1999.
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2001, 2000 and 1999.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2001, 2000 and 1999.
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.
Notes to Consolidated Financial Statements.
Selected Quarterly Financial Data.
2. Financial Statement Schedules.
------------------------------
Included in Part IV of this report Page
----
Report on Financial Statement Schedules of Independent Auditors IV-3
Schedule I - Summary of Investments Other Than Investments
in Related Parties as of December 31, 2001 IV-4
Schedule II - Condensed Financial Information IV-5-7
Schedule III - Supplementary Insurance Information IV-8
Schedule IV - Reinsurance for the years ended December 31, 2001,
2000 and 1999 IV-9
Schedule V - Valuation and Qualifying Accounts IV-10
IV-1
Schedules other than those listed above have been omitted because the
required information is contained in the financial statements and notes thereto,
or because such schedules are not required or applicable.
3. Exhibits.
--------
Exhibit (3) - Articles of Incorporation and By-Laws of the Company are incorporated
by reference from the Company's 10-K for the year ended December 31,
1987.
Exhibit (10(a)) Amendment No. 2 to Management and Operating Agreement effective
January 1, 1992 is incorporated by reference from the Company's 10-K
for the year ended December 31, 1992.
(10(b)) Insurance Pooling Agreement is incorporated by reference from the Company's
10-K for the year ended December 31, 1987.
Exhibit (11) Statement of Computation of Per Share Earnings
Exhibit (13) The Company's Annual Report to Security Holders for the fiscal year
ended December 31, 2001. Such report, except for the portions incorporated
herein by reference, is furnished to the Commission for information only and is
not deemed filed as part of this report.
Exhibit (19) Employee Stock Purchase Plan and 1993 Stock Incentive Plan are incorporated by
reference from the Company's 10-K for the year ended December 31, 1993.
Exhibit (23) Consent of Independent Accountants
(b) Reports on Form 8-K.
-------------------
None
IV-2
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors
Alfa Corporation:
We have audited and reported separately on the financial statements of Alfa
Corporation as of December 31, 2001 and 2000, and for each of the years in the
three-year period ended December 31, 2001. Our report and the financial
statements of Alfa Corporation are incorporated by reference in the Form 10-K.
Our audits were made for the purpose of forming an opinion on the basic
financial statements of Alfa Corporation taken as a whole. The supplementary
information included in financial statement Schedules I through V is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
Birmingham, Alabama
February 8, 2002
IV-3
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 2001
Amount At
Cost Or Which Shown
Amortized Fair In Balance
Type Of Investment Cost Value Sheet
- ------------------ -------------- -------------- -------------
Fixed maturities:
Bonds:
United States Government
and government agencies $ 34,386,948 $ 38,411,958 $ 38,411,958
States, municipalities and
political subdivisions 252,614,802 259,754,368 259,754,368
Public utilities 24,491,946 24,454,793 24,454,793
All other corporate bonds 288,494,252 293,664,421 293,664,421
Mortgage-backed securities 332,462,411 343,259,631 343,223,949
Redeemable preferred stocks 480,000 1,347,500 1,347,500
-------------- -------------- -------------
Total fixed maturities 932,930,359 960,892,671 960,856,989
-------------- -------------- -------------
Equity securities:
Common stocks:
Public utilities 2,657,360 4,175,540 4,175,540
Banks, trusts and insurance
companies 2,275,051 9,872,000 9,872,000
Industrial, miscellaneous and all other 36,958,852 55,306,990 55,306,990
Nonredeemable preferred stocks 4,997,982 5,309,500 5,309,500
-------------- -------------- -------------
Total equity securities 46,889,245 74,664,030 74,664,030
-------------- -------------- -------------
Mortgage loans on real estate 109,556 109,556 109,556
Real estate 2,712,165 2,712,165 2,712,165
Policy loans 49,945,528 49,945,528 49,945,528
Collateral loans 88,561,085 92,558,090 88,561,085
Other long-term investments 164,056,234 164,056,234 164,056,234
