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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
/XX/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-5846
THE LIBERTY CORPORATION
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(Exact name of Registrant as specified in its charter)
South Carolina 57-0507055
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 789, Wade Hampton Boulevard, Greenville, S. C. 29602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 268-8436
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, no par value per share New York Stock Exchange
Rights to Purchase Series A
Participating Cumulative Preferred Stock New York Stock Exchange
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 the filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 1994:
Common Stock, No Par Value $385,685,000
The number of shares outstanding of each of Registrant's classes of common
stock as of March 15, 1994:
Common Stock, No Par Value 19,565,002
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Liberty Corporation Annual Report to Shareholders for the
year ended December 31, 1993 are incorporated into Part II, Items 5, 6, 7, and
8 by reference.
Portions of The Liberty Corporation Proxy Statement for the Annual Meeting
of Shareholders on May 3, 1994 are incorporated into Part III, Items 10, 11,
12, and 13 by reference.
This report is comprised of pages 1 through 237. The exhibit index is on page
34.
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PART I
ITEM 1. BUSINESS
GENERAL
The Registrant, The Liberty Corporation ("the Company") is a holding
company engaged through its subsidiaries primarily in the insurance and
broadcasting businesses. The Company's primary insurance subsidiaries are
Liberty Life Insurance Company ("Liberty Life"), Pierce National Life Insurance
Company ("Pierce National") and, as of late February 1994, North American
National Corporation ("North American") and American Funeral Assurance Company
("American Funeral"). North American's insurance subsidiaries are Pan Western
Life Insurance Company, Brookings International Life Insurance Company and
Howard Life Insurance Company. Together, these insurance subsidiaries offer a
diverse portfolio of individual life and health insurance products. In 1991,
the Company organized Liberty Insurance Services Corporation ("Liberty
Insurance Services") to provide home office support services for unaffiliated
life and health insurance companies, as well as for the Company's insurance
subsidiaries. Other subsidiaries of the Company provide investment advisory
services to the Company's insurance subsidiaries and unaffiliated insurance
companies, and property development and management services to the Company.
The Company's broadcasting subsidiary, Cosmos Broadcasting Corporation
("Cosmos"), currently owns and operates seven network affiliated television
stations, six of which were ranked No. 1 in their markets in the November 1993
Nielsen ratings for sign-on to sign-off.
STRATEGY; RECENT DEVELOPMENTS
The Company's principal strategy is to grow internally and through
insurance acquisitions, while maintaining its emphasis on cost controls.
Management believes that the continuing consolidation in the life insurance
industry presents attractive opportunities for the Company to acquire insurance
companies and blocks of business that complement or fit with the Company's
existing marketing divisions and product lines. As summarized in the table on
the following page, the Company completed two such acquisitions in 1991, two
acquisitions in 1992, one acquisition in 1993 and two acquisitions thus far in
1994, in addition to one pending acquisition which is subject to shareholder
approval and other conditions.
The Company's acquisition strategy has focused on both the home service
and pre-need businesses. Home service business represents the Company's
primary core business, whereas the pre-need business is a relatively new line
of business for the Company. The Company largely entered the pre-need business
with the acquisition of Pierce National in July 1992. Pierce National is a
major provider of pre-need life insurance, a product which pre-funds funeral
services. The Company believes that the pre-need business has favorable
demographics which can provide attractive future premium and earnings growth.
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Recent and Pending Insurance Acquisitions
Annual Premiums
Acquired
or Proposed
Transaction Date to be Acquired
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Acquisition through reinsurance of a block July 1991 $16 million(1)(2)
of home service business from Kentucky
Central Life Insurance Company
Acquisition through reinsurance of a block December 1991 $21 million(1)
of mortgage protection insurance from
Integon Life Insurance Corporation
Acquisition of Pierce National Life July 1992 $31 million(1)
Insurance Company, a California based (includes $6 million of
provider of pre-need life insurance single pay premiums)
Acquisition of Magnolia Financial October 1992 $15 million(1)
Corporation and its subsidiary, Magnolia
Life Insurance Company, a Louisiana based
provider of primarily home service life
insurance
Acquisition of assets and block of April 1993 $7 million(3)
insurance business from Estate Assurance (includes $6 million of
Company, a Louisiana based provider of single pay premiums)
pre-need life insurance
Acquisition of North American National February 1994 $24 million(3)
Corporation and its subsidiaries, an Ohio (includes $5 million of
based holding company with insurance single pay premiums)
subsidiaries based in Ohio, Colorado and
North Dakota that provide primarily pre-
need and other ordinary life insurance and
accident and health insurance
Acquisition of American Funeral February $59 million(3)
Assurance Company, a Mississippi 1994 (includes $44 million
based provider of primarily pre-need life of single pay premiums)
insurance
Acquisition of State National Capital Pending $10 million(3)
Corporation and its subsidiaries, a
Louisiana based provider of primarily home
service insurance
(1) Represents amount of annualized premiums acquired at the time of
acquisition.
(2) Net of annual premiums associated with western portion of Kentucky Central
block of business, which the Company sold in December 1991.
(3) Represents amount of annual premiums reported by the selling company in
its 1992 annual financial statements filed under applicable statutory
requirements. See "Additional Information Regarding Recent and Pending
Acquisitions" for information regarding the relative profitability and
other factors affecting the value of these annual premiums.
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ADDITIONAL INFORMATION REGARDING RECENT AND PENDING ACQUISITIONS. The
Company's very recent acquisitions of North American National Corporation and
American Funeral Assurance Company in addition to its 1993 acquisition of the
business of Estate Assurance Company, expand significantly the Company's
pre-need life insurance business that is presently conducted primarily through
Pierce National. The Company believes that its combined pre-need operation is
the second largest distributor of pre-need insurance in the U.S. The Company
is in the process of studying marketing territories and product lines of Pierce
National and the recent pre-need acquisitions with the objective of developing
an optimal strategy to grow its pre-need business. While no final plans are
formalized, it is anticipated that there will be a realignment of territories
and product lines and consolidation of corporate entities.
NORTH AMERICAN. North American was acquired by the Company on
February 23, 1994. A wholly owned subsidiary of the Company merged into North
American, and the shareholders of North American received $14.75 in cash for
each outstanding share of North American, which resulted in approximately $51.9
million in cash being paid by the Company in this transaction. Prior to its
acquisition by the Company, North American was a publicly held holding company
with three principal insurance subsidiaries --- Pan-Western Life Insurance
Company ("Pan-Western"), Brookings International Life Insurance Company
("Brookings") and Howard Life Insurance Company ("Howard Life"). North
American, through its subsidiaries, provides several types of individual
insurance, the most significant of which are ordinary life insurance and
accident and health insurance. Pan-Western is licensed to transact most types
of insurance customarily written by life insurers, but principally writes
ordinary whole life insurance. Insurance providing funding for pre-arranged
funeral contracts and pre-funded funeral benefits presently constitutes 21% of
the total insurance in force of Pan-Western and, in fiscal year 1993,
contributed approximately 71% of its premium revenues. Pan-Western actively
writes insurance in Illinois, Indiana, Iowa, Maryland, Ohio and Pennsylvania,
and is licensed in twelve additional states. However, Ohio accounted for
approximately 50% of Pan-Western's premium volume (gross) during 1993.
Pan-Western has under contract approximately 500 independent agents, who may
represent more than one insurer. Brookings, a wholly-owned subsidiary of
Pan-Western, is licensed to transact all types of insurance normally written by
life insurers, but a significant, although decreasing, amount of Brookings'
insurance in force consists of Student Modified Life Insurance Policies written
on the lives of students, which are modified whole-life policies providing for
lower premium rates until the insured obtains a specific age and providing for
normal whole-life rates thereafter. In addition to student life insurance,
Brookings writes ordinary whole life insurance on the lives of adults and other
term life insurance and accident and health insurance. Brookings also markets
in Nebraska, North Dakota and South Dakota certain ordinary whole life
insurance products that provide pre-funded funeral benefits and funding for
pre-arranged funeral contracts. Such policies presently constitute 19% of the
total insurance in force of Brookings and, in fiscal year 1993, constituted
approximately 85% of its premium revenues. Brookings is licensed to transact
insurance in 12 states, although most insurance written by Brookings is
produced in South Dakota, the state of its domicile. Brookings is affiliated
with approximately 100 independent agents and brokers who may represent more
than one insurer. Howard Life is a Colorado life insurer that was acquired by
Pan-Western in February 1993. Howard Life, which primarily writes pre-need
life insurance, is licensed to transact insurance in 21 states. Howard Life is
in the process of being consolidated with one of the Company's other pre-need
insurance subsidiaries.
AMERICAN FUNERAL. On February 24, 1994, the Company acquired American
Funeral Assurance Company ("American") in a transaction in which a newly
created, wholly owned subsidiary of the Company merged into American. The
merger consideration was paid with a combination of cash and Preferred Stock
1994-B Series of the Company, having an aggregate value of approximately $28.1
million. American will further expand the Company's pre-need life insurance
business. American Funeral is headquartered in Amory, Mississippi, and offers
a portfolio of whole life, term, limited pay life, single premium and
industrial life insurance plans, primarily to provide funding for funeral
expenses. American also writes a small amount of accident and health
insurance. In the past three years, American has increased its focus on
writing ordinary life insurance and has reduced the amount of industrial life
insurance written. During the three year period prior to 1993, American
experienced significant increases in the sale of single premium, three and five
year excess interest and annuity products used to fund the expenses of specific
pre-arranged funerals, in contrast to insurance which is available to apply
against expenses of funerals that are not pre-arranged. American is licensed
in 26 states, but approximately 71% of premiums written in 1993 were derived
from Mississippi, Illinois, Indiana, Kentucky and Tennessee. American markets
its insurance products through a field force of approximately 2,700 agents, who
work for or in connection with approximately 2,250
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funeral homes.
