|
Pennsylvania
|
| |
6311
|
| |
82-4944172
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
Wesley R. Kelso, Esq.
Stevens & Lee, P.C. 111 North Sixth Street Reading, Pennsylvania 19603 (610) 478-2242 |
| |
James M. Connolly, Esq.
Griffin Financial Group LLC 100 Lennox Drive, Suite 200 Lawrenceville, NJ 08648 (609) 987-6677 |
|
| Large accelerated filer ☐ | | | Accelerated filer ☐ | |
| Non-accelerated filer ☐ | | | Smaller reporting company ☐ | |
| | | | Emerging growth company ☒ | |
Calculation of Registration Fee
|
| ||||||||||||||||||||||||
Title of Each Class of Securities to be Registered
|
| |
Amount to be
Registered (1) |
| |
Proposed
Maximum Offering Price Per Share (2) |
| |
Proposed
Maximum Aggregate Offering Price |
| |
Amount of
Registration Fee |
| ||||||||||||
Common Stock, par value $0.01 per share
|
| | | | 4,600,000 | | | | | $ | 10.00 | | | | | $ | 46,000,000 | | | | | $ | 5,576 | | |
|
| | |
Minimum
|
| |
Maximum
|
| ||||||
Number of shares offered
|
| | | | 3,400,000 | | | | | | 4,600,000 | | |
Gross offering proceeds
|
| | | $ | 34,000,000 | | | | | $ | 46,000,000 | | |
Estimated offering expenses
|
| | | $ | 1,000,000 | | | | | $ | 1,000,000 | | |
Commissions (1)(2) | | | | $ | 1,895,000 | | | | | $ | 2,135,000 | | |
Net proceeds
|
| | | $ | 31,105,000 | | | | | $ | 42,865,000 | | |
Net proceeds per share
|
| | | $ | 9.15 | | | | | $ | 9.32 | | |
| | | | | 1 | | | |
| | | | | 15 | | | |
| | | | | 30 | | | |
| | | | | 31 | | | |
| | | | | 33 | | | |
| | | | | 34 | | | |
| | | | | 34 | | | |
| | | | | 36 | | | |
| | | | | 37 | | | |
| | | | | 43 | | | |
| | | | | 69 | | | |
| | | | | 85 | | | |
| | | | | 106 | | | |
| | | | | 110 | | | |
| | | | | 120 | | | |
| | | | | 121 | | | |
| | | | | 125 | | | |
| | | | | 125 | | | |
| | | | | 125 | | | |
| | | | | F-1 | | |
Stock Based Incentive Plan
|
| |
Individuals
Eligible to Receive Awards |
| |
Number of
Shares |
| |
Percentage of
shares issued in the offering |
| |
Value of shares
Based on $10.00 Share Price |
| |||||||||
Shares available for restricted stock awards
|
| | Selected officers | | | | | 140,000 | | | | | | 4.12 % | | | | | $ | 1,400,000 | | |
Shares available for stock options
|
| |
Directors and selected officers
|
| | | | 340,000 | | | | | | 10.0 % | | | | |
|
(1)
|
| |
| | |
Six Months Ended June 30,
|
| |
Years Ended December 31,
|
| ||||||||||||||||||
(dollars in thousands)
|
| |
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||
Statement of Operations Data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums written
|
| | | $ | 7,593 | | | | | $ | 7,564 | | | | | $ | 14,133 | | | | | $ | 16,299 | | |
Ceded premiums
|
| | | | (1,335 ) | | | | | | (968 ) | | | | | | (2,075 ) | | | | | | (1,872 ) | | |
Insurance revenues
|
| | | | 6,258 | | | | | | 6,596 | | | | | $ | 12,058 | | | | | $ | 14,427 | | |
Net investment income
|
| | | | 4,218 | | | | | | 4,292 | | | | | | 8,523 | | | | | | 8,821 | | |
Net realized investment gains
|
| | | | 324 | | | | | | 904 | | | | | | 2,228 | | | | | | 1,783 | | |
Other revenues
|
| | | | 97 | | | | | | 85 | | | | | | 194 | | | | | | 173 | | |
Total revenues
|
| | | | 10,897 | | | | | | 11,877 | | | | | | 23,003 | | | | | | 25,204 | | |
Benefits and expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 7,018 | | | | | | 7,215 | | | | | | 13,712 | | | | | | 16,069 | | |
Interest credit to policyholder balances
|
| | | | 207 | | | | | | 114 | | | | | | 386 | | | | | | 315 | | |
Operating costs and expenses
|
| | | | 4,331 | | | | | | 3,994 | | | | | | 7,889 | | | | | | 8,099 | | |
Amortization of deferred policy acquisition and sales inducement costs
|
| | | | 897 | | | | | | 1,124 | | | | | | 2,108 | | | | | | 1,876 | | |
Taxes, licenses and fees
|
| | | | 398 | | | | | | 392 | | | | | | 716 | | | | | | 722 | | |
Dividends to policyholders
|
| | | | 31 | | | | | | 31 | | | | | | 66 | | | | | | 86 | | |
Total benefits and expenses
|
| | | | 12,882 | | | | | | 12,870 | | | | | | 24,877 | | | | | | 27,167 | | |
Net loss before taxes
|
| | | | (1,985 ) | | | | | | (993 ) | | | | | | (1,874 ) | | | | | | (1,963 ) | | |
Tax expense
|
| | | | 9 | | | | | | 14 | | | | | | 34 | | | | | | 34 | | |
Net loss
|
| | | $ | (1,994 ) | | | | | $ | (1,007 ) | | | | | $ | (1,908 ) | | | | | $ | (1,997 ) | | |
|
| | |
June 30,
|
| |
Years Ended December 31,
|
| ||||||||||||
(dollars in thousands)
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Balance Sheet Data: | | | | | |||||||||||||||
Total investments, cash and cash equivalents
|
| | | $ | 203,640 | | | | | $ | 208,993 | | | | | $ | 201,314 | | |
Deferred policy acquisition costs, net
|
| | | | 13,320 | | | | | | 12,179 | | | | | | 11,940 | | |
Deferred sales inducement costs, net
|
| | | | 1,076 | | | | | | 867 | | | | | | 315 | | |
Reinsurance recoverables
|
| | | | 3,622 | | | | | | 3,727 | | | | | | 2,107 | | |
Accrued investment income
|
| | | | 1,929 | | | | | | 1,886 | | | | | | 1,832 | | |
Accounts receivable
|
| | | | 2,417 | | | | | | 538 | | | | | | 575 | | |
Prepaid reinsurance premiums
|
| | | | 1,379 | | | | | | 1,358 | | | | | | 924 | | |
Deferred tax asset, net
|
| | | | 495 | | | | | | 458 | | | | | | 664 | | |
Other assets
|
| | | | 296 | | | | | | 202 | | | | | | 254 | | |
Separate account asset
|
| | | | 23,690 | | | | | | 24,779 | | | | | | 21,513 | | |
Real estate, property and equipment
|
| | | | 2,166 | | | | | | 2,151 | | | | | | 2,297 | | |
Total Assets
|
| | | $ | 254,030 | | | | | $ | 257,138 | | | | | $ | 243,735 | | |
Future life policy benefits
|
| | | $ | 72,608 | | | | | $ | 71,927 | | | | | $ | 73,097 | | |
Policyholder account balance
|
| | | | 113,654 | | | | | | 109,823 | | | | | | 99,440 | | |
Future accident and health policy benefits
|
| | | | 343 | | | | | | 386 | | | | | | 351 | | |
Reserve for deposit type contracts
|
| | | | 11,222 | | | | | | 10,850 | | | | | | 10,529 | | |
Other policyholder funds
|
| | | | 2,733 | | | | | | 1,970 | | | | | | 1,889 | | |
Separate account liability
|
| | | | 23,690 | | | | | | 24,779 | | | | | | 21,513 | | |
Unearned revenue
|
| | | | 1,357 | | | | | | 1,387 | | | | | | 1,396 | | |
Deferred reinsurance settlements
|
| | | | 2,826 | | | | | | 2,949 | | | | | | 1,512 | | |
Other liabilities
|
| | | | 2,080 | | | | | | 1,710 | | | | | | 1,146 | | |
Total Liabilities
|
| | | $ | 230,513 | | | | | $ | 225,781 | | | | | $ | 210,873 | | |
Retained earnings
|
| | | $ | 24,606 | | | | | $ | 26,600 | | | | | $ | 29,313 | | |
Accumulated other comprehensive income
|
| | | | (1,089 ) | | | | | | 4,757 | | | | | | 3,549 | | |
Total equity
|
| | | $ | 23,517 | | | | | $ | 31,357 | | | | | $ | 32,862 | | |
|
| | | | | | | | |
Pro Forma Capitalization
of Federal Life Group, Inc. as of June 30, 2018 (2) |
| |||||||||
| | | | | | | | |
(dollars in thousands except share
and per share data) |
| |||||||||
| | |
Historical
Consolidated Capitalization of FLMHC at June 30, 2018 |
| |
Minimum
|
| |
Maximum
|
| |||||||||
Shareholders’ equity (1) : | | | | | | | | | | | | | | | | | | | |
Common Stock, par value $0.01 per share; authorized 10,000,000 shares; shares to be outstanding – as
shown (2)(3) |
| | | $ | — | | | | | $ | 34 | | | | | $ | 46 | | |
Additional paid-in capital
(2)(3)
|
| | | $ | — | | | | | $ | 31,071 | | | | | $ | 42,865 | | |
Retained earnings
|
| | | | 24,606 | | | | | | 24,606 | | | | | | 24,606 | | |
Accumulated other comprehensive income (loss),
net of tax |
| | | $ | (1,089 ) | | | | | $ | (1,089 ) | | | | | $ | (1,089 ) | | |
Total shareholders’ equity
|
| | | $ | 23,517 | | | | | $ | 54,622 | | | | | $ | 66,428 | | |
|
| | |
FLMHC
Historical Consolidated |
| |
Pro Forma
Adjustments |
| |
Federal Life
Group, Inc. Pro Forma Consolidated |
| |||||||||
Assets | | | | | | | | | | | | | | | | | | | |
Cash and investments
|
| | | $ | 203,640 | | | | | $ | 31,105 | | | | | $ | 234,745 | | |
Deferred policy acquisition costs, net
|
| | | | 13,320 | | | | | | — | | | | | | 13,320 | | |
Deferred sales inducement costs, net
|
| | | | 1,076 | | | | | | — | | | | | | 1,076 | | |
Accrued investment income
|
| | | | 1,929 | | | | | | — | | | | | | 1,929 | | |
Accounts receivable
|
| | | | 2,417 | | | | | | — | | | | | | 2,417 | | |
Prepaid reinsurance premiums
|
| | | | 1,379 | | | | | | — | | | | | | 1,379 | | |
Real estate, property and equipment
|
| | | | 2,166 | | | | | | — | | | | | | 2,166 | | |
Reinsurance recoverables
|
| | | | 3,622 | | | | | | — | | | | | | 3,622 | | |
Separate account asset
|
| | | | 23,690 | | | | | | — | | | | | | 23,690 | | |
Deferred tax asset, net
|
| | | | 495 | | | | | | — | | | | | | 495 | | |
Other assets
|
| | | | 296 | | | | | | — | | | | | | 296 | | |
Total assets
|
| | | $ | 254,030 | | | | | $ | 31,105 | | | | | $ | 285,135 | | |
|
| | |
FLMHC
Historical Consolidated |
| |
Pro Forma
Adjustments |
| |
Federal Life
Group, Inc. Pro Forma Consolidated |
| |||||||||
Liabilities | | | | | | | | | | | | | | | | | | | |
