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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, 1995 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
- ---------------------------------------- --------------
(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
----
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $1.00 per share
---------------------------------------
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 29, 1996, was
$255,880,872.
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, 1995
----------------------------- -----------------------------
Common Stock, $1.00 par value 40,785,912 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's annual report to security holders for the fiscal year
ended December 31, 1995, and proxy statement for the annual meeting of
stockholders to be held April 18, 1996, are incorporated by reference into Part
II and Part III.
Total pages included in this filing - 23 pages
Exhibit index - Page 12
Part I
------
Item 1. Business.
--------
(a) General Development of Business. Alfa Corporation is a holding
-------------------------------
company for Alfa Life Insurance Corporation (Life), Alfa Insurance Corporation
(AIC), Alfa General Insurance Corporation (AGI), Alfa Financial Corporation
(AFC), Alfa Investment Corporation, Alfa Realty, Inc. (ARI), and Alfa Agency
Mississippi, Inc. The Registrant's property and casualty insurance subsidiaries
are rated "A++ Superior" and its life subsidiary is rated "A+ Superior" by A. M.
Best Company, the leading rating organization in the insurance industry. The
Registrant's commercial paper ratings are A-1+ by Standard & Poors and P-1 by
Moody's Investors Service. The commercial paper is guaranteed by an affiliate,
Alfa Mutual Insurance Company.
Until August 1, 1987, Registrant's life insurance subsidiary was its
principal source of revenue. Effective that date Registrant's property and
casualty subsidiaries entered into a pooling agreement with Alfa Mutual
Insurance Company (Mutual), Alfa Mutual Fire Insurance Company (Fire) and Alfa
Mutual General Insurance Company (General) (collectively referred to as Mutual
Group) pursuant to which premiums, losses, loss adjustment expenses and other
underwriting expenses attributable to the direct property and casualty insurance
business of each party are pooled and reallocated among the parties. Under the
pooling agreement, sixty five percent of the pooled business is allocated to
Registrant's subsidiaries, Alfa Insurance Corporation and Alfa General Insurance
Corporation.
The majority of the Company's Property Casualty Premiums are derived from
the Company's participation in the Pooling Agreement.
(b) Information as to Industry Segments. Prior to August 1, 1987,
-----------------------------------
Registrant considered it operated in one main reportable segment, that being the
life insurance industry which is operated through its subsidiary, Life.
Effective August 1, 1987, Registrant entered into a property and casualty
Pooling Agreement. Because of the Pooling Agreement, Registrant substantially
increased its property and casualty insurance business. As a result Registrant
is now engaged in two major industry segments, the life and property and
casualty insurance industries. The Information as to Industry Segments
contained in Note 13 to Financial Statements on page 37 of Registrant's Annual
Report is incorporated herein by reference.
(c) Narrative Description of Business. Registrant is a holding company
---------------------------------
organized and existing under the laws of the State of Delaware. Until August 1,
1987, Registrant's life insurance business was its principal source of revenue.
Life directly writes individual life insurance policies consisting primarily of
ordinary whole life, term life, interest sensitive whole life and universal life
products. Life maintains an agency force in Alabama, Georgia and Mississippi.
(i) Life offers several different types of whole life and term
insurance products. As of December 31, 1995, Life had in excess of $8.6
billion of life insurance in force. As of December 31, for each year
indicated the Company had insurance in force as follows:
1995 1994 1993
---------- ---------- ----------
(in thousands)
[S] [C] [C] [C]
Ordinary Life $8,313,698 $7,553,056 $6,782,539
Credit Life $ 14,382 $ 19,499 $ 9,326
Group Life $ 314,826 $ 295,254 $ 272,470
I-1
The following table shows Life's premiums and policy charges by type of policy
and life insurance operating income for the years ended December 31, 1995, 1994,
and 1993:
Years Ended December 31,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Premiums and Policy Charges
Universal life $ 8,789 $ 7,876 $ 6,354
Interest sensitive life 7,991 7,705 7,361
Traditional life 18,320 17,224 17,141
-------------------------
Total $35,100 $32,805 $30,856
=========================
Operating income $13,205 $12,039 $14,520
=========================
Life generally reinsures all life insurance risks in excess of
$200,000 on any one life. The purpose of this is to limit the liability of Life
with respect to any one risk and afford it a greater diversification of its
exposure. When Life reinsures a portion of its risk it must cede the premium
income to the company who reinsures the risk, thereby decreasing the income of
Registrant.