Short-term investments 150,255,275 150,255,275 150,255,275
-------------- -------------- --------------
Total investments $1,435,459,447 $1,495,193,549 $1,491,160,862
============== ============== ==============
See accompanying independent auditors' report
IV-4
ALFA CORPORATION (PARENT COMPANY)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
December 31, 2001 and 2000
2001 2000
------------ ------------
ASSETS
Cash $ 223,079 $ 485,790
Short-term investments 7,559 485,615
Investment in subsidiaries* 569,054,095 532,760,452
Note receivable from subsidiaries* 112,771,539 65,751,539
Accounts receivable and other assets 243,522 378,856
------------ ------------
Total assets $682,299,794 $599,862,252
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper $165,415,905 $117,642,561
Notes payable 4,600,000 4,600,000
Other liabilities 3,171,051 4,057,451
------------ ------------
Total liabilities 173,186,956 126,300,012
------------ ------------
Stockholders' Equity:
Common stock, $1 par value, shares
authorized - 110,000,000;
issued - 41,891,512
outstanding - 2001 - 39,187,678; 2000 - 39,156,527 41,891,512 41,891,512
Capital in excess of par value 26,436,168 24,076,380
Accumulated other comprehensive income 33,996,936 45,444,149
Retained earnings 446,032,558 398,705,679
Treasury stock, at cost (shares, 2001 - 2,703,834; 2000 - 2,734,985) (39,244,336) (36,555,480)
------------ ------------
Total stockholders' equity 509,112,838 473,562,240
------------ ------------
Total liabilities and stockholders' equity $682,299,794 $599,862,252
============ ============
*Eliminates in consolidation
See accompanying independent auditors' report
IV-5
ALFA CORPORATION (PARENT COMPANY)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF INCOME
For the years ended December 31, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- -----------
Revenues:
Dividends from subsidiaries* $25,322,801 $37,951,000 $21,700,542
Interest from subsidiaries* 3,648,727 3,751,340 1,822,047
Other interest 19,897 59,816 32,473
----------- ----------- -----------
Total revenues 28,991,425 41,762,156 23,555,062
Expenses:
Other expenses 6,983,419 9,389,824 4,666,369
----------- ----------- -----------
Income before equity in
undistributed income
of subsidiaries 22,008,006 32,372,332 18,888,693
Equity in undistributed income
of subsidiaries 47,497,563 34,448,531 45,668,769
----------- ----------- -----------
Net income $69,505,569 $66,820,863 $64,557,462
=========== =========== ===========
*Eliminates in consolidation
See accompanying independent auditors' report
IV-6
ALFA CORPORATION (PARENT COMPANY)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2001, 2000 and 1999
2001 2000 1999
--------------------------------------------------------------
Cash flows from operating activities:
Net income $ 69,505,569 $ 66,820,863 $ 64,557,462
--------------------------------------------------------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Undistributed earnings of
subsidiaries (47,497,563) (34,448,531) (45,668,769)
Decrease (increase) in other assets
and accounts receivable 135,334 (156,398) (59,542)
(Increase) decrease in other
liabilities (181,376) 250,465 (913,261)
--------------------------------------------------------------
Net cash provided by
operating activities 21,961,964 32,466,399 17,915,890
--------------------------------------------------------------
Cash flows from investing activities:
(Increase) in note receivable for subsidiaries (47,020,000) (31,705,000) (3,957,000)
Net decrease (increase) in short-term investments 478,056 (447,667) 829,445
(Increase) in investment in subsidiaries (50,000) (1,000) (5,400,000)
Other (193,293) (48,776) (139,279)
--------------------------------------------------------------
Net cash (used in) investing activities (46,785,237) (32,202,443) (8,666,834)
--------------------------------------------------------------
Cash flows from financing activities:
Increase in commercial paper 47,773,344 27,353,362 33,029,680
Purchase of treasury stock (3,575,198) (8,870,081) (24,157,205)
Proceeds from exercise of stock options 2,541,106 1,637,667 610,217
Dividends to stockholders (22,178,690) (20,038,691) (18,902,788)
--------------------------------------------------------------