Policyholder account balance
|
| | | $ | 113,654 | | | | | | — | | | | | $ | 113,654 | | |
Separate account liability
|
| | | | 23,690 | | | | | | — | | | | | | 23,690 | | |
Future policy benefits
|
| | | | 72,951 | | | | | | — | | | | | | 72,951 | | |
Reserve for deposit accounts
|
| | | | 11,222 | | | | | | — | | | | | | 11,222 | | |
Other policyholder funds
|
| | | | 2,733 | | | | | | — | | | | | | 2,733 | | |
Deferred reinsurance settlements
|
| | | | 2,826 | | | | | | | | | | | | 2,826 | | |
Unearned revenue
|
| | | | 1,357 | | | | | | — | | | | | | 1,357 | | |
Other liabilities
|
| | | | 2,080 | | | | | | — | | | | | | 2,080 | | |
Total liabilities
|
| | | $ | 230,513 | | | | | | — | | | | | $ | 230,513 | | |
Common stock
|
| | | | — | | | | | | 34 (2)(3) | | | | | $ | 34 | | |
Additional paid in capital
|
| | | | — | | | | | | 31,071 | | | | | | 31,071 | | |
Retained earnings
|
| | | $ | 24,606 | | | | | | — | | | | | | 24,606 | | |
Accumulated other comprehensive income
|
| | | | (1,089 ) | | | | | | — | | | | | | (1,089 ) | | |
Total equity
|
| | | | 23,517 | | | | | | 31,105 | | | | | | 54,622 | | |
Total liabilities and equity
|
| | | $ | 254,030 | | | | | $ | 31,105 | | | | | $ | 285,135 | | |
|
|
Sale of 3,400,000 shares at $10 per share
|
| | | $ | 34,000,000 | | |
|
Conversion and offering expenses
|
| | | | 1,000,000 | | |
|
Commissions
|
| | | | 1,895,000 | | |
|
Total
|
| | | $ | 31,105,000 | | |
|
Common stock
|
| | | $ | 34,000 | | |
|
Additional paid in capital
|
| | | $ | 31,071,000 | | |
|
Total
|
| | | $ | 31,105,000 | | |
|
(dollars in thousands)
|
| |
FLMHC
Historical Consolidated |
| |
Pro Forma
Adjustments |
| |
Federal Life
Group, Inc. Pro Forma Consolidated |
| |||||||||
Revenues | | | | | | | | | | | | | | | | | | | |
Insurance revenues
|
| | | $ | 12,058 | | | | | $ | — | | | | | $ | 12,058 | | |
Net investment income
|
| | | | 8,523 | | | | | | — (1) | | | | | | 8,523 | | |
Net realized investment gains
|
| | | | 2,228 | | | | | | — (1) | | | | | | 2,228 | | |
Other revenues
|
| | | | 194 | | | | | | — | | | | | | 194 | | |
Total revenues
|
| | | $ | 23,003 | | | | | $ | — | | | | | $ | 23,003 | | |
Benefits and Expenses | | | | | | | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 13,712 | | | | | | — | | | | | | 13,712 | | |
Interest credit to policyholders
|
| | | | 386 | | | | | | — | | | | | | 386 | | |
Operating costs and expenses
|
| | | | 7,889 | | | | | | 350 (2) | | | | | | 8,239 | | |
Amortization of deferred policy acquisition and sales inducement
costs |
| | | | 2,108 | | | | | | — | | | | | | 2,108 | | |
Taxes, licenses and fees
|
| | | | 716 | | | | | | — | | | | | | 716 | | |
Dividends to policyholders
|
| | | | 66 | | | | | | — | | | | | | 66 | | |
Total benefits and expenses
|
| | | | 24,877 | | | | | | 350 | | | | | | 25,227 | | |
Loss before income taxes
|
| | | | (1,874 ) | | | | | | (350 ) | | | | | | (2,224 ) | | |
Tax expense (benefit)
|
| | | | 34 | | | | |
|
(3)
|
| | | | | 34 | | |
Net loss
|
| | | $ | (1,908 ) | | | | | $ | (350 ) | | | | | $ | (2,258 ) | | |
Earnings per share data | | | | | | | | | | | | | | | | | | | |
Basic and diluted earnings per common share
|
| | | | | | | | | | | | | | | $ | (0.66 ) | | |
Weighted average basic and diluted shares outstanding
|
| | | | | | | | | | | | | | | | 3,435,000 (4) | | |
(dollars in thousands)
|
| |
FLMHC
Historical Consolidated |
| |
Pro Forma
Adjustments |
| |
Federal Life
Group, Inc. Pro Forma Consolidated |
| |||||||||
Revenues | | | | | | | | | | | | | | | | | | | |
Insurance revenues
|
| | | $ | 6,258 | | | | | $ | — | | | | | $ | 6,258 | | |
Net investment income
|
| | | | 4,218 | | | | | | — (1) | | | | | | 4,218 | | |
Net realized investment gains
|
| | | | 324 | | | | | | — (1) | | | | | | 324 | | |
Other revenues
|
| | | | 97 | | | | | | — | | | | | | 97 | | |
Total revenues
|
| | | $ | 10,897 | | | | | $ | — | | | | | $ | 10,897 | | |
Benefits and Expenses | | | | | | | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 7,018 | | | | | | — | | | | | | 7,018 | | |
Interest credit to policyholders
|
| | | | 207 | | | | | | — | | | | | | 207 | | |
Operating costs and expenses
|
| | | | 4,331 | | | | | | 350 (2) | | | | | | 4,681 | | |
Amortization of deferred policy acquisition and sales inducement
costs |
| | | | 897 | | | | | | — | | | | | | 897 | | |
Taxes, licenses and fees
|
| | | | 398 | | | | | | | | | | | | 398 | | |
Dividends to policyholders
|
| | | | 31 | | | | | | — | | | | | | 31 | | |
Total benefits and expenses
|
| | | | 12,882 | | | | | | 350 | | | | | | 13,232 | | |
Loss before income taxes
|
| | | | (1,985 ) | | | | | | (350 ) | | | | | | (2,335 ) | | |
Tax expense (benefit)
|
| | | | 9 | | | | | | — (3) | | | | | | 9 | | |
Net loss
|
| | | $ | (1,994 ) | | | | | $ | (350 ) | | | | | $ | (2,344 ) | | |
Loss per share data | | | | | | | | | | | | | | | | | | | |
Basic loss per common share
|
| | | | | | | | | | | | | | | $ | (0.59 ) (4) | | |
Diluted loss per common share
|
| | | | | | | | | | | | | | | | (0.68 ) | | |
Weighted average basic shares outstanding
|
| | | | | | | | | | | | | | | | 3,400,000 | | |
Weighted average diluted shares outstanding
|
| | | | | | | | | | | | | | | | 3,540,000 | | |
| | |
At or for the Year Ended June 30, 2018
|
| |||||||||||||||
| | |
3,400,000
Shares Sold at $10.00 per Share (Minimum of Range) |
| |
4,000,000
Shares Sold at $10.00 per Share (Midpoint of Range) |
| |
4,600,000
Shares Sold at $10.00 per Share (Maximum of Range) |
| |||||||||
| | |
(dollars in thousands, except share and per share data)
|
| |||||||||||||||
Pro forma offering proceeds | | | | | | | | | | | | | | | | | | | |
Gross proceeds of public offering
|
| | | $ | 34,000 | | | | | $ | 40,000 | | | | | $ | 46,000 | | |
Less offering expenses and commissions
|
| | | $ | 2,895 | | | | | $ | 3,060 | | | | | $ | 3,135 | | |
Net Proceeds
|
| | | $ | 31,105 | | | | | $ | 36,940 | | | | | $ | 42,865 | | |
Pro forma shareholders’ equity | | | | | | | | | | | | | | | | | | | |
Historical Equity
|
| | | $ | 23,517 | | | | | $ | 23,517 | | | | | $ | 23,517 | | |
Net proceeds
|
| | | $ | 31,105 | | | | | $ | 36,940 | | | | | $ | 42,865 | | |
Pro forma shareholders’ equity
(1)
|
| | | $ | 54,622 | | | | | $ | 60,457 | | | | | $ | 66,382 | | |
Pro forma per share data | | | | | | | | | | | | | | | | | | | |
Total shares outstanding after the offering
|
| | | | 3,400,000 | | | | | | 4,000,000 | | | | | | 4,600,000 | | |
Pro forma book value per share
|
| | | $ | 16.06 | | | | | $ | 15.11 | | | | | $ | 14.43 | | |
Pro forma price-to-book value per share
|
| | | | 62.3 % | | | | | | 66.2 % | | | | | | 69.3 % | | |
Pro forma net income | | | | | | | | | | | | | | | | | | | |
Historical net loss
|
| | | | (1,994 ) | | | | | $ | (1,994 ) | | | | | $ | (1,994 ) | | |
Pro forma loss
|
| | | $ | (2,344 ) | | | | | $ | (2,344 ) | | | | | $ | (2,344 ) | | |
Weighted average shares outstanding
(2)
|
| | | | 3,435,000 | | | | | | 4,035,000 | | | | | | 4,635,000 | | |
Pro forma loss per share
|
| | | $ | (0.68 ) | | | | | $ | (0.58 ) | | | | | $ | (0.51 ) | | |
Deferred Tax Liability
(in thousands) |
| |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||
Total deferred tax assets
|
| | | $ | 9,139 | | | | | $ | 13,939 | | |
Total deferred tax liabilities
|
| | | | (4,668 ) | | | | | | (7,127 ) | | |
Deferred tax asset (liability) before valuation allowance
|
| | | | 4,471 | | | | | | 6,812 | | |
Valuation allowance
|
| | | | (4,013 ) | | | | | | (6,148 ) | | |
Deferred income tax liability
|
| | | $ | 458 | | | | | $ | 664 | | |
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||
| | |
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||
REVENUES | | | | | | | | | | | | | | | | | | | | | | | | | |
Net insurance revenues
|
| | | $ | 6,258 | | | | | $ | 6,596 | | | | | $ | 12,058 | | | | | $ | 14,427 | | |
Net investment income
|
| | | | 4,218 | | | | | | 4,292 | | | | | | 8,523 | | | | | | 8,821 | | |
Net realized investment gains
|
| | | | 324 | | | | | | 904 | | | | | | 2,228 | | | | | | 1,783 | | |
Other income
|
| | | | 97 | | | | | | 85 | | | | | | 194 | | | | | | 173 | | |
Total revenues
|
| | | | 10,897 | | | | | | 11,877 | | | | | | 23,003 | | | | | | 25,204 | | |
BENEFITS AND EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 7,018 | | | | | | 7,215 | | | | | | 13,712 | | | | | | 16,069 | | |
Interest credit to policyholders
|
| | | | 207 | | | | | | 114 | | | | | | 386 | | | | | | 315 | | |
Operating costs and expenses
|
| | | | 4,331 | | | | | | 3,994 | | | | | | 7,889 | | | | | | 8,099 | | |
Amortization of deferred policy acquisition and sales inducement costs
|
| | | | 897 | | | | | | 1,124 | | | | | | 2,108 | | | | | | 1,876 | | |
Taxes, licenses and fees
|
| | | | 398 | | | | | | 392 | | | | | | 716 | | | | | | 722 | | |
Dividends to policyholders
|
| | | | 31 | | | | | | 31 | | | | | | 66 | | | | | | 86 | | |
Total benefits and expenses
|