Life performs various underwriting procedures and blood testing for
AIDS and other diseases before issuance of insurance.
In addition to the income from premiums of life insurance contracts,
Life's income is directly affected by its investment income or loss from its
investment portfolio. The capital and reserves of the Registrant 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 are qualified state, municipal and federal obligations,
high quality corporate bonds and stocks, mortgage backed securities, mortgages
and certain other assets.
Property and Casualty Insurance. Registrant's two property and
--------------------------------
casualty subsidiaries, Alfa Insurance Corporation and Alfa General Insurance
Corporation, are direct writers of preferred and standard risk property and
casualty insurance in Georgia and Mississippi. Registrant's business is
predominantly in personal, rather than commercial lines, including automobile,
homeowner and fire insurance and similar policies. These companies also write
limited commercial lines (church and business owner's insurance). Registrant
also assumes property and liability insurance written in Alabama through the
pooling agreement.
I-2
The following table sets forth the components of property and casualty
insurance earned premiums, net underwriting income, underwriting margin and
operating income for the years ended December 31, 1995, 1994 and 1993 including
the business written through the property and casualty pooling agreement:
Years Ended December 31,
-------------------------------
1995 1994 1993
-------- ------- -------
(in thousands)
Earned Premiums
Personal lines $270,109 $208,358 $181,686
Commercial lines 10,606 8,524 8,920
Pools, associations
and fees 3,709 2,920 2,541
Reinsurance ceded (11,435) (5,476) (4,090)
-------------------------------
Total $272,989 $214,326 $189,057
===============================
Net Underwriting Income (Loss) $(10,598) $ 10,793 $ 17,217
===============================
Underwriting Margin (3.9%) 5.0% 9.1%
===============================
Operating Income $ 8,182 $ 20,179 $ 24,144
===============================
Pooling Agreement. Effective August 1, 1987, the Registrant's
-----------------
property and casualty insurance subsidiaries entered into the Pooling Agreement
with Mutual, Fire, and General. Under the terms of the Pooling Agreement, the
Registrant ceded to Mutual all of its property and casualty insurance business
in force and written on or after August 1, 1987, net of reinsurance ceded to
others. All of the Mutual Group's direct property and casualty insurance
business, net of such reinsurance, in force or written on or after such date, is
also included in the pool. Mutual retrocedes 65% of the pooled premiums,
losses, loss adjustment expenses and other underwriting expenses to Registrant.
The Pooling Agreement enabled Registrant, in effect, to expand its property and
casualty insurance revenues and to spread and stabilize the underwriting risks
borne by each party through the creation of a larger and more diversified risk
pool.
The Boards of Directors of Mutual, Fire and General and of the
Registrant'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 determined that its implementation did not require its 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 Registrant and
Goodwin Myrick, 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
Registrant 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 Registrant 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 direct underwriting ratios for
the Pooled Business as long as the Pooling Agreement remains in effect.
I-3
The participation of Registrant 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 Registrant'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 Registrant's earnings. Participants' respective
abilities to share in the Pooled Business are subject to regulatory capital
requirements.
Relationship with Mutual Group. The Registrant'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 Registrant
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 Registrant.
Mutual periodically conducts time usage and related expense allocation
studies. Mutual charges Registrant for its allocable and directly attributable
salaries and other expenses, including office facilities in Montgomery, Alabama.
The Board of Directors of Registrant consisted at year end of eleven
members, six of whom serve on the Executive Committee of the Boards of Mutual,
Fire and General and two of whom are Executive Officers of Registrant.
Mutual owns 16,201,538 shares, or 39.72%, and Fire owns 4,515,286
shares, or 11.07%, of Registrant's Outstanding Common Stock.
Other Business
- --------------
Registrant operates five other subsidiaries which are not considered
to be significant by SEC Regulations. These subsidiaries are Alfa Financial
Corporation (AFC), a lending 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, and Alfa
Agency Mississippi, Inc.
AFC is a lending institution engaged principally in making consumer
loans. These loans are available through substantially all agency offices of
Registrant.