STATE NATIONAL. On June 24, 1993, the Company announced the execution
of a letter of intent to acquire State National Capital Corporation and its
subsidiaries ("State National") in a transaction in which State National will
be merged into the Company. On February 25, 1994, the Company signed a merger
agreement with State National which provided a merger consideration consisting
of a combination of cash, Preferred Stock 1994-A Series of the Company and
Common Stock of the Company, having an aggregate value of approximately $27.5
million. The State National transaction is subject to approval by the
shareholders of State National, regulatory approval and certain other
conditions. State National will further expand the Company's home service
business in Louisiana and will complement the similar business being conducted
by the Company through Magnolia Life, which was acquired in October 1992.
State National is the parent company of State National Life Insurance Company
("State National Life"), Delta National Life Insurance Company, State National
Title Guaranty Company, State National Fire Insurance Company, State National
Mortgage Company and several small subsidiaries. State National's principal
insurance subsidiary is State National Life. State National Life' business is
concentrated primarily in the industrial and ordinary life markets -- primarily
home service insurance which is sold by agents who periodically visit the homes
and businesses of policyholders to collect premiums on a monthly basis.
Individual life insurance comprised 78% of State National Life's total premium
income in 1993. Individual annuities, group life and accident and health
insurance premiums accounted for the remainder of its premium income. State
National Life had $409,286,169 of life insurance in force net of reinsurance at
December 31, 1993. State National Life is licensed in Louisiana and
Mississippi, but derived 100% of its premium income in 1993 from Louisiana.
STRATEGY FOR COST SAVINGS AND GROWTH. The Company's strategy is to
realize cost savings as result of (i) the economies of scale inherent in
increased volumes, (ii) productivity increases through continued implementation
of appropriate technology, and (iii) continued consolidation and streamlining
of the administrative functions for both existing operations and acquired
businesses. There can be no assurance that significant cost savings will be
achieved.
Key elements of the Company's strategy for internal growth include (i)
coinsuring its General Agency universal life business and redeploying the
related capital to higher margin lines, in particular, the home service
business that accounts for a predominant portion of the Company's business,
(ii) applying the Company's expertise in marketing to the pre-need life
insurance market, (iii) utilizing the Company's expertise in home office
support and its related investments in technology by offering a full range of
home office support services to unaffiliated life and health insurance
companies through Liberty Insurance Services, and (iv) using the continued cash
flow from Cosmos to support the growth of the Insurance Group. See "Business -
Insurance Operations -- Liberty Insurance Services."
Although the Company believes that the insurance segment currently
provides more attractive opportunities for acquisitions and achievement of
economies of scale, the Company remains committed to its broadcasting business.
INSURANCE OPERATIONS
LIBERTY LIFE. Liberty Life is a stock life insurance company engaged
in the business of writing a broad range of individual life insurance policies
and accident and health insurance policies. Liberty Life is ranked 112th,
based on ordinary life insurance in force among approximately 1,100 United
States life insurance companies, according to the rankings provided by A.M.
Best Company in their "Best's Insurance Management Reports" (Release No. 25,
June 21, 1993). Although Liberty Life is licensed in forty-nine states, and
the District of Columbia, its focus has been the Southeast and Midwest. It
derived the largest percentages of its premium income in 1993 from South
Carolina (31%), North Carolina (22%), Louisiana (6%) and Ohio (4%). The
Company believes that Liberty Life is the largest provider of home service
business in the Carolinas. In October 1992, the Company acquired Magnolia
Life, headquartered in Lake Charles, Louisiana, which expanded the Company's
home service business by generating additional premiums and extending the
territory. Because the acquisition of Magnolia Life was not considered
significant for financial reporting purposes and because the integration of the
business of Magnolia Life into Liberty Life is almost completed, the operations
and business of Magnolia Life are not discussed separately but have been
integrated into the discussion of Liberty Life.
Life insurance and annuity premiums contributed 79% of Liberty Life's
total premiums
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in 1993, 78% in 1992 and 79% in 1991; accident and health insurance premiums
contributed the remainder.
Liberty Life markets its insurance products through three divisions,
Home Service, Mortgage Protection and General Agency Marketing, each of which
represents a different distribution channel.
HOME SERVICE DIVISION. The Home Service Division is Liberty Life's
largest division, contributing 69% of Liberty Life's premiums in 1993. Home
Service agents of Liberty Life sell primarily individual life, including
universal life and interest-sensitive whole life products, as well as health
insurance. As of December 1993 the Company had approximately 1,605 agents and
managers in this division, which is almost double the number in 1986, operating
out of 62 district offices. These agents periodically visit the insureds'
homes and businesses to collect premiums. Although the Company has broadened
this division's area of concentration beyond the Carolinas, principally through
strategic acquisitions, the Company has maintained a regional focus for its
home service business on the Southeast and Midwest.
MORTGAGE PROTECTION DIVISION. The Mortgage Protection Division is the
second largest of Liberty Life's divisions, contributing 27% of Liberty Life's
premiums in 1993. The Mortgage Protection Division primarily sells decreasing
term life insurance designed to extinguish the unpaid portion of a residential
mortgage upon the death of the insured. This division also sells accidental
death, disability income and credit life insurance. A staff of full-time
representatives and independent brokers offer these products through more than
1,000 financial institutions located throughout the United States. The Company
supports the marketing of these products through direct mail and phone
solicitations.
GENERAL AGENCY MARKETING DIVISION. The General Agency Marketing
Division sells individual universal life, as well as term life and
interest-sensitive life insurance through independent agents. At December 31,
1993, the General Agency Marketing Division had 1000 agents contracted to sell
products. It is the smallest of Liberty Life's marketing divisions,
contributing 3% of Liberty Life's premiums in 1993.
At December 31, 1993, Liberty Life had 582 employees in its home
office who perform administrative and clerical duties.
PIERCE NATIONAL. In July 1992, the Company acquired Pierce National,
a major provider of pre-need life insurance, a product which pre-funds funeral
services. Pierce National, a stock life insurance company, is domiciled in
California, but its principal executive offices are in Greenville, South
Carolina. Pierce National's policies consist primarily of ordinary life
insurance policies for which the premiums are paid in a single payment at the
outset or primarily over a three, five or ten-year period. In April 1993,
Pierce National acquired through reinsurance all of the ordinary life
insurance, representing pre-need life insurance, of Estate Assurance Company,
effective as of January 1, 1993.
Pierce National is currently licensed in 37 states, the District of
Columbia, and ten Canadian provinces. Pierce National also has licensing
applications pending in 4 additional states and one Canadian province. Pierce
National plans to seek licensure in the majority of the remaining states by the
end of 1994. Pierce National derived the largest percentages of its premium
income for 1993 from Canada (30%) and California (33%).
At December 31, 1993, Pierce National had 20 employees in its home
office who perform administrative and clerical duties. Policy administration
is carried out by Liberty Insurance Services who employs approximately 60
people in this area.
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PREMIUM BREAKDOWN. The following table sets forth the insurance
premiums and policy charges of each of Liberty Life's marketing and
distribution divisions for the indicated periods and of Pierce National since
its acquisition by the Company in July 1992.
YEAR ENDED
DECEMBER 31,
----------------------------------------
1993 1992 1991
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(000'S)
Liberty Life
Home Service $ 137,919 $122,457 $110,276
Mortgage Protection 54,058 60,639 45,508
General Agency Marketing 5,906 4,425(1) 18,684
Other 1,670 1,744 6,049
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199,553 189,265 180,517
Pierce National (Pre-Need) 51,369(3) 19,868(2) --
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Total $250,922 $209,133 $180,517
(1) Decline reflects the ceding through reinsurance of 80% of this
division's net premiums at December 31, 1991.
(2) Represents premiums from date of acquisition on July 1, 1992.
(3) Increase reflects, in part, the acquisition of Estate Assurance
Company's insurance in force in April 1993.
UNDERWRITING PRACTICES. Liberty Life's underwriting practices for
ordinary life insurance require medical examinations for applicants over age 60
or for policies in excess of certain prescribed face amounts. Approximately 83%
of non-home service life insurance policies issued in 1993 were issued without
medical examinations. In accordance with the general practice in the life
insurance industry, Liberty Life writes life insurance on substandard risks at
increased premium rates. Generally, home service life insurance for
non-universal life products is written for amounts under $5,000 and typically
no medical examination is required. Mortgage protection life insurance is
usually written without medical examination. Substantially all of Pierce
National's policies are written for amounts under $5,000, and no medical
examination is required unless the applicant requests a preferred rate.
REINSURANCE. The Company's insurance subsidiaries use reinsurance in
two distinct ways: first, as a risk management tool in the normal course of
business and second, in isolated strategic transactions to effectively buy or
sell blocks of in force business. The Company's insurance subsidiaries remain
contingently liable with respect to reinsurance ceded should any reinsurer be
unable to meet the obligations assumed by it. As a result of its reinsurance
transactions, the Company's insurance subsidiaries remain contingently liable
on $4.8 billion (24%) of its total $20.2 billion life insurance in force at
December 31, 1993.
For the years ended December 31, 1993, 1992 and 1991, the Insurance
Group had ceded life insurance premiums of $26.1 million, $28.3 million and
$5.5 million, respectively. Accident and Health premiums ceded for the
Insurance Group made up the remainder of ceded premiums which were $3.5
million, $3.0 million, and $2.6 million for the years ended December 31, 1993,
1992, and 1991, respectively.