Net cash provided by (used in) financing activities 24,560,562 82,257 (9,420,096)
--------------------------------------------------------------
Net (decrease) increase in cash (262,711) 346,213 (171,040)
Cash, beginning of year 485,790 139,577 310,617
--------------------------------------------------------------
Cash, end of year $ 223,079 $ 485,790 $ 139,577
==============================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 6,006,433 $ 8,113,973 $ 3,624,586
==============================================================
Income taxes $ 21,639,000 $ 14,869,000 $ 23,552,000
==============================================================
See accompanying independent auditors' report
IV-7
ALFA CORPORATION
SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION
For the years ended December 31, 2001, 2000 and 1999
Other
Future Policy Policy
Deferred Benefits, Claims Premiums
Policy Losses, And And Net
Acquisition Claims And Unearned Benefits Policy Investment
Segment Costs Loss Expenses Premium Payable Charges Income
- ------- ------------- --------------- ------------ -------- ------------ -----------
2001
- ----
Life Insurance $128,766,740 $558,043,631 $ 0 $0 $ 56,006,813 $46,623,273
Property & casualty
insurance 21,053,562 140,174,162 138,384,495 0 396,862,542 31,278,296
Noninsurance
and corporate 0 0 0 0 0 6,812,514
------------ ------------ ------------ -- ------------ -----------
Total $149,820,302 $698,217,793 $138,384,495 $0 $452,869,355 $84,714,083
============ ============ ============ == ============ ===========
2000
- ----
Life Insurance $123,107,799 $507,455,793 $ 0 $0 $ 53,078,123 $41,957,783
Property & casualty
insurance 21,464,215 145,077,064 121,688,810 0 376,118,774 29,645,376
Noninsurance
and corporate 0 0 0 0 0 1,287,958
------------ ------------ ------------ -- ------------ -----------
Total $144,572,014 $652,532,857 $121,688,810 $0 $429,196,897 $72,891,117
============ ============ ============ == ============ ===========
1999
- ----
Life Insurance $117,549,248 $458,830,168 $ 0 $0 $ 48,359,640 $37,873,099
Property & casualty
insurance 18,557,440 143,148,690 114,802,464 0 356,970,311 27,600,849
Noninsurance
and corporate 0 0 0 0 0 2,333,082
------------ ------------ ------------ -- ------------ -----------
Total $136,016,688 $601,978,858 $114,802,464 $0 $405,329,951 $67,807,030
============ ============ ============ == ============ ===========
Benefits Amortization
Claims, Of Deferred
Losses And Policy Other
Settlement Acquisition Operating Premiums
Segment Expenses Costs Expenses Written
- ------- ------------- ---------------- ------------- ---------------
2001
- ----
Life Insurance $ 53,838,049 $ 8,048,303 $ 9,676,175 $ 0
Property & casualty
insurance 259,105,826 66,392,582 39,841,905 403,839,559
Noninsurance
and corporate 0 0 7,884,280 0
------------ ----------- ----------- ------------
Total $312,943,875 $74,440,885 $57,402,360 $403,839,559
============ =========== =========== ============
2000
- ----
Life Insurance $ 48,288,469 $ 7,228,558 $11,219,955 $ 0
Property & casualty
insurance 247,592,086 58,745,118 31,432,839 380,362,518
Noninsurance
and corporate 0 0 7,602,448 0
------------ ----------- ----------- ------------
Total $295,880,555 $65,973,676 $50,255,242 $380,362,518
============ =========== =========== ============
1999
- ----
Life Insurance $ 51,143,122 $ 6,747,130 $ 9,949,006 $ 0
Property & casualty
insurance 232,122,875 53,455,392 30,443,472 363,585,872
Noninsurance
and corporate (1,550,000) 0 4,679,431 0
------------ ----------- ----------- ------------
Total $281,715,997 $60,202,522 $45,071,909 $363,585,872
============ =========== =========== ============
See accompanying independent auditors' report
IV-8
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
For years ended December 31, 2001, 2000 and 1999
Ceded Amount Assumed Percentage of
to from Assumed From
Gross Amount Other Companies Other Companies Net Amount to Net
------------ --------------- ---------------- ---------------- ----------------
2001
- ----
Life insurance in force $17,145,129,689 $1,977,821,759 $ 0 $15,167,307,930 0%
=============================================================================================
Premiums and policy charges:
Life insurance $ 61,672,416 $ 5,739,483 $ 0 $ 55,932,933 0%
Accident and health insurance 73,880 0 0 73,880 0%