| | | | 12,882 | | | | | | 12,870 | | | | | | 24,877 | | | | | | 27,167 | | |
Loss before income taxes
|
| | | | (1,985 ) | | | | | | (993 ) | | | | | | (1,874 ) | | | | | | (1,963 ) | | |
Tax expense
|
| | | | 9 | | | | | | 14 | | | | | | 34 | | | | | | 34 | | |
NET LOSS
|
| | | $ | (1,994 ) | | | | | $ | (1,007 ) | | | | | $ | (1,908 ) | | | | | $ | (1,997 ) | | |
|
| | |
Year Ended December 31,
|
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
| | |
(dollars in thousands)
|
| |||||||||
Call options: | | | | | | | | | | | | | |
Gain (loss) on option expiration
|
| | | $ | 94 | | | | | $ | 0 | | |
Change in unrealized gains (losses)
|
| | | | 140 | | | | | | — | | |
| | |
Year Ended December 31,
|
| |||
| | |
2017
|
| |
2016
|
|
S&P 500 Index
|
| |
16.04 – 18.50%
|
| |
12.59 – 12.59%
|
|
Annual point-to-point strategy | | | | | | | |
Cap
|
| |
3.00 – 3.75%
|
| |
3.50 – 3.50%
|
|
Participation Rate
|
| |
30.0 – 35.0%
|
| |
30.0 – 30.0%
|
|
| | |
Year Ended December 31,
|
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
| | |
(dollars in thousands)
|
| |||||||||
Surrender charges
|
| | | $ | 69 | | | | | $ | 22 | | |
Lifetime income benefit riders (LIBR) fees
|
| | | $ | 34 | | | | | $ | 1 | | |
| | | | $ | 103 | | | | | $ | 23 | | |
Withdrawals from annuity policies subject to surrender charges
|
| | | $ | 1,091 | | | | | $ | 624 | | |
Average surrender charge collected on withdrawals subject to surrender charges
|
| | | | 6.32 % | | | | | | 3.60 % | | |
Fund values on policies subject to LIBR fees
|
| | | $ | 4,496 | | | | | $ | 114 | | |
Weighted average per policy LIBR fee
|
| | | | 0.75 % | | | | | | 0.76 % | | |
| | |
Year Ended December 31,
|
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
| | |
(dollars in thousands)
|
| |||||||||
Index credits on index policies
|
| | | $ | 145 | | | | | $ | 5 | | |
Interest credited (including interest credited on fixed allocation for fixed index annuities)
|
| | | $ | 4,209 | | | | | $ | 3,927 | | |
Lifetime income benefit riders
|
| | | | (34 ) | | | | | | (1 ) | | |
| | | | $ | 4,320 | | | | | $ | 3,931 | | |
| | |
Six Months Ended June 30,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
| | |
(dollars in thousands)
|
| |||||||||
Call options: | | | | | | | | | | | | | |
Gain (loss) on option expiration
|
| | | $ | 116 | | | | | $ | 2 | | |
Change in unrealized gains/losses
|
| | | $ | (108 ) | | | | | $ | 51 | | |
| | |
Six Months Ended June 30,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
S&P 500 Index
|
| | | | 14.24 – 15.72 % | | | | | | 16.04 – 17.47 % | | |
Annual point-to-point strategy | | | | ||||||||||
Cap
|
| | | | 3.50 – 3.50 % | | | | | | 3.50 – 3.75 % | | |
Participation rate
|
| | | | 35.0 – 35.0 % | | | | | | 33.0 – 35.0 % | | |
| | |
Six Months Ended June 30,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
| | |
(dollars in thousands)
|
| |||||||||
Surrender charges
|
| | | $ | 21 | | | | | $ | 5 | | |
Lifetime income benefit riders (LIBR) fees
|
| | | $ | 36 | | | | | $ | 12 | | |
| | | | $ | 57 | | | | | $ | 17 | | |
Withdrawals from annuity policies subject to surrender charges
|
| | | $ | 346 | | | | | $ | 343 | | |
Average surrender charge collected on withdrawals subject to surrender charges
|
| | | | 6.03 % | | | | | | 1.36 % | | |
Fund values on policies subject to LIBR fees
|
| | | $ | 4,734 | | | | | $ | 1,571 | | |
Weighted average per policy LIBR fee
|
| | | | 0.75 % | | | | | | 0.75 % | | |
| | |
Six Months Ended June 30,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
| | |
(Dollars in thousands)
|
| |||||||||
Index credits on index policies
|
| | | $ | 187 | | | | | $ | 5 | | |
Interest credited (including interest credited on fixed allocation for fixed index annuities)
|
| | | $ | 2,027 | | | | | $ | 2,583 | | |
Lifetime income benefit riders
|
| | | | (36 ) | | | | | | (12 ) | | |
| | | | $ | 2,178 | | | | | $ | 2,576 | | |
|
| | |
June 30, 2018
|
| |
December 31, 2017
|
| |
December 31, 2016
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
| |
Amortized
Cost |
| |
%
|
| |
Fair
Value |
| |
%
|
| |
Amortized
Cost |
| |
%
|
| |
Fair
Value |
| |
%
|
| |
Amortized
Cost |
| |
%
|
| |
Fair
Value |
| |
%
|
| ||||||||||||||||||||||||||||||||||||
Due in one year or less
|
| | | $ | 3,499 | | | | | | 1.9 % | | | | | $ | 3,554 | | | | | | 1.9 % | | | | | $ | 2,247 | | | | | | 1.2 % | | | | | $ | 2,288 | | | | | | 1.2 % | | | | | $ | 5,038 | | | | | | 3.0 % | | | | | $ | 5,161 | | | | | | 3.0 % | | |
Due after one year through five years
|
| | | $ | 41,230 | | | | | | 22.3 % | | | | | $ | 41,801 | | | | | | 22.8 % | | | | | $ | 40,926 | | | | | | 22.3 % | | | | | $ | 42,809 | | | | | | 22.7 % | | | | | $ | 34,101 | | | | | | 20.0 % | | | | | $ | 36,605 | | | | | | 20.9 % | | |
Due after five years through ten years
|
| | | $ | 68,467 | | | | | | 37.0 % | | | | | $ | 66,976 | | | | | | 36.6 % | | | | | $ | 66,739 | | | | | | 36.4 % | | | | | $ | 68,151 | | | | | | 36.2 % | | | | | $ | 66,029 | | | | | | 38.7 % | | | | | $ | 66,648 | | | | | | 38.1 % | | |
Due after ten years
|
| | | $ | 26,216 | | | | | | 14.1 % | | | | | $ | 25,576 | | | | | | 14.0 % | | | | | $ | 27,492 | | | | | | 15.0 % | | | | | $ | 27,923 | | | | | | 14.8 % | | | | | $ | 20,244 | | | | | | 11.9 % | | | | | $ | 20,089 | | | | | | 11.5 % | | |
Mortgage-backed securities
|
| | | $ | 45,835 | | | | | | 24.7 % | | | | | $ | 45,342 | | | | | | 24.7 % | | | | | $ | 46,028 | | | | | | 25.1 % | | | | | $ | 47,281 | | | | | | 25.1 % | | | | | $ | 45,103 | | | | | | 26.4 % | | | | | $ | 46,377 | | | | | | 26.5 % | | |
Total debt securities
|
| | | $ | 185,247 | | | | | | 100.0 % | | | | | $ | 183,249 | | | | | | 100.0 % | | | | | $ | 183,432 | | | | | | 100.0 % | | | | | $ | 188,452 | | | | | | 100.0 % | | | | | $ | 170,515 | | | | | | 100 % | | | | | $ | 174,880 | | | | | | 100 % | | |
|
| | |
Six Months Ended
June 30, |
| |
Year Ended
December 31, |
| ||||||||||||||||||
| | |
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||
Book yield on fixed maturity securities available for sale
(1)
|
| | | | 3.97 % | | | | | | 4.14 % | | | | | | 3.98 % | | | | | | 4.35 % | | |
| | |
As of June 30, 2018
|
| |||||||||||||||
(dollars in thousands)
|
| |
Ending
Balance |
| |
Year to Date
Interest Credited |
| |
Average
Crediting Rate |
| |||||||||
Annuity Contract Holder Deposits
|
| | | $ | 50,078 | | | | | $ | 823 | | | | | | 1.65 % | | |
Dividends Left on Deposit
|
| | | | 6,898 | | | | | | 85 | | | | | | 1.22 % | | |
Other
|
| | | | 620 | | | | | | 11 | | | | | | 1.79 % | | |
| | | | $ | 57,596 | | | | | $ | 919 | | | | | | | | |
|
| | |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||||||||||||||||||||||||||
(dollars in thousands)
|
| |
Ending
Balance |
| |
Year to Date
Interest Credit |
| |
Average
Crediting Rate |
| |
Ending
Balance |
| |
Year to Date
Interest Credit |
| |
Average
Crediting Rate |
| ||||||||||||||||||
Annuity Contract Holder Deposits
|
| | | $ | 50,728 | | | | | $ | 1,763 | | | | | | 3.47 % | | | | | $ | 52,528 | | | | | $ | 1,820 | | | | | | 3.45 % | | |
Dividends Left on Deposit
|
| | | | 7,067 | | | | | | 171 | | | | | | 2.40 % | | | | | | 7,405 | | | | | | 184 | | | | | | 2.47 % | | |
Other
|
| | | | 570 | | | | | | 18 | | | | | | 3.50 % | | | | | | 461 | | | | | | 21 | | | | | | 4.66 % | | |
| | | | $ | 58,365 | | | | | $ | 1,952 | | | | | | | | | | | $ | 60,394 | | | | | $ | 2,025 | | | | | | | | |
|
Net Realized Investment Gains (Losses)
(dollars in thousands) |
| |
As of June 30,
|
| |
Years Ended
December 31, |
| ||||||||||||||||||
|
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||||
Sales of Investments: | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturity securities, available for sale
|
| | | $ | 36 | | | | | | 124 | | | | | $ | 177 | | | | | $ | 130 | | |
Equity securities
|
| | | | 0 | | | | | | 420 | | | | | | 897 | | | | | | 1,073 | | |
Oil and gas interests
|
| | | | 261 | | | | | | 358 | | | | | | 1,060 | | | | | | 580 | | |
Real estate
|
| | | | — | | | | | | — | | | | | | 0 | | | | | | 0 | | |
Derivatives
|
| | | | 116 | | | | | | 2 | | | | | | 94 | | | | | | 0 | | |
Other-than-temporary impairment losses on fixed maturity securities, available for sale-net
|
| | | | (89 ) | | | | | | 0 | | | | | | 0 | | | | | | 0 | | |
Trading securities-gains and losses: | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturity securities
|
| | | | — | | | | | | — | | | | | | 0 | | | | | | 0 | | |
Equity securities
|
| | | | 0 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | |
Investment expenses
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Mortgage loans impairments
|
| | | | 0 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | |
Total net realized investment gains (losses)
|
| | | | 324 | | | | | | 904 | | | | | $ | 2,228 | | | | | $ | 1,783 | | |
|
Accumulated Other Comprehensive Income
(dollars in thousands) |
| |
Six Months Ended
June 30, |
| |
Years Ended
December 31, |
| ||||||||||||||||||