RISK MANAGEMENT REINSURANCE TRANSACTIONS. Liberty Life reinsures with
other insurance companies portions of the life insurance it writes in order to
limit its exposure on large or substandard risks. The maximum amount of life
insurance that Liberty Life will retain on any life is $300,000, plus an
additional $50,000 in the event of accidental death. This maximum is reduced
for higher ages and for special classes of risks. The maximum amount of life
insurance that Pierce National will retain on any life is $50,000. Insurance
in excess of the retention limit is either automatically ceded under
reinsurance agreements or is reinsured on an individually agreed basis with
other insurance companies. Liberty Life has ceded a significant portion of its
risks on accidental death and disability coverage to other insurance companies.
Liberty Life and Pierce National also have coverage for catastrophic accidents.
At December 31, 1993, Liberty Life and Pierce National had ceded in the normal
course of business portions of their risks to a number of other insurance
companies.
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STRATEGIC REINSURANCE TRANSACTIONS. At December 31, 1991, 80% or $3.2
billion face amount of Liberty Life's General Agency Marketing Division net
insurance in force was coinsured with Life Reassurance Corporation ("Life Re").
The agreement with Life Re also provides for the coinsurance of 50% of this
division's new insurance issued after 1991. The total face value of amounts
ceded to Life Re at December 31, 1993 was $3 billion. In connection with this
transaction, Liberty Life transferred into trust accounts assets supporting the
statutory reserves with respect to the ceded policies. The Company's
investment advisory subsidiary manages the trust portfolio, and the trust
agreements impose asset quality requirements on investments. The Company
believes that the overall credit quality of the assets held in each asset trust
account is as high as that in the asset portfolio owned directly by the
Company. Liberty Life's interest in the Life Reassurance trust accounts is
shown as other invested assets in the consolidated balance sheet. The transfer
of the reserves and the related assets and the receipt of a ceding commission
from this transaction provided the Company with additional statutory capital
which was redeployed to expand higher margin lines.
In order to facilitate the 1991 acquisition through reinsurance of the
Kentucky Central block of business, Liberty Life coinsured 50% of its home
service traditional life insurance business with Lincoln National Life
Reinsurance Insurance Company. The Lincoln National reinsurance has been
accounted for under generally accepted accounting principles as financial
reinsurance, and no reserve reduction has been taken for the business ceded nor
have the related assets been removed from the consolidated balance sheet. The
reinsurance contract contains an escrow agreement that requires assets equal to
the reserves reinsured, as determined under statutory accounting principles, be
held in escrow for the benefit of this block of business.
The Company uses assumption reinsurance to effectively acquire blocks
of in force business by acting as the "reinsurer" for other insurance
companies. For instance, the Company acquired the Kentucky Central, Integon
and Estate Assurance blocks in this manner.
OPERATIONS. The administrative functions of underwriting and issuing
new policies, and the ongoing servicing and claims settlement of in force
policies, are centralized at the home office of Liberty Life and Pierce
National in Greenville, South Carolina. In acquiring additional blocks of
insurance business, the Company's strategy is to integrate the administrative
functions into its existing operations, either directly or through Liberty
Services, as soon as practical after the effective date of the acquisition.
The Company believes that this centralization permits economies of scale and
promotes greater cost efficiencies. The administrative operations of both
Pierce National and Magnolia were moved to Greenville during the first three
months of ownership. The Magnolia business has been fully integrated into
Liberty Life's policy administration system for its home service business. In
contrast, Pierce National's pre-need business is serviced by Liberty Insurance
Services and is in the process of being converted onto a new system. As
indicated earlier, however, the Company plans to evaluate appropriate ways to
consolidate the pre-need business presently conducted through Pierce National
with the pre-need business acquired through the Company's recent acquisitions
of North American and American Funeral. See "the Company Business - Strategy;
Recent Developments."
The Company's Insurance Group services approximately 2.7 million
policies representing $23.4 billion of life insurance in force, including
policies representing approximately $15.4 billion of insurance in force for
which Liberty Life and Pierce National are primarily liable and $8.0 billion of
insurance for which others are primarily liable, either because of reinsurance
or because Liberty Services contracted to service the policies of others
without any assumption of the underlying liability. Approximately 166,405
policies representing $3.4 million of life insurance in force were issued
during 1993. The Company intends to continue its focus on reducing the unit
costs of administrative services by increasing the volume of business through
acquisitions of blocks of business similar in nature to its existing business,
by internal growth in those businesses, and by investing in up-to-date
technology to further improve efficiency in its operations.
During the past five years the Company has made $20.0 million of
capital expenditures net of amortization for new technology designed to handle
increasing volumes of the insurance business, while controlling operating costs
associated with the Company's insurance operations. In addition to the
Company's internal efforts, since March 1989 the Company has worked closely
with Policy Management Systems Corporation ("PMSC") in developing a new fully
integrated policy administration system. The first stage has been completed
and will be integrated into operations in 1994. During the third quarter of
1993, PMSC completed a significant acquisition of a full line of life insurance
software. The Company's contractual agreement with PMSC
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provides a long term relationship including access to all life insurance
related software available from PMSC, both existing products and those enhanced
and/or acquired in the future. The Company plans to utilize PMSC's recently
acquired software in completing its new policy administration system. The
Company expects to benefit from this new system not only by increasing the
productivity of its own insurance subsidiaries, but also by using this system
when offering home office services to non-affiliated life insurance companies
on a fee basis through Liberty Services.
LIBERTY INSURANCE SERVICES. Consistent with the Company's strategy of
leveraging its existing capital and technical expertise, the Company organized
Liberty Insurance Services in 1991 to provide a wide range of home office
support services to unaffiliated life and health insurance companies on a fee
basis, as well as to the Company's insurance subsidiaries. These services
include underwriting, preparation of policies, accounting, customer service and
claims processing and adjudication and can be tailored to support the special
features of insurance products offered by other companies that desire these
services. The Company's strategy is to target (i) insurance companies that
have closed blocks of business that are expensive to administer, (ii) insurance
companies that have start-up or new product lines requiring new support levels,
(iii) small to midsize insurance companies that cannot justify large
investments in home office technology, and (iv) insurance companies acquired by
financial investors lacking experience in providing home office support.
Liberty Insurance Services believes that its economies of scale will permit its
customers to reduce their home office support costs and focus resources on
marketing their insurance products. Although Liberty Insurance Services is
still in the development stage and the revenues generated to date have not been
material, the Company believes that Liberty Insurance Services has significant
growth potential. Liberty Insurance Services has 271 employees who provide
services to the Company's insurance subsidiaries as well as to its outside
clients.
INSURANCE COMPETITION. The Company's Insurance Group competes with
approximately 2,300 United States and Canadian insurance companies, some of
which have greater financial resources, broader product lines and larger
staffs. In addition, banks and savings and loan associations in some
jurisdictions compete with the Company's Insurance Group for sales of life
insurance products, and the Insurance Group competes with banks, investment
advisors, mutual funds and other financial entities to attract investment funds
generally.
Competition in the home service business is largely regional or local,
largely dependent on the quality of the local management, and is less price
competitive than other insurance markets. The home service business involves
frequent contacts by agents with their customers. Liberty emphasizes to its
agents the importance of taking advantage of these contacts to establish
personal relationships which the Company believes add stability to its home
service business.
The Company believes that competition in the pre-need market is
national and intends to expand the market of its pre-need business. The
Company intends to capitalize on its affinity marketing expertise gained in the
mortgage protection insurance business by targeting national chains of funeral
homes and by supplementing this effort with direct marketing and telemarketing
campaigns.
The Company currently believes that it ranks second nationally in
mortgage protection insurance with an estimated 15% market share. Slightly
over 70% of the mortgage protection market share is believed to be held by four
companies and 33% of the market is held by the market leader. For both the
Company and the mortgage protection industry generally, falling interest rates
which have fueled mortgage refinancing have adversely affected persistency of
existing business, as well as new sales.
The Company has a very small presence in the general agency universal
life business. This is an extremely competitive line of business where
economies of scale are key to success.
INSURANCE REGULATION. Like other insurance companies, the Company's
insurance subsidiaries are subject to regulation and supervision by the state
or other insurance department of each jurisdiction in which they are licensed
to do business. These supervisory agencies have broad administrative powers
relating to the granting and revocation of licenses to transact business, the
licensing of agents, the approval of policy forms, reserve requirements and the
form and content of required financial statements. As to its investments, each
of the Company's insurance subsidiaries must meet the standards and tests
established by NAIC and, in particular, the investment laws and regulations of
the states in which each subsidiary is domiciled. The
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insurance companies are also subject to laws in most states that require
solvent life insurance companies to pay guaranty fund assessments to protect
the interests of policyholders of insolvent life insurance companies.
In December 1991, the NAIC adopted two new reserve requirements (the
Asset Valuation Reserve or "AVR" and the Interest Maintenance Reserve or "IMR")
to replace the former Mandatory Securities Valuation Reserve or "MSVR." These
reserves are generally required by state insurance regulatory authorities to be
established as a liability on a life insurer's statutory financial statements
beginning with the 1992 annual statement, but do not affect financial
statements of the Company prepared in accordance with generally accepted
accounting principles. AVR establishes a statutory reserve for mortgage loans,
equity real estate and joint ventures, as well as for the types of investments
(fixed maturities and common and preferred stock) that have been subject to the
MSVR. AVR generally captures all realized and unrealized gains and losses on
such assets, other than those resulting from changes in interest rates. IMR
captures the net gains or losses that are realized upon the sale of fixed
income securities (bonds, preferred stocks, mortgage-backed securities and
mortgage loans) and that result from changes in the overall level of interest
rates, and amortizes these net realized gains or losses into income over the
remaining life of each investment sold, thus limiting the ability of an insurer
to enhance statutory surplus by taking gains on fixed income securities. The
implementation of the IMR and AVR has not had a material impact on the
Company's insurance subsidiaries' surplus nor Liberty Life's ability to pay
dividends to the Company.