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 and Autauga County, Alabama, areas.
Alfa Agency Mississippi Inc. places substandard insurance risks with
third party insurers for a commission.
(ii) - (ix). Not applicable.
I-4
(x) Both the life and property and casualty insurance businesses are
highly competitive. There are numerous insurance companies in Registrant's area
of operation and throughout the United States. Many of the companies which are
in direct competition with the Registrant 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 Registrant. In its life and property and casualty insurance businesses,
Registrant competes with other insurers in the sale of insurance products to
consumers and the recruitment and retention of qualified agents. Registrant
believes that the main competitive factors in its business are price, name
recognition and service. Registrant believes that it competes effectively in
these areas in Alabama. In Georgia and Mississippi, however, the Registrant's
name is not as well recognized.
Registrant'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 and the
benefit of policyholders, periodic examination of the affairs and financial
condition of the Registrant, annual and other reports required to be filed on
the financial condition and operation of the Registrant. Life insurance rates
are generally not subject to prior regulatory approval. Rates of property and
casualty insurance are subject to regulation and approval of regulatory
authorities.
The Mutual Group and Registrant'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.
(xi-xii) Not applicable.
(xiii) The Registrant has no management or operational employees.
Registrant and its subsidiaries have a Management and Operating Agreement with
Mutual whereby Registrant and its subsidiaries reimburse Mutual for salaries and
expenses of employees provided to Registrant 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, 1995, Registrant
was represented by 469 agents in Alabama who are employees of Mutual.
Registrant's property and casualty subsidiaries had 116 independent exclusive
agents in Georgia and Mississippi at December 31, 1995.
Item 2. Properties.
----------
(a) Physical Properties of Registrant and Its Subsidiaries. The
-------------------------------------------------------
Registrant leases it home office facilities in Montgomery, Alabama,from Mutual.
Registrant and its subsidiaries own several investment properties,
none of which are material to Registrant's business.
(b) Oil and Gas Operations. Not applicable.
----------------------
I-5
Item 3. Legal Proceedings.
-----------------
Various legal proceedings arising during the normal course of business
with policyholders and agents are in process at December 31, 1995. Based upon
information presently available, applicable law and the defenses available to
Alfa Corporation and its subsidiaries, management does not consider that
contingent liabilities which might arise from pending litigation are material in
relation to the financial position, results of operations or cash flows of the
Company. Management's opinion is based upon the Company's experience in dealing
with such claims and the historical results of such claims against the Company.
However, it should be noted that in Alabama, where Alfa Corporation has
substantial business, the frequency of large punitive damage awards, bearing
little or no relation to actual damages awarded by juries, continues to
increase.
Item 4. Submission of Matters to Vote of Security Holders.
-------------------------------------------------
Not applicable.
Executive Officers of the Registrant:
- ------------------------------------
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 18, 1996.
The following is a list of name and ages of all of the executive
officers of the Registrant indicating all positions and offices with the
Registrant 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 Registrant.
I-6
NAME AGE POSITION SINCE
- ---- --- -------- -----
Goodwin L. Myrick 70 Director; Chairman of the Board and President, since 1978; 1973
President of its Subsidiaries and associated companies;
President Alabama Farmers Federation.
B. Phil Richardson 70 Director; Executive Vice President, Operations 1979
of Alfa Corporation and its subsidiaries;
Vice President, Treasurer.
Bill Harper, Jr. 51 Senior Vice President, Life Operations of Alfa Life 1986
Insurance Corporation Vice President, of Alfa
Financial Corporation since 1978.
C. Lee Ellis 44 Executive Vice President, Investments. 1983
Prior to 1993, Senior Vice President, Investments.
Donald Price 44 Senior Vice President, Finance and 1984
Chief Financial Officer.
John Holley 40 Vice President and Controller, Director Financial Relations 1986
Chief Accounting Officer.
Al Dees 49 Executive Vice President, Marketing 1993
Prior to 1993 Vice President Georgia and
Mississippi Marketing.
Ken Wallis 54 Secretary and General Counsel. 1993
Prior to 1993 Vice President, Government Relations.
James Azar 59 Senior Vice President, Planning 1979
Terry McCollum 59 Senior Vice President, Claims 1979
Bill Oswalt 62 Senior Vice President, Underwriting 1979
I-7
Part II
-------
Item 5. Market for Registrant's Common Stock and Related Security Holder
----------------------------------------------------------------
Matters.