|
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||||
Unrealized holding gains (losses) from changes in the market
value of securities, including the related impact to future policy benefit liabilities, the policyholder dividend obligation, and deferred policy acquisition cost balances |
| | | $ | (5,884 ) | | | | | $ | 1,273 | | | | | $ | 611 | | | | | $ | (539 ) | | |
Income tax effect
|
| | | | 38 | | | | | | (433 ) | | | | | | (208 ) | | | | | | 183 | | |
Cumulative effect of adoption of new accounting principle
|
| | | | 0 | | | | | | 0 | | | | | | 805 | | | | | | 0 | | |
Net increase in accumulated other comprehensive income
|
| | | $ | (5,846 ) | | | | | $ | 840 | | | | | $ | 1,208 | | | | | $ | (356 ) | | |
|
| | |
Six Months Ended
|
| |
Year Ended December 31,
|
| ||||||||||||||||||
Consolidated Summary of Cash Flow
(in thousands) |
| |
June 30,
2018 |
| |
June 30,
2017 |
| |
2017
|
| |
2016
|
| ||||||||||||
Cash flows provided by (used for) operating activities
|
| | | $ | (3,883 ) | | | | | $ | (1,362 ) | | | | | $ | (5,779 ) | | | | | $ | (5,056 ) | | |
Cash flows from investing activities
|
| | | | (493 ) | | | | | | (4,461 ) | | | | | | (9,228 ) | | | | | | 1,653 | | |
Cash flows provided by (used for) financing activities
|
| | | | 4,204 | | | | | | 4,615 | | | | | | 10,703 | | | | | | 5,239 | | |
Net increase (decrease) in cash
|
| | | | (172 ) | | | | | $ | (1,208 ) | | | | | $ | (4,304 ) | | | | | $ | 1,836 | | |
|
Contractual Cash Obligations
(dollars in thousands) |
| |
Total
|
| |
Less than
1 year |
| |
1 – 3 years
|
| |
3 – 5 years
|
| |
More than
5 years |
| |||||||||||||||
Future policy benefits and claims
(1)
|
| | | $ | 159,093 | | | | | $ | 7,075 | | | | | $ | 14,145 | | | | | $ | 20,949 | | | | | $ | 116,924 | | |
Policyholder account balances
(2)
|
| | | | 162,087 | | | | | | 9,086 | | | | | | 16,875 | | | | | | 21,767 | | | | | | 114,359 | | |
Other policyholder liabilities
(3)
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Commissions (4) | | | | | 6,023 | | | | | | 680 | | | | | | 958 | | | | | | 1,148 | | | | | | 3,237 | | |
Reinsurance liabilities and payables
(5)
|
| | | | 5,162 | | | | | | 173 | | | | | | 487 | | | | | | 863 | | | | | | 3,369 | | |
Total contractual obligations
|
| | | $ | 332,365 | | | | | $ | 17,014 | | | | | $ | 32,465 | | | | | $ | 44,727 | | | | | $ | 238,159 | | |
|
| | |
Net Premium Revenue and Annuity Deposits
|
| |||||||||||||||||||||
| | |
Six Months Ended June 30,
|
| |
Years Ended December 31,
|
| ||||||||||||||||||
(dollars in thousands)
|
| |
2018
|
| |
2017
|
| |
2017
|
| |
2016
|
| ||||||||||||
Life
|
| | | $ | 6,258 | | | | | $ | 6,596 | | | | | $ | 12,058 | | | | | $ | 14,427 | | |
Annuity deposits
|
| | | | 5,206 | | | | | | 6,184 | | | | | | 12,969 | | | | | | 8,107 | | |
Total
|
| | | $ | 11,464 | | | | | $ | 12,780 | | | | | $ | 25,027 | | | | | $ | 22,534 | | |
|
| | |
For the Year Ended December 31,
|
| |||||||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2013
|
| |
2012
|
| |
2011
|
| |||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||
Total industry sales of fixed index annuities
|
| | | $ | 53,069,850 | | | | | $ | 46,896,350 | | | | | $ | 38,646,864 | | | | | $ | 33,975,442 | | | | | $ | 32,387,045 | | |
Increase from prior year
|
| | | | 6,173,500 | | | | | | 8,249,486 | | | | | | 4,671,422 | | | | | | 1,588,397 | | | | | | 41,481 | | |
Increase from prior year
|
| | | | 13.2 % | | | | | | 21.3 % | | | | | | 13.7 % | | | | | | 4.9 % | | | | | | 0.1 % | | |
| | |
Year Ended December 31,
|
| |||||||||||||||||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2015
|
| |||||||||||||||||||||||||||
Product Type
|
| |
Deposits
Collected |
| |
Deposits as
a % of Total |
| |
Deposits
Collected |
| |
Deposits as
a % of Total |
| |
Deposits
Collected |
| |
Deposits as
a % of Total |
| ||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||
Fixed index annuities
|
| | | $ | 11,349 | | | | | | 87 % | | | | | $ | 5,788 | | | | | | 71 % | | | | | $ | 250 | | | | | | 7.0 % | | |
Single premium fixed rate annuities
|
| | | | 231 | | | | | | 2 % | | | | | | 161 | | | | | | 2 % | | | | | | 1,015 | | | | | | 31 % | | |
Flexible premium fixed rate annuities
|
| | | | 716 | | | | | | 6 % | | | | | | 1,428 | | | | | | 18 % | | | | | | 1,650 | | | | | | 50 % | | |
Single premium immediate annuities
|
| | | | 672 | | | | | | 5 % | | | | | | 731 | | | | | | 9 % | | | | | | 401 | | | | | | 12 % | | |
| | | | $ | 12,969 | | | | | | 100 % | | | | | $ | 8,107 | | | | | | 100 % | | | | | $ | 3,316 | | | | | | 100 % | | |
|
| | |
For the Year Ended December 31,
|
| |||||||||||||||
| | |
2017
|
| |
2016
|
| |
2015
|
| |||||||||
| | |
(dollars in thousands)
|
| |||||||||||||||
Annuity Surrender Charges:
|
| | | $ | 2,666 | | | | | $ | 1,295 | | | | | $ | 603 | | |
Average years at issue
|
| | | | 8 | | | | | | 7 | | | | | | 7 | | |
Average years remaining
|
| | | | 4 | | | | | | 2 | | | | | | 1 | | |
Average surrender charge percentage remaining
|
| | | | 4.42 % | | | | | | 2.59 % | | | | | | 1.32 % | | |
Annuity Account Value (net of coinsurance)
|
| | | $ | 60,257 | | | | | $ | 49,931 | | | | | $ | 45,498 | | |
| | |
As of December 31, 2017
|
| |||||||||||||||||||||
| | |
2017 A.M.
Best’s Rating |
| |
Ceded Future
Policy Benefits |
| |
Claims and
Other Amounts Recoverable |
| |
Total
Reinsurance Recoverables |
| ||||||||||||
| | |
(in thousands)
|
| |||||||||||||||||||||
Reinsurer | | | | | | | | | | | | | | | | | | | | | | | | | |
Optimum Re Insurance Company
|
| | | | A- | | | | | $ | 3,275 | | | | | $ | 77 | | | | | $ | 3,352 | | |
SCOR Global Life Americas Reins Co
|
| | | | A+ | | | | | | 444 | | | | | | — | | | | | | 444 | | |
Prudential Insurance Co of America
|
| | | | A+ | | | | | | 3 | | | | | | — | | | | | | 3 | | |
Swiss Re Life & Health America Inc.
|
| | | | A+ | | | | | | 5 | | | | | | 2 | | | | | | 7 | | |
| | | | | | | | | | $ | 3,727 | | | | | $ | 79 | | | | | $ | 3,806 | | |
|
|
Fixed maturities, available for sale, at fair value
|
| | | $ | 188,452 | | |
|
Equity securities, available for sale, at fair value
|
| | | | 6,209 | | |
|
Policy loans
|
| | | | 9,852 | | |
|
Derivative instruments
|
| | | | 395 | | |
|
Total Investments
|
| | | | 204,908 | | |
|
Cash and cash equivalents
|
| | | | 4,085 | | |
|
Total Cash and Investments
|
| | | $ | 208,993 | | |
|
| | |
% of Stock owned
|
| |||||||||||||||||||||
Name
|
| |
Amount ($)
|
| |
Number of
shares |
| |
Minimum
|
| |
Adjusted
Maximum |
| ||||||||||||
Directors | | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph D. Austin
|
| | | $ | 1,700,000 | | | | | | 170,000 | | | | | | 5.0 % | | | | | | 3.7 % | | |
William S. Austin
|
| | | | 610,000 | | | | | | 61,000 | | | | | | 1.8 % | | | | | | 1.3 % | | |
Michael Austin
|
| | | | 500,000 | | | | | | 50,000 | | | | | | 1.5 % | | | | | | 1.1 % | | |
Wayne R. Ebersberger
|
| | | | 50,000 | | | | | | 5,000 | | | | | | * | | | | | | * | | |
William H. Springer
|
| | | | 50,000 | | | | | | 5,000 | | | | | | * | | | | | | * | | |
James H. Stacke
|
| | | | 50,000 | | | | | | 5,000 | | | | | | * | | | | | | * | | |
Executive Officers (who are not also directors) Anders Raaum
|
| | | | 100,000 | | | | | | 10,000 | | | | | | * | | | | | | * | | |
All Directors and Executive Officers as a Group (7 persons)
|
| | | $ | 3,060,000 | | | | | | 306,000 | | | | | | 9.0 % | | | | | | 6.7 % | | |
|
| | | | | | | | | | | |
Trailing 12 Months
|
| |
As of 12/22/2017
|
| ||||||||||||||||||
Ticker
|
| |
Company
|
| |
Total
Assets ($Mil) |
| |
Policy
Revenues ($Mil) |
| |
Total
Revenues ($Mil) |
| |
Common
Stock Price ($) |
| |
Market
Value ($Mil) |
| |||||||||||||||
| | |
Federal Life Insurance Company
(1)
|
| | | $ | 258 | | | | | $ | 13 | | | | | $ | 24 | | | | | | NA | | | | | | NA | | |
AEL | | |
American Equity Investment Life Holding Company
|
| | | $ | 60,380 | | | | | $ | 230 | | | | | $ | 3,275 | | | | | $ | 32.13 | | | | | $ | 2,863 | | |
CIA | | |
Citizens, Inc.
|
| | | $ | 1,651 | | | | | $ | 199 | | | | | $ | 253 | | | | | $ | 7.48 | | | | | $ | 375 | | |
CNO | | |
CNO Financial Group, Inc.
|
| | | $ | 32,705 | | | | | $ | 2,641 | | | | | $ | 4,212 | | | | | $ | 24.87 | | | | | $ | 4,172 | | |
FFG | | |
FBL Financial Group, Inc.
|
| | | $ | 9,892 | | | | | $ | 311 | | | | | $ | 737 | | | | | $ | 71.80 | | | | | $ | 1,790 | | |
IHC | | |
Independence Holding Company
|
| | | $ | 1,039 | | | | | $ | 278 | | | | | $ | 317 | | | | | $ | 27.95 | | | | | $ | 415 | | |
KCLI | | |
Kansas City Life Insurance Company
|
| | | $ | 4,511 | | | | | $ | 292 | | | | | $ | 450 | | | | | $ | 45.10 | | | | | $ | 437 | | |
NWLI | | |
National Western Life Group, Inc.
|
| | | $ | 12,138 | | | | | $ | 181 | | | | | $ | 811 | | | | | $ | 337.03 | | | | | $ | 1,158 | | |
SNFCA | | |
Security National Financial Corporation
|
| | | $ | 1,008 | | | | | $ | 69 | | | | | $ | 288 | | | | | $ | 5.40 | | | | | $ | 82 | | |
UTGN | | |
UTG, Inc.