In recent years the NAIC has approved and recommended to the states
for adoption and implementation several regulatory initiatives designed to
decrease the risk of insolvency of insurance companies in general. These
initiatives include the implementation of a risk-based capital formula for
determining adequate levels of capital and surplus and further restrictions on
an insurance company's payment of dividends to its shareholders. To date,
South Carolina has not adopted the NAIC risk-based capital model act; however,
effective October 1, 1993, it does require prior notice to the South Carolina
Commissioner of dividend distributions to shareholders, and permits the
Commissioner to disapprove or limit the dividend within 30 days of notice if
the dividend or distribution is deemed an unreasonable strain on surplus. The
NAIC risk-based capital model act or similar initiatives may be adopted by
South Carolina or the various states in which Liberty Life and the Company's
other insurance subsidiaries are licensed, but the ultimate content and timing
of any statutes and regulations adopted by the states cannot be determined at
this time.
Under the NAIC's risk-based capital initiatives, insurance companies
must calculate and report information under a risk-based capital formula,
beginning with their year-end 1993 statutory financial statement. This
information is intended to permit insurance regulators to identify and require
remedial action for inadequately capitalized insurance companies, but is not
designed to rank adequately capitalized companies. The NAIC initiatives
provide for four levels of potential involvement by state regulators for
inadequately capitalized insurance companies, ranging from regulatory control
of the insurance company to a requirement for the insurance company to submit a
plan to improve its capital. Implementation of the substantive regulatory
authority contemplated by this NAIC initiative depends on adoption by the
states of the NAIC Model Act on risk-based capital requirements. The NAIC has
determined to deny accreditation to state insurance regulatory authorities in
states failing to adopt this risk-based capital Model Act by January 1, 1996.
Based on statutory financial statements at December 31, 1993, Liberty Life and
Pierce National are more than adequately capitalized under the formula.
Another NAIC Model Act limits dividends that may be paid in any
calendar year without regulatory approval to the lesser of (i) 10% of the
insurer's statutory surplus at the prior year-end, or (ii) the statutory net
gain from operations of the insurer (excluding realized capital gains and
losses) for the prior calendar year. The NAIC has determined that it will not
grant accreditation to any state insurance regulatory authority in a state that
has not enacted statutes "substantially similar" to the NAIC Model Act
regulating the payment of dividends by insurers. The South Carolina statutes
applicable to Liberty Life do not conform to the NAIC Model Act (South Carolina
limits dividends to the greater of 10% of statutory surplus or gain from
operations) and the legislature of South Carolina may consider legislation to
bring South Carolina laws into substantial compliance with the NAIC Model Act.
Under current South Carolina law, without prior approval from the
South Carolina Commissioner of Insurance, dividend payments from Liberty Life
to the Company are limited to the greater of the prior year's statutory gain
from operations or 10% of the prior year's statutory surplus. This resulted in
a maximum allowable dividend in
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1993 of $23.2 million without approval from the South Carolina Insurance
Commissioner. Actual dividends paid by Liberty Life were $12.8 million in
1993, $8.4 million in 1992 and $22.7 million in 1991. If South Carolina were
to adopt the NAIC Model Act, there can be no assurance the Company can obtain
approval to pay dividends in excess of the statutory maximum, but the Company
has been successful in the past in obtaining such approvals.
In accordance with the rules and practices of the NAIC and in
accordance with state law, every insurance company is examined generally once
each three years by examiners from its state of domicile and from several of
the other states where it is licensed to do business. Liberty Life and Pierce
National's most recent examinations were for the period ending December 31,
1990. All states and jurisdictions (including the Canadian provinces where
Pierce National is also licensed) have their own statutes and regulations,
which vary in certain respects. However, the NAIC Model Act and regulations
have tended to make the various states' regulation more uniform. Pierce
National has agreed with several states to not pay dividends until after 1995.
The Office of the Superintendent of Financial Institutions - Canada,
and the Canadian provinces regulate and supervise the Canadian operations of
Pierce National in the same manner as the NAIC and the states. Separate
financial statements are required to meet the Canadian regulatory requirements
and a separate examination is conducted by the Canadian regulatory agencies.
The Company's insurance subsidiaries are also subject to regulation as
an insurance holding company system under statutes which have been enacted in
their states of domicile and other states in which they are licensed to do
business. Pursuant to these statutes, Liberty Life and Pierce National are
required to file an annual registration statement with the Office of the
Commissioner of Insurance and to report all material changes or transactions.
In addition, these statutes restrict the ability of any person to acquire
control (generally presumed at 10% or more) of the outstanding voting
securities of the Company without prior regulatory approval.
BROADCASTING OPERATIONS
Cosmos currently owns and operates the following television stations,
six of which were ranked No. 1 in their market by the November 1993 Nielsen
ratings for sign-on to sign-off:
Station Primary Market Affiliation VHF/UHF
------- -------------- ----------- ---------
WAVE-TV Louisville, Kentucky NBC VHF
WIS-TV Columbia, South Carolina NBC VHF
WSFA-TV Montgomery, Alabama NBC VHF
KLPC-TV Lake Charles, Louisiana NBC VHF
WTOL-TV Toledo, Ohio CBS VHF
KAIT-TV Jonesboro, Arkansas ABC VHF
WFIE-TV Evansville, Indiana NBC UHF
Cosmos has approximately 617 full-time employees and 80 part-time
employees.
NETWORK AFFILIATES. All of Cosmos' stations are affiliated with one
of the major networks - NBC, ABC, CBS. The affiliation contracts provide that
the network will offer to the affiliated station a variety of network programs,
both sponsored and unsponsored, for which the station has the right of first
refusal against any other television station located in its community. The
station has the right to reject or accept the programs offered by the network
and also has the right to broadcast programs either produced by the station or
acquired from other sources. The major networks provide their affiliated
stations with programming and sell the programs, or commercial time during the
programs, to national advertisers. Each affiliate is compensated by its
network for carrying the network's programs. That compensation is based on the
local market rating strength of the affiliate and the audience it helps bring
to the network programs. The major networks typically provide programming for
approximately 90 hours of the approximately 135 hours per week broadcast by
their affiliated stations.
The NBC affiliation contracts with each of Cosmos' NBC affiliated
stations have been continuously in effect for over thirty-eight years. Cosmos'
CBS affiliation contract and ABC affiliation contract have each been
continuously in effect for approximately thirty years.
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SOURCES OF COSMOS' TELEVISION OPERATING REVENUES. The following table
shows the approximate percentage of Cosmos' gross television operating revenues
by source excluding other income for the three years ended December 31, 1993:
YEAR ENDED
DECEMBER 31,
--------------------------------------
1993 1992 1991
---- ---- ----
Local and Regional Advertising 60% 57% 56%
National Spot Advertising 32 31 32
Network Compensation 7 8 9
Political Advertising 1 4 3
Local and regional advertising is sold by station's own sales
representatives to local and other non-national advertisers or agencies.
Generally these contracts are short-term, although occasionally longer-term
packages will be sold. National spot advertising (generally a series of spot
announcements between programs or within the station's own programs) is sold by
the station or its sales representatives directly to agencies representing
national advertisers. Most of these national sales contracts are also
short-term, often covering spot campaigns running for thirteen weeks or less.
Network compensation is paid by the network to its affiliated stations for
broadcasting network programs that include advertising sold by the network to
agencies representing national advertisers. Political advertising is generated
by national and local elections, which is by definition very cyclical.
A television station's rates are primarily determined by the estimated
number of television homes it can provide for an advertiser's message. The
estimates of the total number of television homes in the market and of the
station's share of those homes is based on the AC Nielsen industry wide
television rating service. The demographic make-up of the viewing audience is
equally important to advertisers. Twenty-five to fifty-four year old and
eighteen to forty-nine year old adults are the demographics most desired by
advertisers. A station's rate card for national and local advertisers takes
into account, in addition to audience delivered, such variables as the length
of the commercial announcements and the quantity purchased. The payments by a
network to an affiliated station are largely determined by the total homes
delivered, the relative preference of the station among the viewers in the
market area and other factors related to management and ownership.
TELEVISION BROADCASTING COMPETITION. The television broadcasting
industry competes with other leisure time activities for the time of viewers
and with all other advertising media for advertising dollars. Within its
coverage area a television station competes with other stations and with other
advertising media serving the same area. The outcome of the competition among
stations for advertising dollars in a market depends principally on share of
audience, advertising rates and the effectiveness of the sales effort.
Cosmos believes that each of its stations has a strong competitive
position in its local market, enabling it to deliver a high percentage of the
local television audience to local advertisers. Cosmos' commitment to local
news programming, combined with syndicated programming, are important elements
in maintaining Cosmos' current market positions.
Another source of competition is cable television, which brings
additional television programming, including pay cable (HBO, Showtime, Movie
Channel, etc.), into subscribers' homes in a television station's service area.
Cable television competes for the station's viewing audience and, on a more
modest scale, its advertising.
Federal law now requires that cable operators negotiate with
television operators for the right to carry a station's signal (programs) on
cable systems. Cosmos recently used this "retransmission consent" negotiation
to forge long term partnerships with cable operators with the purpose of
developing secondary revenue streams from programs and services specifically
produced for cable. Cosmos also recently formed CableVantage Inc., a marketing
company designed to assist local cable operators in the sale of commercial time
available in cable network programs.