--------
The "Stockholder Information" section on the Inside Back Cover of
Registrant's annual report to security holders for the fiscal year ended
December 31, 1995, is incorporated herein by reference.
Item 6. Selected Financial Data.
------------------------
The "Selected Financial Data" section on pages 6 and 7 of the
Registrant's annual report to security holders for the year ended December 31,
1995, 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 14 through
20 of the Registrant's annual report to security holders for the fiscal year
ended December 31, 1995, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The Financial Statements on pages 21 through 40 of the Registrant's
annual report to security holders for the fiscal year ended December 31, 1995,
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 Registrant.
--------------------------------------------------
For information with respect to the Executive Officers of the
Registrant see Executive Officers of the Registrant at the end of Part I of this
Report. For information with respect to the Directors of the Registrant, see
Election of Directors on Page 2 of the Proxy statement for the annual meeting of
stockholders to be held April 18, 1996, which is incorporated herein by
reference.
Item 11. Executive Compensation.
----------------------
The information set forth under the caption "Executive Compensation"
on Page 6 of the Proxy Statement for the annual meeting of stockholders to be
held April 18, 1996, 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 1 through 3 of the Proxy Statement
for the annual meeting of stockholders to be held April 18, 1996, 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 6 of the Proxy Statement for the annual meeting of stockholders to be
held April 18, 1996, 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.
--------------------
Report of Independent Certified Public
Accountants for 1995, 1994, and 1993.
Consolidated Balance Sheets as of
December 31, 1995 and 1994.
Consolidated Statements of Income for the three years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the three years
ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Selected Quarterly Financial Data.
2. Financial Statement Schedules.
-----------------------------
Included in Part IV of this report:
Page
----
Reports on Financial Statements and Financial Statement Schedules
of Independent Certified Public Accountants for 1995, 1994 and 1993. IV-3
Schedule I - Summary of Investments Other Than Investments in
Related Parties for the year ended December 31, 1995 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, 1995,
1994 and 1993 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 Registrant are incorporated by
reference from Registrant'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 Registrant's 10-K for the year
ended December 31, 1992.
(10(b)) - Insurance Pooling Agreement is
incorporated by reference from
registrant's 10-K for the year ended
December 31, 1987.
Exhibit (13) - Registrant's Annual Report to Security
Holders for the fiscal year ended
December 31, 1995. 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 registrant's 10-K for
the year ended December 31, 1993.
Exhibit (24) - Consents of Independent Accountants
(b) Reports on Form 8-K.
-------------------
An 8-K report was filed on May 22, 1995 reporting a
change in certifying accountants from Coopers & Lybrand
L.L.P. to KPMG Peat Marwick LLP .
IV-2
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors
Alfa Corporation
Montgomery, Alabama:
We have audited the accompanying consolidated balance sheet of Alfa Corporation
and subsidiaries (the Company) as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alfa
Corporation and subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audit for the year ended December 31, 1995, was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
supplementary information included in Schedules I through V for the year ended
December 31, 1995, 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 audit 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 for the year ended
December 31, 1995.