|
| | | $ | 405 | | | | | $ | 6 | | | | | $ | 21 | | | | | $ | 25.00 | | | | | $ | 83 | | |
Name
|
| |
Age
(1)
|
| |
Position
|
|
Joseph D. Austin | | |
90
|
| | Director and Executive Chairman | |
William S. Austin | | |
54
|
| | Director, President, and Chief Executive Officer | |
Anders Raaum | | |
53
|
| | Chief Financial Officer | |
Michael Austin | | |
60
|
| |
Director, Executive Vice President, and Chief of Marketing Officer
|
|
Wayne R. Ebersberger | | |
63
|
| | Director | |
William H. Springer | | |
88
|
| | Director | |
James H. Stacke | | |
79
|
| | Director | |
Name and Principal Position
|
| |
Year
|
| |
Salary
($) |
| |
Non-Equity
Incentive Plan Compensation ($) |
| |
All Other
Compensation ($) (1) |
| |
Total
($) |
| ||||||||||||
Joseph D. Austin
Chairman and Chief Executive Officer |
| |
2017
|
| | | $ | 418,140 | | | | | | — | | | | | $ | 25,333 | | | | | $ | 443,473 | | |
|
2016
|
| | | | 404,000 | | | | | | — | | | | | | 23,713 | | | | | | 427,713 | | | ||
William S. Austin
President and Chief Operating Officer |
| |
2017
|
| | | | 265,000 | | | | | | — | | | | | | 33,184 | | | | | | 298,184 | | |
|
2016
|
| | | | 254,702 | | | | | | — | | | | | | 32,897 | | | | | | 287,599 | | | ||
Anders Raaum
Chief Financial Officer |
| |
2017
|
| | | | 194,953 | | | | | | — | | | | | | 5,813 | | | | | | 200,766 | | |
|
2016
|
| | | | 190,740 | | | | | | — | | | | | | 5,722 | | | | | | 196,462 | | | ||
Michael Austin
Executive Vice President and Chief Marketing Officer |
| |
2017
|
| | | | 245,861 | | | | | | — | | | | | | 24,892 | | | | | | 270,753 | | |
|
2016
|
| | | | 238,700 | | | | | | — | | | | | | 24,914 | | | | | | 263,614 | | |
Name
|
| |
Title
|
| |
Equity Award
(1)(2)
|
|
Joseph D. Austin | | | Chairman | | | Options to purchase 40,000 shares and 60,000 shares of restricted stock | |
William S. Austin | | | President and Chief Operating Officer | | | Options to purchase 70,000 shares and 36,666 shares of restricted stock | |
Anders Raaum | | | Chief Financial Officer | | | Options to purchase 35,000 shares and 11,667 shares of restricted stock | |
Michael Austin | | | Executive Vice President and Chief Marketing Officer | | | Options to purchase 35,000 shares and 11,667 shares of restricted stock | |
Judy Manning | | | Secretary | | | 10,000 shares of restricted stock | |
Wayne R. Ebersberger | | | Director | | | Options to purchase 11,667 shares | |
William H. Springer | | | Director | | | Options to purchase 11,667 shares | |
James H. Stacke | | | Director | | | Options to purchase 11,667 shares | |
Name
|
| |
Fees Earned
or Paid in Cash |
| |
Non-Equity
Incentive Plan Compensation (1) |
| |
Total
|
| |||||||||
Wayne R. Ebersberger
|
| | | $ | 38,350 | | | | | $ | -0- | | | | | $ | 38,350 | | |
William H. Springer
|
| | | $ | 36,950 | | | | | $ | -0- | | | | | $ | 36,950 | | |
James H. Stacke
|
| | | $ | 36,950 | | | | | $ | -0- | | | | | $ | 36,950 | | |
| | |
Page
|
| |||
Audited Consolidated Financial Statements | | | | | | | |
| | | | F-2 | | | |
| | | | F-3 | | | |
| | | | F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | | |
Unaudited Consolidated Financial Statements | | | | | | | |
| | | | F-31 | | | |
| | | | F-32 | | | |
| | | | F-33 | | | |
| | | | F-34 | | | |
| | | | F-35 | | |
(in thousands of dollars)
|
| |
2017
|
| |
2016
|
| ||||||
Assets | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | |
Securities available for sale, at fair value:
|
| | | | | | | | | | | | |
Fixed maturities (amortized cost; 2017, $183,432; 2016, $170,515)
|
| | | $ | 188,452 | | | | | $ | 174,880 | | |
Equity securities
|
| | | | 6,209 | | | | | | 7,927 | | |
Policy loans
|
| | | | 9,852 | | | | | | 10,059 | | |
Derivative instruments, at fair value
|
| | | | 395 | | | | | | 59 | | |
Total investments
|
| | | | 204,908 | | | | | | 192,925 | | |
Cash and cash equivalents
|
| | | | 4,085 | | | | | | 8,389 | | |
Real estate, property and equipment
|
| | | | 2,151 | | | | | | 2,297 | | |
Accrued investment income
|
| | | | 1,886 | | | | | | 1,832 | | |
Accounts receivable
|
| | | | 538 | | | | | | 575 | | |
Reinsurance recoverables
|
| | | | 3,727 | | | | | | 2,107 | | |
Prepaid reinsurance premiums
|
| | | | 1,358 | | | | | | 924 | | |
Deferred policy acquisition costs, net
|
| | | | 12,179 | | | | | | 11,940 | | |
Deferred sales inducement costs, net
|
| | | | 867 | | | | | | 315 | | |
Deferred tax asset, net
|
| | | | 458 | | | | | | 664 | | |
Other assets
|
| | | | 202 | | | | | | 254 | | |
Separate account asset
|
| | | | 24,779 | | | | | | 21,513 | | |
Total Assets
|
| | | | 257,138 | | | | | | 243,735 | | |
Liabilities | | | | | | | | | | | | | |
Policy liabilities and accruals | | | | | | | | | | | | | |
Policyholder account balance
|
| | | | 109,823 | | | | | | 99,440 | | |
Future life policy benefits
|
| | | | 71,927 | | | | | | 73,097 | | |
Future accident and health policy benefits
|
| | | | 386 | | | | | | 351 | | |
Reserve for deposit type contracts
|
| | | | 10,850 | | | | | | 10,529 | | |
Other policyholder funds
|
| | | | 1,970 | | | | | | 1,889 | | |
Unearned revenue
|
| | | | 1,387 | | | | | | 1,396 | | |
Deferred reinsurance settlements
|
| | | | 2,949 | | | | | | 1,512 | | |
Taxes payable
|
| | | | 7 | | | | | | 6 | | |
Other liabilities
|
| | | | 1,703 | | | | | | 1,140 | | |
Separate account liability
|
| | | | 24,779 | | | | | | 21,513 | | |
Total Liabilities
|
| | | | 225,781 | | | | | | 210,873 | | |
Equity | | | | | | | | | | | | | |
Retained earnings
|
| | | | 26,600 | | | | | | 29,313 | | |
Accumulated other comprehensive income
|
| | | | 4,757 | | | | | | 3,549 | | |
Total Equity
|
| | | | 31,357 | | | | | | 32,862 | | |
Total Liabilities and Equity
|
| | | $ | 257,138 | | | | | $ | 243,735 | | |
|
(in thousands of dollars)
|
| |
2017
|
| |
2016
|
| ||||||
Revenues | | | | | | | | | | | | | |
Insurance revenues
|
| | | $ | 12,058 | | | | | $ | 14,427 | | |
Net investment income
|
| | | | 8,523 | | | | | | 8,821 | | |
Net realized investment gains
|
| | | | 2,228 | | | | | | 1,783 | | |
Other revenues
|
| | | | 194 | | | | | | 173 | | |
Total Revenues
|
| | | | 23,003 | | | | | | 25,204 | | |
Benefits and expenses | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 13,712 | | | | | | 16,069 | | |
Interest credit to policyholders
|
| | | | 386 | | | | | | 315 | | |
Operating costs and expenses
|
| | | | 7,889 | | | | | | 8,099 | | |
Amortization of deferred acquisition and sales inducement costs
|
| | | | 2,108 | | | | | | 1,876 | | |
Taxes, licenses and fees
|
| | | | 716 | | | | | | 722 | | |
Dividends to policyholders
|
| | | | 66 | | | | | | 86 | | |
Total Benefits and Expenses
|
| | | | 24,877 | | | | | | 27,167 | | |
Net loss before taxes
|
| | | | (1,874 ) | | | | | | (1,963 ) | | |
Tax expense
|
| | | | 34 | | | | | | 34 | | |
Net loss
|
| | | $ | (1,908 ) | | | | | $ | (1,997 ) | | |
Other Comprehensive Income (Loss), net of tax: | | | | | | | | | | | | | |
Unrealized holding gains (losses) arising during the year (net of tax expense (benefit) of: 2017 $236; 2016 ($185))
|
| | | | 458 | | | | | | (359 ) | | |
Adjustment to deferred acquisition costs (net of tax expense (benefit) of: 2017 ($28); 2016 $1)
|
| | | | (55 ) | | | | | | 3 | | |
Other Comprehensive Income (Loss)
|
| | | | 403 | | | | | | (356 ) | | |
Comprehensive Loss
|
| | | $ | (1,505 ) | | | | | $ | (2,353 ) | | |
|
(in thousands of dollars)
|
| |
Accumulated Other
Comprehensive Income |
| |
Retained
Earnings |
| |
Total
|
| |||||||||
Balance, January 1, 2016
|
| | | $ | 3,905 | | | | | $ | 31,310 | | | | | $ | 35,215 | | |
Net loss
|
| | | | — | | | | | | (1,997 ) | | | | | | (1,997 ) | | |
Other Comprehensive Loss
|
| | | | (356 ) | | | | | | — | | | | | | (356 ) | | |
Balance, December 31, 2016
|
| | | $ | 3,549 | | | | | $ | 29,313 | | | | | $ | 32,862 | | |
|
(in thousands of dollars)
|
| |
Accumulated Other
Comprehensive Income |
| |
Retained
Earnings |
| |
Total
|
| |||||||||
Balance, January 1, 2017
|
| | | $ | 3,549 | | | | | $ | 29,313 | | | | | $ | 32,862 | | |
Net loss
|
| | | | — | | | | | | (1,908 ) | | | | | | (1,908 ) | | |
Other Comprehensive Income
|
| | | | 403 | | | | | | — | | | | | | 403 | | |
Cumulative effect of adoption of new accounting principle (see Note 3)
|
| | | | 805 | | | | | | (805 ) | | | | | | — | | |
Balance, December 31, 2017
|
| | | $ | 4,757 | | | | | $ | 26,600 | | | | | $ | 31,357 | | |
|
(in thousands of dollars)
|
| |
2017
|
| |
2016
|
| ||||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,908 ) | | | | | $ | (1,997 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Realized investment gains, net
|
| | | | (2,228 ) | | | | | | (1,783 ) | | |
Amortization on investments
|
| | | | (42 ) | | | | | | (180 ) | | |
Depreciation
|
| | | | 271 | | | | | | 263 | | |
Deferred taxes
|
| | | | (1 ) | | | | | | 1 | | |
Deferred insurance acquisition costs
|
| | | | (2,354 ) | | | | | | (2,267 ) | | |
Deferred sales inducement costs
|
| | | | (545 ) | | | | | | (246 ) | | |
Interest and amortization of deferred acquisition and sales inducement costs
|
| | | | 2,108 | | | | | | 1,876 | | |
Change in accrued investment income
|
| | | | (54 ) | | | | | | 119 | | |
Change in receivables
|
| | | | 37 | | | | | | (23 ) | | |
Change in reinsurance recoverable
|
| | | | (1,620 ) | | | | | | (1,696 ) | | |
Change in prepaid reinsurance premiums
|
| | | | (434 ) | | | | | | (821 ) | | |
Change in policy benefits
|
| | | | (1,053 ) | | | | | | 349 | | |
Change in unearned revenue
|
| | | | (8 ) | | | | | | 162 | | |
Change in deferred reinsurance settlements
|
| | | | 1,437 | | | | | | 1,512 | | |