Subscription Television, an over-the-air pay television service, and
Multipoint Distribution Service, a microwave-distributed pay television
service, also compete for television audiences. In addition, licenses are now
being granted for Multichannel Multipoint Distribution Service. None of these
services has significantly fractionalized the audiences of commercial
television stations.
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The use of home video recording and playback (VCR) equipment is
growing and provides another element of competition for television audiences.
Two television broadcast services are still in the developmental
stage. Low power television, sometimes referred to as "neighborhood TV," is
authorized to operate in a limited coverage area. Authorizations are being
granted by the FCC on a lottery basis. A second developmental service is
direct broadcast satellite which transmits television signals from satellite
transponders to parabolic antennae. Neither of these new services has shown
the potential for significant effects on commercial television broadcasting.
FEDERAL REGULATION OF BROADCASTING. Cosmos' broadcasting operations
are subject to the jurisdiction of the FCC under the Communications Act. The
Communications Act empowers the FCC, among other things, to issue, revoke or
modify broadcasting licenses; to assign frequency bands; to determine the
location of stations; to regulate the apparatus used by stations; to establish
areas to be served; to adopt such regulations as may be necessary to carry out
the provisions of the Communications Act and to impose certain penalties for
violation of such regulations.
Television broadcasting licenses may be granted for a maximum term of
five years and, upon application, and in the absence of a conflicting
application or a petition to deny which raises a substantial and material issue
of relevant fact (which would require the FCC to hold a hearing) or adverse
findings as to the licensee's qualifications, are usually renewed without
hearing by the FCC for additional five year terms. Cosmos' renewal
applications have always been granted without hearing for the full term. The
Communications Act prohibits the transfer of a license or the transfer of
control or other change in control of a licensee without prior approval of the
FCC. The Hipp family is considered to have de facto control over Cosmos, and
any action that would change such control would require prior approval of the
FCC.
Under FCC regulations governing multiple ownership, a license to
operate a television station generally will not be granted to any person (or
persons under common control) if such person directly or indirectly holds a
significant interest in (i) another radio or television station, with an
overlapping service area, (ii) more than 12 television stations or (iii) less
than 12 television stations if their audience coverage exceeds 25% of total
United States households. FCC regulations also limit ownership of television
stations by those having interests in cable television systems and daily
newspapers serving the same service area as the television stations. The rules
provide that each case will be considered on the basis of its particular facts.
During 1994, legislation is expected which will remove many of the ownership
restrictions now encumbering broadcasters. Congress has publicly stated that
broadcasters need regulatory relief in order to effectively compete in the
multi-channel environment of the future commonly referred to as the "electronic
information superhighway".
There are additional FCC Regulations and Policies, and regulations and
policies of other federal agencies, principally the Federal Trade Commission,
regulating network/affiliate relations, political broadcasts, children's
programming, advertising practices, equal employment opportunity, carriage of
television signals by CATV systems, application and reporting procedures and
other areas affecting the business and operations of television stations.
INVESTMENTS AND INVESTMENT POLICY
The Company derives a substantial portion of its total revenues from
investment income. Invested assets are held primarily through Liberty Life and
Pierce National, although the parent company and its real estate subsidiary
held $49.8 million (59%) of the $84.5 million of the consolidated investment
real estate portfolio at December 31, 1993. The Company's investment advisory
subsidiary manages securities and non-real estate related assets for the
Company and its subsidiaries, while the Company's property development and
management subsidiary manages all investment real estate assets and the
mortgage loan portfolio for the Company and its subsidiaries.
All investments made for the Company are governed by the general
requirements and guidelines established and approved by the Company's
Investment Committee and by qualitative and quantitative limits prescribed by
applicable insurance laws and regulations. The Committee, comprised of seven
senior officers of the Company and appropriate subsidiaries, meets monthly to
set and review investment policy and to approve current investment plans.
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The Company follows a value-oriented investment philosophy in which
purchases are generally made with the intention of holding securities to
maturity. Investment philosophy is focused on the intermediate to longer-term
horizon and is not oriented towards trading. As market relationships change
and individual securities become increasingly over or undervalued, securities
may be sold prior to maturity and replaced with similar securities. In
addition, the Company attempts to minimize liquidity risk by using an
integrated asset/liability matching process. As an additional risk control
measure, the Company's investment strategy focuses on diversity through a
relatively large number of smaller investments in contrast to larger, more
concentrated investments. As of December 31, 1993, the Company's invested
assets had an aggregate book value of $1.4 billion.
BONDS. As of December 31, 1993, bonds comprised 59% ($797.4 million)
of the Company's invested assets and had a weighted average credit rating of
AA. As of December 31, 1993, publicly traded bonds comprised 93% of the total
bond portfolio. The Company's emphasis on call protection as part of its
investment strategy makes its portfolio less vulnerable to prepayments which
reduce portfolio yield during low interest rate environments. However, due to
historically low interest rates, the Company experienced a significant amount
of prepayments during 1993, which have accordingly been reinvested at lower
interest rates causing downward pressure on investment income. A continuation
of low interest rates can be expected to result in a continued high level of
prepayments in the future.
EQUITY SECURITIES. As of December 31, 1993, approximately 1.5% ($20.3
million) of the Company's invested assets were common stocks and 8% ($108.4
million) were preferred stocks. Common stocks and nonredeemable preferred
stocks are carried on the Company's balance sheet at market if owned by the
Company's insurance subsidiaries and at the lower of cost or market if owned by
the parent company or one of its non-insurance subsidiaries. As of December
31, 1993, all of the Company's common stock and nonredeemable preferred stock
were held by Liberty Life and Pierce National. Redeemable preferred stocks are
carried at amortized cost which includes write-downs for impaired value where
appropriate. At December 31, 1993, redeemable preferred stock represented 4.4%
($60.3 million) of the Company's investment portfolio.
MORTGAGES. As of December 31, 1993, mortgage loans comprised 12.2%
($165.8 million) of the Company's invested assets. Mortgage loans on real
estate are carried at amortized cost which include valuation adjustments for
impaired value where appropriate. As of December 31, 1993, 1.59% of the
Company's mortgage loan portfolio was more than 60 days delinquent, compared to
the industry average of 4.54% at December 31, 1993 (as reported in the American
Council of Life Insurance's "Investment Bulletin" dated March 1, 1994). It is
the Company's policy to stop accruing mortgage loan interest income for
financial statement purposes once a loan is more than 90 days past due. At
that time the accrued interest on the loan is deducted from income.
REAL ESTATE. As of December 31, 1993, 6.2% ($84.5 million) of the
Company's invested assets were real estate. Liberty Life holds 41% ($34.7
million) of the real estate portfolio and the remainder is held by the parent
company and its real estate subsidiary. The Company's real estate assets are
comprised primarily of residential land development, business parks, business
property rentals and shopping centers. Residential land development is
partially developed and undeveloped properties zoned residential that are sold
to home builders. Business parks are partially developed and undeveloped
properties zoned for business use that are primarily sold to various
industrial, manufacturing, and office users. The Company records gains
(losses) on the sale of residential land development and business parks as
operating income. Business property rentals and shopping centers are leased to
commercial and rental tenants, respectively, and gains (losses) from sales of
such properties are recorded as investment gains (losses). The Company's real
estate investment properties are carried at cost less accumulated depreciation
and valuation adjustments for impaired value where appropriate.
The Company's methodology for determining impairment of a
property begins with an annual review of estimated value for each property in
the portfolio. This process uses a discounted cash flow method to value
partially developed land for resale, a combination of comparable tract sales
and discounted cash flow to value undeveloped land and capitalization rates
relative to net operating cash flow for developed properties. As of December
31, 1993, the Company does not believe that the values of these properties have
been impaired from their carrying values.
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EXECUTIVE OFFICERS
The following is a list of the Executive Officers of the Registrant
indicating their age and certain biographical data.
FRANCIS M. HIPP, Age 83 (1)
Chairman of the Board of Liberty since 1967
W. HAYNE HIPP, Age 54 (1)
Chairman of the Board of Liberty Life from January 1, 1979 - February 9, 1988;
September 18, 1989 - present
Chairman of the Board of Cosmos - May 1, 1989 - February 18, 1992
President and Chief Executive Officer of Liberty since September, 1981
MARTHA G. WILLIAMS, Age 51
Vice President, General Counsel & Secretary of Liberty since January, 1982
Vice President, General Counsel & Secretary of Liberty Life since
January, 1982
Secretary and Counsel of Cosmos since February 11, 1982
BARRY L. EDWARDS, Age 46
Vice President and Treasurer of Liberty since January 1, 1979
Treasurer of Cosmos since January 22, 1979
M. PORTER B. ROSE, Age 52
President, Liberty Investment Group, Inc. since March 24, 1992
Chairman, Liberty Capital Advisors, Inc. since January 1, 1987
Chairman, Liberty Properties Group, Inc. since January 1, 1987
JENNIE M. JOHNSON, Age 47
Vice President, Planning, of Liberty since February 1, 1986
WILLIAM S. KLECKLEY, Age 50
Vice President & Controller of Liberty since July 26, 1993
RALPH L. OGDEN, Age 52
President of Liberty Life since February 9, 1988
Executive Vice President of Liberty Life November 28, 1983 - February 9, 1988
JAMES M. KEELOR, Age 51
President of Cosmos since February 18, 1992
Vice President, Operations, of Cosmos from December, 1989 to February 18, 1992
Vice President & General Manager of WDSU-TV from January, 1987 to
December, 1989
(1) W. Hayne Hipp is the son of Francis M. Hipp.