Property and liability insurance 71,705,153 71,835,760* 396,993,149* 396,862,542 100%
---------------------------------------------------------------------------------------------
$ 133,451,449 $ 77,575,243 $396,993,149 $ 452,869,355 88%
=============================================================================================
2000
- ----
Life insurance in force $15,317,803,867 $1,713,371,323 $ 0 $13,604,432,544 0%
=============================================================================================
Premiums and policy charges:
Life insurance $ 56,916,973 $ 3,909,913 $ 0 $ 53,007,060 0%
Accident and health insurance 71,063 0 0 71,063 0%
Property and liability insurance 65,034,104 65,172,392* 376,257,062* 376,118,774 100%
---------------------------------------------------------------------------------------------
$ 122,022,140 $ 69,082,305 $376,257,062 $ 429,196,897 88%
=============================================================================================
1999
- ----
Life insurance in force $13,384,834,865 $1,369,300,363 $ 0 $12,015,535,502 0%
=============================================================================================
Premiums and policy charges:
Life insurance $ 51,942,189 $ 3,657,594 $ 0 $ 48,284,595 0%
Accident and health insurance 75,045 0 75,045 0%
Property and liability insurance 60,196,005 60,302,447* 357,076,753* 6,970,311 100%
---------------------------------------------------------------------------------------------
$ 112,213,239 $ 63,960,041 $357,076,753 $ 405,329,951 88%
=============================================================================================
*These amounts are subject to the pooling agreement.
See accompanying independent auditors' report
IV-9
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Additions
-------------------------
Balance Charged Charged Balance
at beginning to costs to other at end
Description of period and expenses accounts Deductions of period
- -----------------------------------------------------------------------------------------------------------------------
2001 Allowance for Loan losses $678,730 $ 641,772 $0 $428,426 $ 892,076
=======================================================================================
2000 Allowance for Loan losses $637,965 $ 634,531 $0 $593,766 $ 678,730
=======================================================================================
2001 Allowance for Lease losses $554,498 $1,196,981 $0 $ 441,438 $1,310,041
=======================================================================================
2000 Allowance for Lease losses $ 0 $ 589,779 $0 $ 35,281 $ 554,498
=======================================================================================
See accompanying independent auditors' report
IV-10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALFA CORPORATION
By /s/ Jerry A. Newby
---------------------------
Jerry A. Newby
President
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Jerry A. Newby Chairman of the Board 3/25/02
- ------------------------- Director and Principal (Date)
(Jerry A. Newby) Executive Officer
/s/ C. Lee Ellis
- ------------------------- Executive Vice President, Operations 3/25/02
(C. Lee Ellis) Treasurer, Director (Date)
(Principal Operations Officer)
/s/ Stephen G. Rutledge Senior Vice President, CFO and 3/25/02
- ------------------------- Chief Investment Officer, (Principal (Date)
(Stephen G. Rutledge) Financial Officer)
/s/ Hal F. Lee Director 3/25/02
- ------------------------- (Date)
(Hal F. Lee)
/s/ James A. Tolar, Jr. Director 3/25/02
- ------------------------- (Date)
(James A. Tolar, Jr.)
/s/ Steve Dunn Director 3/25/02
- ------------------------- (Date)
(Steve Dunn)
/s/ Dean Wysner Director 3/25/02
- ------------------------- (Date)
(Dean Wysner)
/s/ Russell R. Wiggins Director 3/25/02
- -------------------------- (Date)
(Russell R. Wiggins)
/s/ James I. Harrison, Jr. Director 3/25/02
- -------------------------- (Date)
(James I. Harrison, Jr.)
/s/ John R. Thomas Director 3/25/02
- -------------------------- (Date)
(John R. Thomas)
/s/ B. Phil Richardson Director 3/25/02
- -------------------------- (Date)
(B. Phil Richardson)
/s/ Boyd E. Christenberry Director 3/25/02
- -------------------------- (Date)
(Boyd E. Christenberry)