Change in other assets and liabilities
|
| | | | 615 | | | | | | (325 ) | | |
Net cash used in operating activities
|
| | | $ | (5,779 ) | | | | | $ | (5,056 ) | | |
Cash flows from investing activities: | | | | | | | | | | | | | |
Proceeds from investments sold or matured:
|
| | | | | | | | | | | | |
Fixed maturity securities
|
| | | | 23,130 | | | | | | 26,986 | | |
Equity securities
|
| | | | 4,043 | | | | | | 3,974 | | |
Derivatives
|
| | | | 154 | | | | | | 0 | | |
Policy loans
|
| | | | 206 | | | | | | 70 | | |
Costs of investments purchased:
|
| | | | | | | | | | | | |
Fixed maturity securities
|
| | | | (35,816 ) | | | | | | (28,479 ) | | |
Equity securities
|
| | | | (327 ) | | | | | | (486 ) | | |
Derivatives
|
| | | | (255 ) | | | | | | (60 ) | | |
Real estate additions
|
| | | | (84 ) | | | | | | (226 ) | | |
Other investing activities
|
| | | | (238 ) | | | | | | (17 ) | | |
Purchase of property and equipment
|
| | | | (41 ) | | | | | | (109 ) | | |
Net cash (used in) provided by investing activities
|
| | | | (9,228 ) | | | | | | 1,653 | | |
Cash flows from financing activities: | | | | | | | | | | | | | |
Policyholder account balances:
|
| | | | | | | | | | | | |
Deposits
|
| | | | 19,300 | | | | | | 14,559 | | |
Withdrawals
|
| | | | (8,482 ) | | | | | | (9,366 ) | | |
Net transfers (to) from separate accounts
|
| | | | (115 ) | | | | | | 46 | | |
Net cash provided by financing activities
|
| | | | 10,703 | | | | | | 5,239 | | |
Net (decrease) increase in cash
|
| | | | (4,304 ) | | | | | | 1,836 | | |
Cash, beginning of year
|
| | | | 8,389 | | | | | | 6,553 | | |
Cash, end of year
|
| | | $ | 4,085 | | | | | $ | 8,389 | | |
|
| | |
December 31, 2017
|
| |||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross Unrealized
|
| |
Fair
Value |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
U.S. government
|
| | | $ | 4,075 | | | | | $ | 207 | | | | | $ | (120 ) | | | | | $ | 4,162 | | |
States, political subdivisions, other
|
| | | | 26,850 | | | | | | 876 | | | | | | (112 ) | | | | | | 27,614 | | |
Corporate
|
| | | | 106,479 | | | | | | 3,459 | | | | | | (543 ) | | | | | | 109,395 | | |
Residential mortgage-backed securities
|
| | | | 41,818 | | | | | | 1,480 | | | | | | (212 ) | | | | | | 43,086 | | |
Commercial mortgage-backed securities
|
| | | | 4,210 | | | | | | 26 | | | | | | (41 ) | | | | | | 4,195 | | |
Total fixed maturity securities
|
| | | | 183,432 | | | | | | 6,048 | | | | | | (1,028 ) | | | | | | 188,452 | | |
Equity securities
|
| | | | 4,443 | | | | | | 1,766 | | | | | | — | | | | | | 6,209 | | |
Total fixed maturity and equity securities
|
| | | $ | 187,875 | | | | | $ | 7,814 | | | | | $ | (1,028 ) | | | | | $ | 194,661 | | |
|
| | |
December 31, 2016
|
| |||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross Unrealized
|
| |
Fair
Value |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
U.S. government
|
| | | $ | 4,087 | | | | | $ | 267 | | | | | $ | (140 ) | | | | | $ | 4,214 | | |
States, political subdivisions, other
|
| | | | 19,627 | | | | | | 616 | | | | | | (130 ) | | | | | | 20,113 | | |
Corporate
|
| | | | 101,698 | | | | | | 3,452 | | | | | | (974 ) | | | | | | 104,176 | | |
Residential mortgage-backed securities
|
| | | | 35,282 | | | | | | 1,450 | | | | | | (314 ) | | | | | | 36,418 | | |
Commercial mortgage-backed securities
|
| | | | 9,821 | | | | | | 228 | | | | | | (90 ) | | | | | | 9,959 | | |
Total fixed maturity securities
|
| | | | 170,515 | | | | | | 6,013 | | | | | | (1,648 ) | | | | | | 174,880 | | |
Equity securities
|
| | | | 6,202 | | | | | | 1,745 | | | | | | (20 ) | | | | | | 7,927 | | |
Total fixed maturity and equity securities
|
| | | $ | 176,717 | | | | | $ | 7,758 | | | | | $ | (1,668 ) | | | | | $ | 182,807 | | |
|
| | |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||||||||||||||
| | |
Amortized
Cost |
| |
Fair
Value |
| |
Amortized
Cost |
| |
Fair
Value |
| ||||||||||||
Due in one year or less
|
| | | $ | 2,247 | | | | | $ | 2,288 | | | | | $ | 5,038 | | | | | $ | 5,161 | | |
Due after one year through five years
|
| | | | 40,926 | | | | | | 42,809 | | | | | | 34,101 | | | | | | 36,605 | | |
Due after five years through ten years
|
| | | | 66,739 | | | | | | 68,151 | | | | | | 66,029 | | | | | | 66,648 | | |
Due after ten years
|
| | | | 27,492 | | | | | | 27,923 | | | | | | 20,244 | | | | | | 20,089 | | |
Mortgage-backed securities
|
| | | | 46,028 | | | | | | 47,281 | | | | | | 45,103 | | | | | | 46,377 | | |
Total
|
| | | $ | 183,432 | | | | | $ | 188,452 | | | | | $ | 170,515 | | | | | $ | 174,880 | | |
|
| | |
2017
|
| |||||||||||||||
| | |
Fixed
Maturities |
| |
Equity
Securities |
| |
Derivative
Instruments |
| |||||||||
Proceeds from sales or maturities
|
| | | $ | 23,130 | | | | | $ | 4,043 | | | | | $ | 154 | | |
Gross gains from sales or maturities
|
| | | | 200 | | | | | | 1,957 | | | | | | 183 | | |
Gross losses from sales or maturities
|
| | | | (23 ) | | | | | | — | | | | | | (89 ) | | |
| | |
2016
|
| |||||||||
| | |
Fixed
Maturities |
| |
Equity
Securities |
| ||||||
Proceeds from sales or maturities
|
| | | $ | 26,986 | | | | | $ | 3,974 | | |
Gross gains from sales or maturities
|
| | | | 208 | | | | | | 1,714 | | |
Gross losses from sales or maturities
|
| | | | (78 ) | | | | | | (61 ) | | |
2017
|
| |
Less than 12 months
|
| |
12 months or longer
|
| |
Total
|
| |||||||||||||||||||||||||||
Description of Securities
|
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| ||||||||||||||||||
U.S. government
|
| | | $ | 1,161 | | | | | $ | (31 ) | | | | | $ | 1,782 | | | | | $ | (89 ) | | | | | $ | 2,943 | | | | | $ | (120 ) | | |
States, political subdivisions, other
|
| | | | 8,773 | | | | | | (86 ) | | | | | | 714 | | | | | | (26 ) | | | | | | 9,487 | | | | | | (112 ) | | |
Corporate
|
| | | | 10,935 | | | | | | (169 ) | | | | | | 6,853 | | | | | | (374 ) | | | | | | 17,788 | | | | | | (543 ) | | |
Residential mortgage-backed securities
|
| | | | 11,517 | | | | | | (126 ) | | | | | | 2,263 | | | | | | (86 ) | | | | | | 13,780 | | | | | | (212 ) | | |
Commercial mortgage-backed securities
|
| | | | 2,039 | | | | | | (27 ) | | | | | | 77 | | | | | | (14 ) | | | | | | 2,116 | | | | | | (41 ) | | |
Equity securities
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 34,425 | | | | | $ | (439 ) | | | | | $ | 11,689 | | | | | $ | (589 ) | | | | | $ | 46,114 | | | | | $ | (1,028 ) | | |
|
2016
|
| |
Less than 12 months
|
| |
12 months or longer
|
| |
Total
|
| |||||||||||||||||||||||||||
Description of Securities
|
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| ||||||||||||||||||
U.S. government
|
| | | $ | 2,932 | | | | | $ | (140 ) | | | | | $ | — | | | | | $ | — | | | | | $ | 2,932 | | | | | $ | (140 ) | | |
States, political subdivisions, other
|
| | | | 5,983 | | | | | | (130 ) | | | | | | — | | | | | | — | | | | | | 5,983 | | | | | | (130 ) | | |
Corporate
|
| | | | 25,055 | | | | | | (791 ) | | | | | | 3,239 | | | | | | (183 ) | | | | | | 28,294 | | | | | | (974 ) | | |
Residential mortgage-backed securities
|
| | | | 11,367 | | | | | | (314 ) | | | | | | — | | | | | | — | | | | | | 11,367 | | | | | | (314 ) | | |
Commercial mortgage-backed securities
|
| | | | 979 | | | | | | (25 ) | | | | | | 538 | | | | | | (65 ) | | | | | | 1,517 | | | | | | (90 ) | | |
Equity securities
|
| | | | 183 | | | | | | (3 ) | | | | | | 180 | | | | | | (17 ) | | | | | | 363 | | | | | | (20 ) | | |
Total
|
| | | $ | 46,499 | | | | | $ | (1,403 ) | | | | | $ | 3,957 | | | | | $ | (265 ) | | | | | $ | 50,456 | | | | | $ | (1,668 ) | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Fixed maturity securities
|
| | | $ | 7,350 | | | | | $ | 7,818 | | |
Equity securities
|
| | | | 181 | | | | | | 253 | | |
Real estate
|
| | | | 149 | | | | | | 122 | | |
Cash equivalents
|
| | | | 32 | | | | | | 9 | | |
Policy loans
|
| | | | 723 | | | | | | 737 | | |
Other
|
| | | | 685 | | | | | | 470 | | |
Subtotal
|
| | | | 9,120 | | | | | | 9,409 | | |
Investment expense
|
| | | | (597 ) | | | | | | (588 ) | | |
Net investment income
|
| | | $ | 8,523 | | | | | $ | 8,821 | | |
|
| | |
December 31, 2017
|
| |||||||||||||||||||||
| | |
Fair
Value |
| |
Gross Unrealized
|
| |
Net
Unrealized Gain (Loss) |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
Fixed income securities
|
| | | $ | 188,452 | | | | | $ | 6,048 | | | | | $ | (1,028 ) | | | | | $ | 5,020 | | |
Equity securities
|
| | | | 6,209 | | | | | | 1,766 | | | | | | — | | | | | | 1,766 | | |
Net unrealized capital gains
|
| | | | | | | | | | | | | | | | | | | | | $ | 6,786 | | |
|
| | |
December 31, 2016
|
| |||||||||||||||||||||
| | |
Fair
Value |
| |
Gross Unrealized
|
| |
Net
Unrealized Gain (Loss) |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
Fixed income securities
|
| | | $ | 174,880 | | | | | $ | 6,013 | | | | | $ | (1,648 ) | | | | | $ | 4,365 | | |
Equity securities
|
| | | | 7,927 | | | | | | 1,745 | | | | | | (20 ) | | | | | | 1,725 | | |
Net unrealized capital gains
|
| | | | | | | | | | | | | | | | | | | | | $ | 6,090 | | |
|
| | |
Carrying/Fair
Value 12/31/2017 |
| |
Carrying/Fair
Value 12/31/2016 |
| ||||||
Financial instruments recorded as assets: | | | | | | | | | | | | | |
Fixed maturity securities
|
| | | $ | 188,452 | | | | | $ | 174,880 | | |
Equity securities
|
| | | | 6,209 | | | | | | 7,927 | | |
Policy loans
|
| | | | 9,852 | | | | | | 10,059 | | |
Derivative instruments
|
| | | | 395 | | | | | | 59 | | |
Cash and cash equivalents
|
| | | | 4,085 | | | | | | 8,389 | | |
Separate account
|
| | | | 24,779 | | | | | | 21,513 | | |
Financial Instruments recorded as liabilities: | | | | | | | | | | | | | |