OTHER BUSINESS
In addition to the operating subsidiaries, the Company has other minor
organizations. These include the Company's administrative staff, an investment
advisory company, a property development & management company and
transportation operations. There are approximately 102 full-time employees in
these areas.
RESEARCH ACTIVITIES
The Company and its subsidiaries do not have a formal program of
research on new or improved products. As a part of its operation, each company
continues to seek improved methods and products. No material amounts were
spent in this area during 1993.
INDUSTRY SEGMENT DATA
Information concerning the Company's industry segments is contained in
Selected Financial Data on page 37 of The Liberty Corporation Annual Report to
Shareholders and is filed as Exhibit 13 on page 183 of this report and is
incorporated in this Item 1 by reference.
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ITEM 2. PROPERTIES
MAIN OFFICES. The main office of the Company, Liberty Life and Cosmos
is located on a 30-acre tract in Greenville, S. C. and consists of three
buildings totalling approximately 360,000 square feet plus parking. The main
office facilities are owned by the Company and Liberty Life, a wholly owned
subsidiary of the Company. Liberty Life also owns three branch office
buildings located in various cities in South Carolina and Kentucky and leases
branch office space in various cities. Leases are normally made for terms of
one to ten years.
Cosmos owns its television broadcast studios, office buildings and
transmitter sites in Columbia, SC; Montgomery, AL; Toledo, OH; Louisville, KY;
Evansville, IN; Jonesboro, AR; and Lake Charles, LA.
The following properties are owned by the Company or a wholly owned
subsidiary.
INDUSTRIAL PROPERTY
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
Liberty Life
Woodland Corporate Center 133 acres, being developed Tampa, FL
Northpoint 349 acres, being developed Columbia, SC
SouthChase 229 acres, developed Greenville, SC
The Exchange 2 acres, developed Greenville, SC
Ridgeview Center 17 acres, developed Spartanburg, SC
LPC of SC, Inc.
Fairview Road/I-385 298 acres, to be developed Fountain Inn, SC
OFFICE & OTHER BUILDINGS
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
LIBCO of Florida, Inc.
Woodland Business Center I 88,800 sq. ft. on 8 acres Tampa, FL
Woodland Business Center II 45,351 sq. ft. on 9.3 acres Tampa, FL
Liberty Life
Lindsay Parking 7,534 sq. ft. leased Greensboro, NC
Print Shop 10,749 sq. ft. unoccupied Greensboro, NC
Leased to B.F. Goodrich Co 11,630 sq. ft. leased Greensboro, NC
Dixie Sales Co. 19,699 sq. ft. unoccupied Greensboro, NC
Dunwoody Center 17,262 sq. ft. unoccupied DeKalb County, GA
1800 Building 18,000 sq. ft. part leased W. Palm Beach, FL
LPC of SC, Inc.
Leased to Aloca
Fujikura, Ltd. 222,670 sq. ft. on 22 acres Duncan, SC
Leased to Perrigo Co. 72,000 sq. ft. on 9 acres Greenville, SC
Jumper House Lot 44 Phase III Hampton's
Grant unoccupied Columbia, SC
LPG Development Corp.
Spec I @ Northpoint 70,800 sq. ft. on 10 acres Columbia, SC
SouthChase Development Corp.
Leased to Stone Safety 104,200 sq. ft. on 11 acres Greenville, SC
Spec IV @ SouthChase 49,500 sq. ft. on 8 acres Greenville, SC
Spec V @ SouthChase 102,400 sq. ft. on 12.3 acres Greenville, SC
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RESIDENTIAL LAND
Name Description/Size Location
- --------------------------- --------------------------- ----------------
Liberty Life
Prestwick 108 acre, first home Fulton County, GA
Carlos Tract 444 acre, first home Gwinnett County, GA
Jamesford Meadows 194 acre, first home Greensboro, NC
Hampton's Grant 106 acre, first home Columbia, SC
Cedar Grove 56 acre, first home Lexington County, SC
Rose Creek 97 acre, first home Richland County, SC
Liberty Downs 133 acre, first home Williamson Cty., TN
LPC of SC, Inc.
Amberleigh 73 acre, first home Fulton County, GA
Devonhall 68 acre, first home Fulton County, GA
Preston 32 acre, first home Burlington, NC
Ashford 305 acre, first home Columbia, SC
Adam's Run 70 acre, first home Greenville, SC
Neely Farm 92 acre, first home Greenville, SC
Deerspring at Neely Farm 88 acre, first home Greenville, SC
Laurel Brook at Neely Farm 69 acre, first home Greenville, SC
Miramont 69 acre, first home Gwinnett Cty., GA
Storza 117 acre, first home Forsyth Cty., GA
Planter's Row 110.85 acre, first home Greenville, SC
Hawthorne Ridge at
Neely Farm 67 acre, first home Greenville, SC
Berkshire Park 65 acre, first home Greenville, SC
SHOPPING CENTERS
Name Description/Size Location
- --------------------------- --------------------------- ----------------
LIBCO of Florida, Inc.
Village Market Place 54,417 sq. ft. on 7 acres Orange City, FL
LPC of SC, Inc.
Rushmore Place 13,585 sq. ft. on 1 acres Greenville, SC
TIMBER TRACTS
Name Description/Size Location
- --------------------------- --------------------------- --------------------
Liberty Life
Wolf Mtn/Fox Hill 15 acres undeveloped land Cashiers, NC
UNDEVELOPED LAND
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
Liberty Life
Edwards/Wade Hampton 6 acres, adjacent to main
office of Registrant Greenville, SC
North Creek Land 60 acres, undeveloped land Anderson, SC
LPC of SC, Inc.
Haltiwanger 94 acres Columbia, SC
Scuffletown Road 18 acres, adjacent to
Adam's Run Greenville, SC
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Park Avenue Associates, Inc., a wholly owned subsidiary
of Liberty Life, has a 60% interest as General Partner of Tanyard Creek
Partnership. The partnership owns a 49,500 square foot office building.
Greensboro Holdings, Inc., a wholly owned subsidiary of
Liberty Life, owns the mortgage loans which funded the sales of a hotel and a
parking deck in Greensboro, NC.
PROPOSED ACQUISITION OF ADDITIONAL INVESTMENT
PROPERTIES. In March 1994, the Company finalized an agreement to purchase a
portion of the real estate assets of SCANA Development Corporation, a
subsidiary of SCANA Corporation, for approximately $50 million in cash. This
transaction is expected to close in April and May 1994, and will significantly
increase the real estate portfolio of the Company.
The properties to be purchased from SCANA are located
primarily in South Carolina and include residential, commercial and industrial
projects, which are similar to the Company's existing real estate investments
throughout the Southeast. The properties to be purchased include residential
projects under development, undeveloped land held for future development,
income producing commercial properties consisting of shopping centers and
office buildings, undeveloped land intended for possible development and/or
sale, and of land to be developed as business parks.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not currently engaged in legal proceedings of material consequence other than ordinary
routine litigation incidental to its business. Any proceedings reported in prior filings have been settled
or otherwise satisfied.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
STOCKHOLDER MATTERS
Information concerning the market for the Company's Common Stock and related stockholder matters is
contained on the inside back cover of The Liberty Corporation Annual Report to Shareholders and is filed as
Exhibit 13 on page 182 of this report and is incorporated in this Item 5 by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the Company is contained on page 37 of The Liberty Corporation Annual Report to
Shareholders and is filed as Exhibit 13 on page 183 of this report and is incorporated in this Item 6 by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is contained on pages
38-47 of The Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on pages 184-193 of
this report and is incorporated in this Item 7 by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
The Company's Consolidated Financial Statements and Report of Independent Auditors are contained on pages
10-35 of The Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on pages 194-219
of this report and are incorporated in this Item 8 by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors of the Company is contained in The Liberty Corporation Proxy Statement for
the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this Item 10 by reference.
Information concerning Executive Officers of the Company is submitted in a separate section of this report
in Part I, Item 1 on page 15 and is incorporated in this Item 10 by reference.
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ITEM 11. EXECUTIVE COMPENSATION
Information concerning Executive Compensation and transactions is contained in The Liberty Corporation
Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this Item 11 by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning Security Ownership of Certain Beneficial Owners and Management is contained in The
Liberty Corporation Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated
in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning Certain Relationships and Related Transactions is contained in The Liberty
Corporation Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this
Item 13 by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) AND (2). LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following consolidated financial statements of
The Liberty Corporation and Subsidiaries are included
in the Company's Annual Report to Shareholders for
the year ended December 31, 1993, filed as Exhibit 13
to this report and incorporated in Item 8 by
reference:
Consolidated Balance Sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For Each
of the Three Years Ended December 31, 1993
Consolidated Statements of Cash Flows - For
Each of the Three Years Ended December 31, 1993
Consolidated Statements of Shareholders'
Equity - For Each of the Three Years Ended
December 31, 1993
Notes to Consolidated Financial Statements -
December 31, 1993
Report of Independent Auditors
The following consolidated financial statement
schedules of The Liberty Corporation and Subsidiaries
are included in Item 14(d):
I - Summary of Investments
III - Condensed Financial Statements of The
Liberty Corporation (Parent
Company)
V - Supplementary Insurance Information
VI - Reinsurance
VIII - Valuation and Qualifying Accounts and Reserves
IX - Short-Term Borrowings
20
21
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission, but which are
excluded from this report, are not required under the related
instructions or are inapplicable, and therefore have been omitted.
(A)(3). LIST OF EXHIBITS
3.1 Restated Articles of Incorporation, as amended through March 28,
1994.
3.2 Bylaws, as amended (filed as Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1990 and incorporated herein by reference).