KPMG Peat Marwick LLP
Birmingham, Alabama
January 31, 1996
IV-3(a)
Report of Independent Accountants
To the Stockholders and Board of Directors
Alfa Corporation
Montgomery, Alabama
We have audited the consolidated financial statements and the financial
statement schedules of Alfa Corporation and subsidiaries (the Company) as of
December 31, 1994 and for each of the years ended December 31, 1994 and 1993 as
listed in the index on page IV-1 of this Form 10-K. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial statement schedules
referred to above present fairly, in all material respects, the financial
position of Alfa Corporation and its subsidiaries as of December 31, 1994 and
the results of its operations and its cash flows for the years ended December
31, 1994 and 1993 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for certain investments in debt and equity
securities in 1994 and in 1993 the Company changed its methods of accounting for
income taxes, postretirement benefits other than pensions, and for certain
reinsurance contracts to comply with new Financial Accounting Standards Board
pronouncements.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
February 2, 1995
IV-3(b)
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
FOR THE YEAR ENDED DECEMBER 31, 1995
------------
Amount At
Cost Or Which Shown
Amortized Market In Balance
Type Of Investment Cost Value Sheet
- ------------------ ------------ ------------ ------------
Fixed maturities:
Bonds:
United States Government
and government agencies $ 63,606,264 $ 69,739,296 $ 69,739,296
States, municipalities and
political subdivisions 89,129,790 94,480,408 94,480,408
Public utilities 20,497,766 21,089,250 21,089,250
All other corporate bonds 126,092,593 139,154,137 139,154,137
Mortgage-backed securities 238,897,886 247,141,713 246,872,464
Redeemable preferred stocks 4,704,630 4,779,162 4,779,162
------------ ------------ ------------
Total fixed maturities 542,928,929 576,383,966 576,114,717
------------ ------------ ------------
Equity securities:
Common stocks:
Public utilities 9,941,759 12,411,810 12,411,810
Banks, trusts and insurance
companies 9,113,562 17,177,032 17,177,032
Industrial, miscellaneous
and all other 39,190,866 56,187,122 56,187,122
Nonredeemable preferred stocks 3,001,000 3,238,500 3,238,500
------------ ------------ ------------
Total equity securities 61,247,187 89,014,464 89,014,464
------------ ------------ ------------
Mortgage loans on real estate 995,777 995,777
Real estate 1,829,363 1,829,363
Policy loans 29,084,753 29,084,753
Other long-term investments 111,073,137 111,073,137
Short-term investments 33,010,906 33,010,906
------------ ------------
Total investments $780,170,052 $841,123,117
============ ============
IV-4
ALFA CORPORATION (PARENT COMPANY)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
------------
1995 1994
------------ ------------
ASSETS
Cash $ 28,271 $ 88,289
Short-term investments 437,090 82,516
Investment in subsidiaries 342,291,962 289,176,810
Note receivable from subsidiary 54,445,000
Accounts receivable and other assets 283,274 28,161
------------ ------------
Total assets $397,485,597 $289,375,776
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper $ 81,949,616
Notes payable 4,600,000 $ 31,613,665
Other liabilities 2,326,237 2,776,665
------------ ------------
Total liabilities 88,875,853 34,390,330
------------ ------------
Common stock, $1 par value, shares
authorized - 110,000,000;
issued - 41,891,512
outstanding - 40,785,912 41,891,512 41,891,512
Capital in excess of par value 21,276,023 21,276,023
Net unrealized investment (losses) gains 35,620,863 (10,980,201)
Retained earnings 214,453,116 207,429,882
Treasury stock, at cost, 1,105,600 shares; (4,631,770) (4,631,770)
------------ ------------
Total stockholders' equity 308,609,744 254,985,446
------------ ------------
Total liabilities and stockholders' equity $397,485,597 $289,375,776
============ ============
IV-5
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
-------------
1995 1994 1993
----------- ----------- -----------
Revenues:
Dividends from subsidiaries $19,415,006 $16,241,650 $13,722,532
Interest from subsidiary 2,708,256
Other interest 25,171 1,456 974
Expenses:
Other expenses 6,071,779 3,596,198 1,814,621
----------- ----------- -----------
Income before equity in
undistributed income
of subsidiaries 16,076,654 12,646,908 11,908,885
Equity in undistributed income
of subsidiaries 6,241,217 20,219,830 33,051,345