Policyholder account balance:
|
| | | | | | | | | | | | |
Interest sensitive life contracts
|
| | | | 41,078 | | | | | | 40,508 | | |
Annuities
|
| | | | 68,745 | | | | | | 58,932 | | |
Dividend accumulations and other
(1)
|
| | | | 7,076 | | | | | | 7,413 | | |
Separate account
|
| | | | 24,779 | | | | | | 21,513 | | |
| | |
Recurring Fair Value Measurements
at December 31, 2017 Using: |
| |||||||||||||||||||||
Description
|
| |
Fair Values
|
| |
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
| |
Significant
Other Observable Inputs (Level 2) |
| |
Significant
Unobservable Inputs (Level 3) |
| ||||||||||||
Fixed maturity securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. government
|
| | | $ | 4,162 | | | | | $ | 4,162 | | | | | $ | — | | | | | $ | — | | |
States, political subdivisions, other
|
| | | | 27,614 | | | | | | — | | | | | | 27,614 | | | | | | — | | |
Corporate
|
| | | | 109,395 | | | | | | — | | | | | | 109,395 | | | | | | — | | |
Residential mortgage-backed securities
|
| | | | 43,086 | | | | | | — | | | | | | 43,086 | | | | | | — | | |
Commercial mortgage-backed securities
|
| | | | 4,195 | | | | | | — | | | | | | 4,195 | | | | | | — | | |
Total fixed maturities
|
| | | | 188,452 | | | | | | 4,162 | | | | | | 184,290 | | | | | | — | | |
Equities
|
| | | | 6,209 | | | | | | 4,027 | | | | | | — | | | | | | 2,182 | | |
Derivative instruments
|
| | | | 395 | | | | | | 395 | | | | | | — | | | | | | — | | |
Cash equivalents
(1)
|
| | | | 4,085 | | | | | | 4,085 | | | | | | — | | | | | | — | | |
Separate accounts
(2)
|
| | | | 24,779 | | | | | | 24,779 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 223,920 | | | | | $ | 37,448 | | | | | $ | 184,290 | | | | | $ | 2,182 | | |
|
| | |
Recurring Fair Value Measurements
at December 31, 2016 Using: |
| |||||||||||||||||||||
Description
|
| |
Fair Values
|
| |
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
| |
Significant
Other Observable Inputs (Level 2) |
| |
Significant
Unobservable Inputs (Level 3) |
| ||||||||||||
Fixed maturity securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. government
|
| | | $ | 4,214 | | | | | $ | 4,214 | | | | | $ | — | | | | | $ | — | | |
States, political subdivisions, other
|
| | | | 20,113 | | | | | | — | | | | | | 20,113 | | | | | | — | | |
Corporate
|
| | | | 104,176 | | | | | | — | | | | | | 104,176 | | | | | | — | | |
Residential mortgage-backed securities
|
| | | | 36,418 | | | | | | — | | | | | | 36,418 | | | | | | — | | |
Commercial mortgage-backed securities
|
| | | | 9,959 | | | | | | — | | | | | | 9,959 | | | | | | — | | |
Total fixed maturities
|
| | | | 174,880 | | | | | | 4,214 | | | | | | 170,666 | | | | | | — | | |
Equities
|
| | | | 7,927 | | | | | | 4,758 | | | | | | — | | | | | | 3,169 | | |
Derivative instruments
|
| | | | 59 | | | | | | 59 | | | | | | — | | | | | | — | | |
Cash equivalents
(1)
|
| | | | 5,670 | | | | | | 5,670 | | | | | | — | | | | | | — | | |
Separate accounts
(2)
|
| | | | 21,513 | | | | | | 21,513 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 210,049 | | | | | $ | 36,214 | | | | | $ | 170,666 | | | | | $ | 3,169 | | |
|
Fair value at December 31, 2017
|
| | | | | | | |
Primary Valuation
Technique(s) |
| |
Significant
Unobservable Inputs |
| |
Range
|
| |
Weighted
Average |
| ||||||||||||
|
Min
|
| |
Max
|
| ||||||||||||||||||||||||||
Rreef America REIT II
|
| | | $ | 2,150 | | | |
Discounted Cash Flows
|
| | Discounted Rate | | | | | 5.50 % | | | | | | 9.00 % | | | | | | 6.61 % | | |
| | | | | | | | | | | |
Term capitalization rate
|
| | | | 4.00 % | | | | | | 8.25 % | | | | | | 5.62 % | | |
Fair value at December 31, 2016
|
| | | | | | | |
Primary Valuation
Technique(s) |
| |
Significant
Unobservable Inputs |
| |
Range
|
| |
Weighted
Average |
| ||||||||||||
|
Min
|
| |
Max
|
| ||||||||||||||||||||||||||
Rreef America REIT II
|
| | | $ | 3,074 | | | |
Discounted cash flows
|
| | Discounted Rate | | | | | 5.50 % | | | | | | 10.75 % | | | | | | 6.71 % | | |
| | | | | | | | | | | |
Term capitalization rate
|
| | | | 4.00 % | | | | | | 9.50 % | | | | | | 5.70 % | | |
| | |
2017
|
| |
2016
|
| ||||||
Balance, beginning of year
|
| | | $ | 3,169 | | | | | $ | 6,006 | | |
Gains included in net income
|
| | | | 396 | | | | | | 1,131 | | |
Settlements
|
| | | | (1,000 ) | | | | | | (3,000 ) | | |
Unrealized gains (losses) in OCI
|
| | | | (383 ) | | | | | | (968 ) | | |
Balance, end of year
|
| | | $ | 2,182 | | | | | $ | 3,169 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Balance, beginning of year
|
| | | $ | 11,940 | | | | | $ | 12,288 | | |
Capitalization of commissions, sales and issue expenses
|
| | | | 2,437 | | | | | | 2,263 | | |
Accrual of interest
|
| | | | 544 | | | | | | 530 | | |
Amortization
|
| | | | (2,659 ) | | | | | | (2,462 ) | | |
Change in Shadow DAC
|
| | | | (83 ) | | | | | | (679 ) | | |
Balance end of year
|
| | | $ | 12,179 | | | | | $ | 11,940 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Balance, beginning of year
|
| | | $ | 315 | | | | | $ | 13 | | |
Capitalization of commissions and issue expenses
|
| | | | 545 | | | | | | 246 | | |
Accrual of interest
|
| | | | 18 | | | | | | — | | |
Amortization
|
| | | | (11 ) | | | | | | 56 | | |
Balance end of year
|
| | | $ | 867 | | | | | $ | 315 | | |
|
| | |
Unrealized
Investment Gains (losses) |
| |
Shadow DAC
|
| |
Accumulated
Other Comprehensive Income (loss) |
| |||||||||
Balance, December 31, 2015
|
| | | $ | 4,356 | | | | | $ | (451 ) | | | | | $ | 3,905 | | |
Available-for-sale investment gains (losses) arising during the year:
|
| | | | | | | | | | | | | | | | | | |
Fixed maturity securities net of tax benefit of $29
|
| | | | (56 ) | | | | | | | | | | | | (56 ) | | |
Equity securities net of tax benefit of $156
|
| | | | (303 ) | | | | | | | | | | | | (303 ) | | |
Change in Shadow DAC net of tax of $1
|
| | | | | | | | | | 3 | | | | | | 3 | | |
Balance, December 31, 2016
|
| | | $ | 3,997 | | | | | $ | (448 ) | | | | | $ | 3,549 | | |
Available-for-sale investment gains (losses) arising during the year:
|
| | | | | | | | | | | | | | | | | | |
Fixed maturity securities net of tax of $227
|
| | | | 440 | | | | | | | | | | | | 440 | | |
Equity securities net of tax of $9
|
| | | | 18 | | | | | | | | | | | | 18 | | |
Change in Shadow DAC net of tax benefit of $28
|
| | | | | | | | | | (55 ) | | | | | | (55 ) | | |
Cumulative effect of adoption of new accounting principle (see Note 3)
|
| | | | 904 | | | | | | (99 ) | | | | | | 805 | | |
Balance, December 31, 2017
|
| | | $ | 5,359 | | | | | $ | (602 ) | | | | | $ | 4,757 | | |
| | |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||
Balance, beginning of year
|
| | | $ | 21,513 | | | | | $ | 23,335 | | |
Cost of bonds and stocks acquired
|
| | | | 299 | | | | | | 80 | | |
Unrealized valuation increase
|
| | | | 3,275 | | | | | | 91 | | |
Total gain on disposals
|
| | | | 186 | | | | | | 1,820 | | |
Deduction consideration for bonds and stocks disposed of
|
| | | | (562 ) | | | | | | (3,813 ) | | |
Other assets
|
| | | | 68 | | | | | | — | | |
Balance end of year
|
| | | $ | 24,779 | | | | | $ | 21,513 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Traditional life contracts
|
| | | $ | 62,311 | | | | | $ | 63,141 | | |
Immediate annuities and pension plan
|
| | | | 6,774 | | | | | | 7,135 | | |
Supplemental contracts with life contingencies
|
| | | | 2,522 | | | | | | 2,500 | | |
Accident and health
|
| | | | 386 | | | | | | 351 | | |
Accident death benefits
|
| | | | 132 | | | | | | 130 | | |
Disability
|
| | | | 188 | | | | | | 191 | | |
| | | | $ | 72,313 | | | | | $ | 73,448 | | |
|
Product
|
| |
Mortality
|
| |
Interest Rate
|
| |
Estimation Method
|
|
Immediate fixed annuities | | |
1971, 1983, 2000, and
2012 annuity mortality tables |
| |
Rates range from
4% to 6.5% |
| | Present value of expected future benefits based on historical experience | |
Traditional life insurance | | |
Actual company
experience plus loading |
| |
Rates range from
2.5% to 5.75% |
| |
Net level premium
reserve method using the Company’s withdrawal experience |
|
Accident and health | | |
Actual company
experience plus loading |
| | n/a | | |
Unearned premium;
additional contract reserves for mortality risk |
|
| | |
2017
|
| |
2016
|
| ||||||
Interest sensitive life contracts
|
| | | $ | 41,078 | | | | | $ | 40,508 | | |
Annuities
|
| | | | 68,745 | | | | | | 58,932 | | |
| | | | $ | 109,823 | | | | | $ | 99,440 | | |
|
Product
|
| |
Interest Rate
|
| |
Withdrawal/surrender charges
|
|
Interest-sensitive life insurance | | | Rates range from 3% to 7% | | | Either a percentage of account balance or a dollar amount grading off generally over 20 years | |
Fixed annuities | | | Rates range from 0% to 8% | | | Either a declining or level charge generally over 9 years or less | |
Other investment contracts | | | Rates range from 2% to 6% | | | No explicit charge assumed | |
| | |
2017
|
| |
2016
|
| ||||||
Balance, beginning of year
|
| | | $ | 99,440 | | | | | $ | 94,691 | | |
Deposits
|
| | | | 17,994 | | | | | | 13,005 | | |
Interests credited
|
| | | | 4,353 | | | | | | 3,932 | | |
Benefits
|
| | | | (2,734 ) | | | | | | (2,446 ) | | |
Surrenders and partial withdrawals
|
| | | | (4,835 ) | | | | | | (5,769 ) | | |
COI charges
|
| | | | (2,973 ) | | | | | | (2,852 ) | | |
Contract charges
|
| | | | (1,307 ) | | | | | | (1,167 ) | | |
Net transfers from separate accounts
|
| | | | (115 ) | | | | | | 46 | | |
Balance, end of year
|
| | | $ | 109,823 | | | | | $ | 99,440 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Payout annuities without life contingencies