4.1 See Articles 4, 5, 7 and 9 of the Company's Restated Article of
Incorporation (filed as Exhibit 3.1) and Articles I, II and VI
of the Company's Bylaws (filed as Exhibit 3.2).
4.2 See the Form of Rights Agreement dated as of August 7, 1990
between The Liberty Corporation and The Bank of New York, as
Rights Agent, which includes as Exhibit B thereto the form of
Right Certificate (filed as Exhibits 1 and 2 to the Registrant's
Form 8-A, dated August 10, 1990, and incorporated herein by
reference) with respect to the Rights to purchase Series A
Participating Cumulative Preferred Stock.
4.3 See Credit Agreement dated September 28, 1993 filed as Exhibit
10.
10. Credit Agreement dated September 28, 1993.
11. The Liberty Corporation and Subsidiaries Consolidated Earnings
Per Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 1993:
Market for the Registrant's Common Stock and Related
Security Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For the three
years ended December 31, 1993
Consolidated Statements of Cash Flows - For the
three years ended December 31, 1993
Consolidated Shareholders' Equity - For the three
years ended December 31, 1993
Notes to Consolidated Financial Statements - December
31, 1993
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
24. A. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's
10-K filed for the year ended December 31, 1983
21
22
B. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1985
C. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1986
D. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1989
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Related Adopting Employers' 401(k)
Thrift Plan for the year ended December 31, 1993
(B). REPORTS ON FORM 8-K FILED IN 1993
None
(C). EXHIBITS FILED WITH THIS REPORT
3.1 Restated Articles of Incorporation, as amended through March 28,
1994.
10. Credit Agreement dated September 28, 1993.
11. The Liberty Corporation and Subsidiaries Consolidated Earnings Per
Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended d December 31, 1993:
Market for the Registrant's Common Stock and Related Security
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For the three years
ended December 31, 1993
Consolidated Statements of Cash Flows - For the three
years ended December 31, 1993
Consolidated Shareholders' Equity - For the three
years ended December 31, 1993
Notes to Consolidated Financial Statements - December 31,
1993
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Related Adopting Employers' 401(k)
Thrift Plan for the year ended December 31, 1993
22
23
(D). CONSOLIDATED FINANCIAL STATEMENT SCHEDULES FILED WITH THIS REPORT
I - Summary of Investments - December 31, 1993
III - Condensed Financial Statements of The Liberty Corporation
(Parent Company) - December 31, 1993 and 1992
V - Supplementary Insurance Information - For the Three Years Ended
December 31, 1993
VI - Reinsurance - For the Three Years Ended December 31, 1993
VIII - Valuation and Qualifying Accounts and Reserves - For the Three
Years Ended December 31, 1993
IX - Short-Term Borrowings - For the Three Years Ended December 31,
1993
23
24
Schedule I
THE LIBERTY CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
December 31, 1993
(In $000's)
Fair Amount Shown on
Type of Investment Cost Value Balance Sheet
------------------------- ------------- ------------ -----------------
Fixed Maturities:
Bonds:
United States Government and government
agencies and authorities $ 383,488 $ 407,360 $ 383,488
States, municipalities and political subdivisions 18,530 19,589 18,530
Foreign governments 23,418 24,017 23,418
Public utilities 110,227 134,372 110,227
All other corporate bonds 261,725 273,818 261,725
Redeemable preferred stocks 60,285 62,013 60,285
---------- ----------- ----------
Total Fixed Maturities 857,673 921,169 857,673
---------- ----------- ----------
Equity Securities:
Common stocks:
Public utilities 738 1,306 1,306
Banks, trusts and insurance companies 4,538 5,731 5,731
Industrial, miscellaneous, and all other 10,880 13,441 13,231
Nonredeemable preferred stocks 44,359 48,123 48,123
---------- ----------- ----------
Total Equity Securities 60,515 68,601 68,391
---------- ----------- ----------
Other Investments:
Mortgage loans on real estate 165,784 165,784
Investment properties 84,530 84,530
Policy loans 86,942 86,942
Other long-term investments 82,826 82,826
Short-term investments 13,355 13,355
---------- ----------
Total Other Investments 433,437 433,437
---------- ----------
Total Investments $1,351,625 $1,359,501
========== ==========
24
25
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1993 and 1992
(In $000's, except share data)
ASSETS 1993 1992
------ ---------- ----------
Cash $ 1,069 $ 2,033
Investment securities 2 2
Loans, notes and other receivables 8,841 934
Investment properties, at cost
less accumulated depreciation of
$5,383 in 1993 and $7,936 in 1992 50,990 60,091
Other long-term investments 1,409 1,974
Buildings and equipment, at cost
less accumulated depreciation of
$9,226 in 1993 and $7,139 in 1992 19,896 17,115
Investment in affiliated companies* 474,942 461,613
Intercompany debt and advances* 19,922 18,656
Income taxes recoverable 4,752 7,347
Deferred income tax benefits 4,818 2,226
Other assets 3,281 2,093
---------- ----------
$ 589,922 $ 574,084
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Notes, mortgages and other debt $ 147,843 $ 174,560
Accounts payable and accrued expenses 6,269 7,239
Other liabilities 560 80
---------- ----------
Total liabilities 154,672 181,879
---------- ----------
Shareholders' equity
Common stock
Authorized - 50,000,000 shares, no par value
Issued and Outstanding - 19,497,515 in 1993
and 18,859,164 in 1992 143,939 126,961
Unearned stock compensation (4,475) (3,222)
Net unrealized investment gains (losses) 5,177 3,901
Cumulative foreign currency translation
adjustment (1,529) (880)
Retained earnings 292,138 265,445
---------- ----------
Total shareholders' equity 435,250 392,205
---------- ----------
$ 589,922 $ 574,084
========== ==========
*Eliminated in consolidation.
See notes to condensed financial statements.
25
26
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
1993 1992 1991
-------- -------- --------
REVENUES
Dividends from subsidiaries* $ 31,209 $ 43,911 $103,883
Outside interest 59 45 4
Intercompany interest* 6,933 6,736 4,512
Other 25,723 21,506 14,685
-------- -------- --------
Total Revenues 63,924 72,198 123,084
-------- -------- --------
EXPENSES
Salaries and wages 7,530 7,249 6,887
Outside interest 9,360 15,652 20,418
Intercompany interest* 3,642 3,671 1,657
Taxes and licenses 821 889 900
Depreciation and amortization 2,260 2,950 2,742
Other 23,682 14,006 9,601
-------- -------- --------
Total Expenses 47,295 44,417 42,205
-------- -------- --------
16,629 27,781 80,879
Income tax benefits (4,859) (5,537) (7,925)
-------- -------- --------
Income before cumulative effect
of accounting changes 21,488 33,318 88,804
Cumulative effect of accounting
changes (155) --- ---
-------- -------- --------
21,333 33,318 88,804
Earnings of subsidiaries
net of dividends paid to parent* 16,202 4,160 (61,274)
-------- -------- --------
NET INCOME $ 37,535** $ 37,478** $ 27,530**
======== ======== ========
*Eliminated in consolidation.
**Differs from consolidated net income by $1,612, $3,407 and $3,036 in
1993, 1992 and 1991, respectively, due to gains recognized on a
consolidated basis previously recognized by subsidiaries on intercompany
transactions. Gains were deferred on a consolidated basis until completion
of the earnings process.
See notes to condensed financial statements.
26
27
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
1993 1992 1991
---------- ---------- ----------
OPERATING ACTIVITIES
Net income $ 37,535 $ 37,478 $ 27,530
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,260 2,950 2,742
Provision for deferred income taxes (2,834) 1,663 (631)
Earnings from subsidiary operations, net of
dividends paid to parent (16,202) (4,160) 61,274
(Gain) loss on disposal of assets 2,299 (1,373) (1,378)
Change in operating assets and liabilities:
(Increase) Decrease in intercompany debt and
advances* (1,266) (1,455) (59,592)
(Decrease) Increase in accounts payable and
accrued expenses (970) 1,469 (931)
Decrease (Increase) in other assets (1,188) 1,754 (2,034)
Increase (Decrease) in other liabilities, and
accrued income taxes 3,075 2,918 3,708
Other 856 (4,345) 1,881
---------- ---------- ----------
NET CASH PROVIDED IN OPERATING ACTIVITIES 23,565 36,899 32,569
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of investment securities --- --- (20)
Sale of investment securities --- --- ---
Additional investment in subsidiaries* (6,500) (7,000) ---
Reduction in investment in subsidiaries* 10,000 5,952 ---
Notes receivable repayments (made) (7,907) 233 (242)
Purchase of investment properties (19,055) (5,753) (14,274)
Sale of investment properties 26,780 26,622 3,225
Purchase of buildings and equipment (3,700) --- (165)
Net cash paid on purchase of insurance business --- (66,434) ---
Other (48) --- ---
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (430) (46,380) (11,476)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings 2,192,635 1,699,000 424,400
Principal payments on debt (2,219,351) (1,748,869) (443,552)
Dividends paid (13,108) (7,892) (5,472)
Stock issued for employee benefit and performance
incentive compensation programs 7,181 4,153 2,984
Common stock offering 8,544 64,274 ---
Common stock repurchased --- --- ---
---------- ---------- ----------
NET CASH (USED) PROVIDED IN FINANCING ACTIVITIES (24,099) 10,666 (21,640)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH (964) 1,185 (547)
Cash at beginning of year 2,033 848 1,395
---------- ---------- ----------
CASH AT END OF YEAR $ 1,069 $ 2,033 $ 848
========== ========== ==========
*Eliminated in consolidation.
See notes to condensed financial statements.