----------- ----------- -----------
Net income $22,317,951 $32,866,738 $44,960,230
=========== =========== ===========
IV-6
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
------------- ------------- -------------
Cash flows from operating activities:
Net income $ 22,317,951 $ 32,866,738 $ 44,960,230
------------ ------------ ------------
Adjustments to reconcile net
income to net cash provided by
operating activities:
Undistributed earnings of
subsidiaries (6,241,297) (20,219,830) (33,051,345)
Increase in other assets
and accounts receivable (255,113) (13,001) (15,000)
Increase (decrease) in other
liabilities (450,428) 1,202,683 792,331
------------ ------------ ------------
Total adjustments (6,946,838) (19,030,148) (32,274,014)
------------ ------------ ------------
Net cash provided by
operating activities 15,371,113 13,836,590 12,686,216
------------ ------------ ------------
Cash flows from investing activities:
Increase in note receivable from subsidiary (54,445,000)
Net increase in short-term investments (354,574) (81,963) (480)
Other (272,790) (4,925) (1,023,222)
------------ ------------ ------------
Net cash used in investing activities (55,072,264) (86,888) (1,023,702)
------------ ------------ ------------
Cash flows from financing activities:
Increase in commercial paper 81,949,616
Net increase (decrease) in notes payable (27,013,665) 198,665 (205,000)
Dividends to stockholders (15,294,718) (13,969,175) (11,420,057)
------------ ------------ ------------
Net cash provided by (used in) financing activities 39,641,233 (13,770,510) (11,625,057)
------------ ------------ ------------
Net (decrease) increase in cash (60,018) (20,808) 37,457
Cash, beginning of year 88,289 109,097 71,640
------------ ------------ ------------
Cash, end of year $ 28,271 $ 88,289 $ 109,097
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,470,881 $ 1,545,255 $ 1,186,663
============ ============ ============
Income taxes $ 7,888,000 $ 13,927,719 $ 12,581,159
============ ============ ============
IV-7
ALFA CORPORATION
SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Other
Future Policy Policy
Deferred Benefits, Claims
Policy Losses, And
Segment Acquisition Claims And Unearned Benefits
1995 Costs Loss Expenses Premium Payable
- ------- ----------- ------------ ---------- -------------
Life Insurance $75,410,879 $294,049,256 $ 0 $0
Property &
casualty
insurance 13,745,663 108,303,253 85,306,194 0
Noninsurance
and corporate 0 0 0 0
----------- ------------ ----------- --
Total $89,156,542 $402,352,509 $85,306,194 $0
=========== ============ =========== ==
1994
- -------
Life Insurance $75,551,400 $262,017,490 $ 0 $0
Property &
casualty
insurance 13,461,166 88,486,091 79,426,172 0
Noninsurance
and corporate 0 0 0 0
----------- ------------ ----------- --
Total $89,012,566 $350,503,581 $79,426,172 $0
=========== ============ =========== ==
1993
- -------
Life insurance $68,825,574 $232,379,119 $ 0 $0
Property &
casualty
insurance 9,707,852 77,984,288 57,077,350 0
Noninsurance
and corporate 0 0 0 0
----------- ------------ ----------- --
Total $78,533,426 $310,363,407 $57,077,350 $0
=========== ============ =========== ==
Benefits Amortization
Premiums Claims, Of Deferred
And Net Losses And Policy Other
Segment Policy Investment Settlement Acquisition Operating Premiums
1995 Charges Income Expenses Costs Expenses Written
- ------- ------------ ---------- ------------ ------------ ----------- ------------
Life Insurance $ 35,099,995 $27,620,913 $ 29,301,615 $ 5,504,517 $ 6,077,846 $ 0
Property &
casualty
insurance 272,988,974 20,996,611 220,330,040 41,857,226 24,957,163 286,483,508
Noninsurance
and corporate 0 2,305,583 0 0 727,145 0
------------ ----------- ------------ ----------- ----------- ------------
Total $308,088,969 $50,923,107 $249,631,655 $47,361,743 $31,762,164 $286,483,508
============ =========== ============ =========== =========== ============
1994
- -------
Life Insurance $ 32,805,431 $25,729,717 $ 26,960,413 $ 4,832,612 $ 6,196,441 $ 0
Property &
casualty
insurance 214,325,192 17,405,225 154,656,527 32,913,610 19,351,233 234,392,978
Noninsurance
and corporate 0 2,418,719 1,000,000 0 (329,479) 0
------------ ----------- ------------ ----------- ----------- ------------
Total $247,130,623 $45,553,661 $182,616,940 $37,746,222 $25,218,195 $234,392,978
============ =========== ============ =========== =========== ============
1993
- -------
Life insurance $ 30,856,337 $25,530,790 $ 24,007,967 $ 4,159,869 $ 4,926,546 $ 0
Property &
casualty
insurance 189,056,892 17,185,737 130,592,373 27,027,526 15,459,954 189,934,400
Noninsurance
and corporate 0 2,185,422 0 0 (374,412) 0
------------ ----------- ------------ ----------- ----------- ------------
Total $219,913,229 $44,901,949 $154,600,340 $31,187,395 $20,760,912 $189,934,400
============ =========== ============ =========== =========== ============
IV-8
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Percentage of
Ceded to Amount Assumed by Assumed From
Gross Amount Other Companies Other Companies Net Amount to Net
-------------- ------------------ ---------------- -------------- ------------
1995
- ----------
Life insurance in force $9,534,858,844 $891,952,000 $ 0 $8,642,906,844 0%
============== ============ ============ ============== ===
Premiums and policy charges:
Life Insurance $ 37,735,370 $ 2,735,919 $ 34,999,451 0%
Accident and health insurance 100,544 100,544 0%
Property and liability insurance 42,029,253 52,264,315* $283,224,036* 272,988,974 104%
-------------- ------------ ------------ -------------- ---
$ 79,865,167 $ 55,000,234 $283,224,036 $ 308,088,969 92%
============== ============ ============ ============== ===
1994
- ----------
Life insurance in force $8,638,808,254 $771,000,000 $ 0 $7,867,808,254 0%
============== ============ ============ ============== ===
Premiums and policy charges:
Life Insurance $ 35,195,373 $ 2,535,275 $ 32,660,098 0%
Acccident and health insurance 145,333 145,333 0%
Property and liability insurance 36,961,724 42,485,376* $219,848,844* 214,325,192 103%
-------------- ------------ ------------ -------------- ---
$ 72,302,430 $ 45,020,651 $219,848,844 $ 247,130,623 89%
============== ============ ============ ============== ===
1993
- ----------
Life insurance in force $7,749,942,364 $685,607,000 $ 0 $7,064,335,364 0%
============== ============ ============ ============== ===
Premiums and policy charges:
Life insurance $ 33,009,114 $ 2,293,796 $ 30,715,318 0%
Accident and health insurance 141,019 141,019 0%
Property and liability insurance 32,539,660 34,836,237* $191,353,469* 189,056,892 101%
-------------- ------------ ------------ -------------- ---
$ 65,689,793 $ 37,130,033 $191,353,469 $ 219,913,229 87%
============== ============ ============ ============== ===
- --------------
*These amounts are subject to the pooling agreement.
IV-9
ALFA CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
ADDITIONS
BALANCE ---------------------------------
AT BEGINNING CHARGED TO COSTS CHARGED TO BALANCE
DESCRIPTION OF PERIOD AND EXPENSES OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
- ------------- --------------- ---------------- -------------- ---------- -------------
1995 Reserve for loan losses $769,544 $454,952 $248,397 $976,100
======== ======== ======== ========
1994 Reserve for loan losses $453,900 $315,644 $769,544
======== ======== ========
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/ Goodwin L. Myrick
--------------------------------------
Goodwin L. Myrick
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.
Chairman of the Board
/s/ Goodwin L. Myrick Director and Principal
- -------------------------- Executive Officer ---------
(Goodwin L. Myrick) (Date)
Senior Vice President,
/s/ Donald Price Finance, (Principal
- -------------------------- Financial Officer) ---------
(Donald Price) (Date)
/s/ John D. Holley Vice President and
- -------------------------- Controller --------
(John D. Holley) (Date)
/s/ Jerry A. Newby
- -------------------------- Director --------
(Jerry A. Newby) (Date)
/s/ James E. Mobley
- -------------------------- Director --------
(James E. Mobley) (Date)
/s/ James A. Tolar, Jr.
- -------------------------- Director --------
(James A. Tolar, Jr.) (Date)
/s/ John W. Morris
- -------------------------- Director --------
(John W. Morris) (Date)
/s/ Milborn N. Chesser
- -------------------------- Director --------
(Milborn N. Chesser) (Date)
/s/ James I. Harrison, Jr.
- -------------------------- Director --------
(James I. Harrison, Jr.) (Date)
/s/ Young J. Boozer
- -------------------------- Director --------
(Young J. Boozer) (Date)
/s/ John R. Thomas
- -------------------------- Director --------
(John R. Thomas) (Date)
/s/ B. Phil Richardson
- -------------------------- Director --------
(B. Phil Richardson) (Date)
/s/ Boyd E. Christenberry
- -------------------------- Director --------
(Boyd E. Christenberry) (Date)
/s/ Thomas H. Miller
- -------------------------- Director --------
(Thomas H. Miller) (Date)