27
28
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. NOTES, MORTGAGES AND OTHER DEBT
The general debt obligations at December 31, 1993, are as follows:
Average
Interest
(In 000's) Rate % Amount
---------- -------- --------
Notes due to banks 3.7 $145,500
Mortgage loans on investment property 8.0 2,343
--------
$147,843
========
On September 28, 1993, the Parent Company completed the restructuring of
its revolving credit facility into a new $325,000,000 three and one-half year
facility which will mature on April 1, 1997 and includes a one year extension
provision at the Company's option. This facility provides funds to meet working
capital requirements and finance acquisitions. Note 5 of The Liberty Corporation
and Subsidiaries Consolidated Financial Statements provides additional
information as to this agreement. The maturities of the general debt
obligations at December 31, 1993 are as follows:
(In 000's) Amount
---------- --------
1994 $ 31,616
1995 1,001
1996 226
1997 115,000
1998 ---
Thereafter ---
--------
$147,843
========
2. COMMITMENTS AND CONTINGENT LIABILITIES
The Parent Company is contingently liable for $792,000 of debt incurred
by Cosmos on an industrial development bond.
3. RETAINED EARNINGS
As of December 31, 1993 and 1992, retained earnings of $292,138,000 and
$265,445,000 respectively, in The Liberty Corporation (Parent Company) financial
statements differs from The Liberty Corporation and Subsidiaries consolidated
financial statements. The difference of $1,405,000 and $3,017,000 at December
31, 1993 and 1992, respectively, relates to the capitalization of interest on a
consolidated basis and the elimination of gains on intercompany transactions.
28
29
Schedule V
THE LIBERTY CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
December 31
------------------------------------------------------------------------
Future
Policy
Benefits, Other
Deferred Losses, Policy
Policy Claims, Claims &
Acquisition and Loss Unearned Benefits
Segment Costs Expenses Premiums Payable
------------------------------------------------------------------------------------------------------------------
1993
----
Life/Health Insurance $ 288,635 $1,342,369 $ 3,135 $ 43,672
1992
----
Life/Health Insurance $ 275,875 $1,265,410 $ 5,645 $ 40,210
1991
----
Life/Health Insurance $ 211,829 $1,000,539 $ 4,754 $ 39,791
Year Ended December 31
-------------------------------------------------------------------------------------------------
Benefits, Amortization
Claims, of Deferred Accident
Net Losses, & Policy Other & Health
Premium Investment Settlement Acquisition Operating Premiums
Segment Revenue Income Expenses Costs Expenses Written
--------------------------------------------------------------------------------------------------------------------------
1993
----
Life/Health Insurance $ 250,922 $ 106,864 $ 159,452 $ 39,402 $ 112,025 $ 42,151
1992
----
Life/Health Insurance $ 209,133 $ 90,120 $ 126,182 $ 29,581 $ 94,200 $ 45,250
1991
----
Life/Health Insurance $ 180,517 $ 93,066 $ 123,783 $ 25,203 $ 77,000 $ 37,710
29
30
Schedule VI
THE LIBERTY CORPORATION AND SUBSIDIARIES
REINSURANCE
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
Ceded to Assumed Percentage of
Gross Other from Other Net Amount Assumed
Amount(1) Companies Companies Amount to Net
--------- ----------- ----------- ----------- --------------
Year ended December 31, 1993
- ----------------------------
Life insurance in force $ 20,202,101 $ 4,788,883 $ 20,431 $15,433,649 0.1%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 233,263 $ 26,075 $ 208 $ 207,396 .1%
Accident and health 45,191 3,546 1,881 43,526 4.3%
------------ ----------- ----------- -----------
TOTAL $ 278,454 $ 29,621 $ 2,089 $ 250,922
============ =========== =========== ===========
Year ended December 31, 1992
- ----------------------------
Life insurance in force $ 20,458,434 $ 4,915,995 $ 28,417 $15,570,856 0.2%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 194,311 $ 28,279 $ 150 $ 166,182 0.1%
Accident and health 43,292 3,017 2,676 42,951 6.2%
------------ ----------- ----------- -----------
TOTAL $ 237,603 $ 31,296 $ 2,826 $ 209,133
============ =========== =========== ===========
Year ended December 31, 1991
- ----------------------------
Life insurance in force $ 19,928,079 $ 4,932,644 $ 44,581 $15,040,016 0.3%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 148,526 $ 5,499 $ 479 $ 143,506 0.3%
Accident and health 36,163 2,618 3,466 37,011 9.4%
------------ ----------- ----------- -----------
TOTAL $ 184,689 $ 8,117 $ 3,945 $ 180,517
============ =========== =========== ===========
(1) Includes the blocks of business assumed during 1991 from Kentucky
Central Life Insurance Company and Integon Life Insurance
Corporation for which Kentucky Central and Integon have no further
liability.
30
31
Schedule VIII
THE LIBERTY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
Additions
----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Deducted From Asset Accounts of Period Expenses Accounts Deductions of Period
- ---------------------------- ---------- ------------ ---------- ---------- -----------
Year Ended December 31, 1993
Accounts receivable - 5(b)
reserve for bad debts $ 921 $ 1,004 $ --- $ 893(a) $ 1,027
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Year Ended December 31, 1992
Accounts receivable -
reserve for bad debts $ 556 $ 353 $ 315 $ 303(a) $ 921
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Year Ended December 31, 1991
Accounts receivable -
reserve for bad debts $ 502 $ 744 $ --- $ 690(a) $ 556
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ----------- ---------- -----------
Notes:
(a) Uncollectible accounts written off, net of recoveries.
(b) Reversal of reserves no longer required.
31
32
Schedule IX
THE LIBERTY CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's, except interest rates)
Average
Weighted Average Maximum Amount Weighted Average
Category of Aggregate Balance Interest Rate of Amount Outstanding Interest Rate
Short-Term Borrowings(1) End of Period Amounts Outstanding Outstanding During Period(2) During Period(3)
---------------------------- ------------- ------------------- ----------- ---------------- ----------------
Year Ended December 31, 1993
Lines of credit $ 30,500 3.68% $ 30,500 $ 10,925 3.70%
Year Ended December 31, 1992
Lines of credit $ 8,000 4.80% $ 10,000 $ 5,800 4.11%
Year Ended December 31, 1991
Lines of credit $ 82,000 6.10% $104,000 $ 97,225 6.51%
Notes:
(1) Lines of credit arrangements with various banks impose no
restrictions, do not require formal compensating balances and
are at current quoted rates.
(2) The average amount outstanding during the period was computed
primarily by weighting all short-term borrowings during the period
by the number of days outstanding and then dividing by the number
of days outstanding.
(3) The weighted average interest rate during the period was computed
by annualizing the interest expense associated with all short-term
borrowings and then dividing by the total short-term borrowings
during the period.
32
33
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 hereunto duly authorized, as of the xxth day
of March, 1994
THE LIBERTY CORPORATION By: /s/ Hayne Hipp
-------------------------- --------------------------
Registrant Hayne Hipp
President and Chief
Executive Officer
Pursuant to the requirements 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 indicated, as of the xxth day of March, 1994.
By: /s/ William S. Kleckley *By: /s/ James G. Lindley
-------------------------- --------------------------
William S. Kleckley James G. Lindley
Vice President & Controller Director
By: /s/ Barry L. Edwards *By: /s/ William O. McCoy
-------------------------- --------------------------
Barry L. Edwards William O. McCoy
Vice President & Treasurer Director
*By: /s/ Rufus C. Barkley, Jr. *By: /s/ Buck Mickel
-------------------------- ------------------------
Rufus C. Barkley, Jr. Buck Mickel
Director Director
*By: /s/ Edward E. Crutchfield *By: /s/ John H. Mullin, III
-------------------------- ------------------------
Edward E. Crutchfield John H. Mullin, III
Director Director
*By: /s/ Francis M. Hipp *By: /s/ Benjamin F. Payton
-------------------------- ------------------------
Francis M. Hipp Benjamin F. Payton
Director Director
By: /s/ W. Hayne Hipp *By: /s/ Robert S. Small
-------------------------- ------------------------
W. Hayne Hipp Robert S. Small
Director Director
*By: /s/ W. W. Johnson *By: /s/ John A. Warren
-------------------------- ------------------------
W. W. Johnson John A. Warren
Director Director
*By: /s/ James F. Kane By: /s/ Martha G. Williams
-------------------------- ------------------------
James F. Kane *Martha G. Williams, as
Director Special Attorney-in-Fact
*By: /s/ William S. Lee
--------------------------
William S. Lee
Director
33
34
Annual Report on Form 10-K
The Liberty Corporation
December 31, 1993
Index to Exhibits
Exhibit Page Number
----------- -------------
3.1 Restated Articles of Incorporation, as amended 35 - 81
through March 28, 1994.
10. Credit Agreement dated September 28, 1993. 82 - 180
11. The Liberty Corporation and Subsidiaries Consolidated 181
Earnings Per Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 1993:
Market for the Registrant's Common Stock and Related 182
Security Stockholder Matters 183
Selected Financial Data
Management's Discussion and Analysis of Financial 184 - 193
Condition and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and 1992 194 - 195
Consolidated Statements of Income - For the three years 196
ended December 31, 1993
Consolidated Statements of Cash Flows - For the three years 197
ended December 31, 1993
Consolidated Shareholders' Equity - For the three years 198
ended December 31, 1993
Notes to Consolidated Financial Statements - December 31, 199 - 218
1993
Report of Independent Auditors 219
21. The Liberty Corporation and Subsidiaries, List of 220
Significant Subsidiaries
23. Consent of Independent Auditors 221
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Adopting Related Employers' 401(k) 222 - 237
Thrift Plan for the year ended December 31, 1993
34