|
| | | $ | 3,774 | | | | | $ | 3,116 | | |
Dividend accumulations and other
|
| | | | 7,076 | | | | | | 7,413 | | |
| | | | $ | 10,850 | | | | | $ | 10,529 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Land
|
| | | $ | 405 | | | | | $ | 405 | | |
Building and other
|
| | | | 8,378 | | | | | | 8,294 | | |
| | | | | 8,783 | | | | | | 8,699 | | |
Accumulated depreciation
|
| | | | (6,828 ) | | | | | | (6,712 ) | | |
Real Estate, net
|
| | | $ | 1,955 | | | | | $ | 1,987 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
EDP equipment
|
| | | $ | 3,955 | | | | | $ | 3,963 | | |
Furniture
|
| | | | 1,522 | | | | | | 1,501 | | |
EDP equipment & furniture cost
|
| | | | 5,477 | | | | | | 5,464 | | |
Accumulated depreciation
|
| | | | (5,281 ) | | | | | | (5,154 ) | | |
Property and Equipment, net
|
| | | $ | 196 | | | | | $ | 310 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Current
|
| | | $ | 34 | | | | | $ | 34 | | |
Deferred
|
| | | | — | | | | | | — | | |
Provision for income tax
|
| | | $ | 34 | | | | | $ | 34 | | |
|
| | |
2017
|
| |
2016
|
| ||||||
Income taxes at statutory rate
|
| | | $ | (637 ) | | | | | $ | (667 ) | | |
Dividends received deduction
|
| | | | — | | | | | | — | | |
Tax effect from change in enacted tax rate
|
| | | | 805 | | | | | | — | | |
Other
|
| | | | (134 ) | | | | | | (701 ) | | |
Income tax (benefit) expense
|
| | | $ | 34 | | | | | $ | 34 | | |
Effective tax rate
|
| | | | -1.8 % | | | | | | -1.7 % | | |
| | |
2017
|
| |
2016
|
| ||||||
Deferred federal tax assets: | | | | | | | | | | | | | |
Difference between financial reporting and the tax basis of: | | | | | | | | | | | | | |
Operating loss carry forward
|
| | | $ | 5,859 | | | | | $ | 9,567 | | |
Other than temporary impairments
|
| | | | 947 | | | | | | 1,545 | | |
Deferred premiums
|
| | | | 734 | | | | | | 1,465 | | |
Life policy reserves
|
| | | | 600 | | | | | | 103 | | |
Other
|
| | | | 380 | | | | | | 745 | | |
Deferred reinsurance settlements
|
| | | | 619 | | | | | | 514 | | |
Total deferred tax assets
|
| | | $ | 9,139 | | | | | | 13,939 | | |
Deferred federal tax liabilities: | | | | | | | | | | | | | |
Difference between financial reporting and the tax basis of: | | | | | | | | | | | | | |
Deferred acquisition costs and sales inducements
|
| | | $ | 2,147 | | | | | | 3,215 | | |
Net unrealized gains
|
| | | | 1,421 | | | | | | 2,064 | | |
Reinsurance recoverable
|
| | | | 766 | | | | | | 716 | | |
Amortized discount on bonds
|
| | | | 138 | | | | | | 527 | | |
Other
|
| | | | 143 | | | | | | 516 | | |
Fixed assets
|
| | | | 53 | | | | | | 89 | | |
Total deferred tax liabilities
|
| | | | 4,668 | | | | | | 7,127 | | |
Net
|
| | | | 4,471 | | | | | | 6,812 | | |
Less valuation allowance
|
| | | | (4,013 ) | | | | | | (6,148 ) | | |
Net deferred tax asset
|
| | | $ | 458 | | | | | $ | 664 | | |
|
Expiring
|
| | |||||
2018
|
| | | $ | 167 | | |
2019
|
| | | | 1,590 | | |
2020
|
| | | | 2,296 | | |
2021
|
| | | | 651 | | |
2022
|
| | | | 520 | | |
2023
|
| | | | 861 | | |
2024
|
| | | | 1,762 | | |
2025
|
| | | | 7,836 | | |
2026
|
| | | | 2,188 | | |
2027
|
| | | | 1,353 | | |
2028
|
| | | | 2,664 | | |
2029
|
| | | | 509 | | |
2030
|
| | | | 2,240 | | |
2031
|
| | | | 1,119 | | |
2032
|
| | | | 596 | | |
Total
|
| | | $ | 26,352 | | |
|
(in thousands of dollars)
|
| |
6/30/2018
|
| |
12/31/2017
|
| ||||||
| | |
(unaudited)
|
| | ||||||||
Assets | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | |
Securities available for sale, at fair value:
|
| | | | | | | | | | | | |
Fixed maturities (amortized cost; 2018, $185,247; 2017, $183,432)
|
| | | $ | 183,249 | | | | | $ | 188,452 | | |
Equity securities
|
| | | | 6,362 | | | | | | 6,209 | | |
Policy loans
|
| | | | 9,718 | | | | | | 9,852 | | |
Derivative instruments, at fair value
|
| | | | 398 | | | | | | 395 | | |
Total investments
|
| | | | 199,727 | | | | | | 204,908 | | |
Cash and cash equivalents
|
| | | | 3,913 | | | | | | 4,085 | | |
Real estate, property and equipment
|
| | | | 2,166 | | | | | | 2,151 | | |
Accrued investment income
|
| | | | 1,929 | | | | | | 1,886 | | |
Accounts receivable
|
| | | | 2,417 | | | | | | 538 | | |
Reinsurance recoverables
|
| | | | 3,622 | | | | | | 3,727 | | |
Prepaid reinsurance premiums
|
| | | | 1,379 | | | | | | 1,358 | | |
Deferred policy acquisition costs, net
|
| | | | 13,320 | | | | | | 12,179 | | |
Deferred sales inducement costs, net
|
| | | | 1,076 | | | | | | 867 | | |
Deferred tax asset, net
|
| | | | 495 | | | | | | 458 | | |
Other assets
|
| | | | 296 | | | | | | 202 | | |
Separate account asset
|
| | | | 23,690 | | | | | | 24,779 | | |
Total Assets
|
| | | | 254,030 | | | | | | 257,138 | | |
Liabilities | | | | | | | | | | | | | |
Policy liabilities and accruals | | | | | | | | | | | | | |
Policyholder account balance
|
| | | | 113,654 | | | | | | 109,823 | | |
Future life policy benefits
|
| | | | 72,608 | | | | | | 71,927 | | |
Future accident and health policy benefits
|
| | | | 343 | | | | | | 386 | | |
Reserve for deposit type contracts
|
| | | | 11,222 | | | | | | 10,850 | | |
Other policyholder funds
|
| | | | 2,733 | | | | | | 1,970 | | |
Unearned revenue
|
| | | | 1,357 | | | | | | 1,387 | | |
Deferred reinsurance settlements
|
| | | | 2,826 | | | | | | 2,949 | | |
Taxes payable
|
| | | | 7 | | | | | | 7 | | |
Other liabilities
|
| | | | 2,073 | | | | | | 1,703 | | |
Separate account liability
|
| | | | 23,690 | | | | | | 24,779 | | |
Total Liabilities
|
| | | | 230,513 | | | | | | 225,781 | | |
Equity | | | | | | | | | | | | | |
Retained earnings
|
| | | | 24,606 | | | | | | 26,600 | | |
Accumulated other comprehensive income (loss)
|
| | | | (1,089 ) | | | | | | 4,757 | | |
Total Equity
|
| | | | 23,517 | | | | | | 31,357 | | |
Total Liabilities and Equity
|
| | | $ | 254,030 | | | | | $ | 257,138 | | |
|
| | |
for the six-month periods ended
|
| |||||||||
(in thousands of dollars)
|
| |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Revenues | | | | | | | | | | | | | |
Insurance revenues
|
| | | $ | 6,258 | | | | | $ | 6,596 | | |
Net investment income
|
| | | | 4,218 | | | | | | 4,292 | | |
Net realized investment gains
|
| | | | 324 | | | | | | 904 | | |
Other revenues
|
| | | | 97 | | | | | | 85 | | |
Total Revenues
|
| | | | 10,897 | | | | | | 11,877 | | |
Benefits and expenses | | | | | | | | | | | | | |
Policyholder benefits
|
| | | | 7,018 | | | | | | 7,215 | | |
Interest credit to policyholders
|
| | | | 207 | | | | | | 114 | | |
Operating costs and expenses
|
| | | | 4,331 | | | | | | 3,994 | | |
Amortization of deferred acquisition and sales inducement costs
|
| | | | 897 | | | | | | 1,124 | | |
Taxes, licenses and fees
|
| | | | 398 | | | | | | 392 | | |
Dividends to policyholders
|
| | | | 31 | | | | | | 31 | | |
Total Benefits and Expenses
|
| | | | 12,882 | | | | | | 12,870 | | |
Net loss before taxes
|
| | | | (1,985 ) | | | | | | (993 ) | | |
Tax expense
|
| | | | 9 | | | | | | 14 | | |
Net loss
|
| | | $ | (1,994 ) | | | | | $ | (1,007 ) | | |
Other Comprehensive Income (Loss), net of tax: | | | | | | | | | | | | | |
Unrealized holding gains (losses) arising during the year (net of
tax expense (benefit) of: 2018 ($255); 2017 $506) |
| | | | (6,663 ) | | | | | | 982 | | |
Adjustment to deferred acquisition costs (net of tax expense
(benefit) of: 2018 $217; 2017 ($73)) |
| | | | 817 | | | | | | (142 ) | | |
Other Comprehensive Income (Loss)
|
| | | | (5,846 ) | | | | | | 840 | | |
Comprehensive Loss
|
| | | $ | (7,840 ) | | | | | $ | (167 ) | | |
|
(in thousands of dollars)
|
| |
Accumulated Other
Comprehensive Income (Loss) |
| |
Retained
Earnings |
| |
Total
|
| |||||||||
Balance, January 1, 2018
|
| | | $ | 4,757 | | | | | $ | 26,600 | | | | | $ | 31,357 | | |
Net loss
|
| | | | — | | | | | | (1,994 ) | | | | | | (1,994 ) | | |
Other Comprehensive Loss
|
| | | | (5,846 ) | | | | | | — | | | | | | (5,846 ) | | |
Balance, June 30, 2018
|
| | | $ | (1,089 ) | | | | | $ | 24,606 | | | | | $ | 23,517 | | |
|
| | |
for the six-month periods ended
|
| |||||||||
(in thousands of dollars)
|
| |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,994 ) | | | | | $ | (1,007 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Realized investment gains, net
|
| | | | (324 ) | | | | | | (904 ) | | |
Amortization on investments
|
| | | | (40 ) | | | | | | (46 ) | | |
Depreciation
|
| | | | 137 | | | | | | 137 | | |
Deferred taxes
|
| | | | 1 | | | | | | — | | |
Deferred insurance acquisition costs
|
| | | | (2,046 ) | | | | | | (1,039 ) | | |
Deferred sales inducement costs
|
| | | | (201 ) | | | | | | (263 ) | | |
Interest and amortization of deferred acquisition and sales inducement costs
|
| | | | 897 | | | | | | 1,124 | | |
Change in accrued investment income
|
| | | | (42 ) | | | | | | (13 ) | | |
Change in receivables
|
| | | | (1,879 ) | | | | | | (1,455 ) | | |
Change in reinsurance recoverable
|
| | | | 105 | | | | | | 4 | | |
Change in prepaid reinsurance premiums
|
| | | | (21 ) | | | | | | (36 ) | | |
Change in policy benefits
|
| | | | 1,401 | | | | | | 1,650 | | |
Change in unearned revenue
|
| | | | (30 ) | | | | | | (8 ) | | |
Change in deferred reinsurance settlements
|
| | | | (123 ) | | | | | | (108 ) | | |
Change in other assets and liabilities
|
| | | | 276 | | | | | | 602 | | |
Net cash used in operating activities
|
| | | $ | (3,883 ) | | | | | $ | (1,362 ) | | |
Cash flows from investing activities: | | | | | | | | | | | | | |
Proceeds from investments sold or matured:
|
| | | | | | | | | | | | |
Fixed maturity securities
|
| | | | 8,197 | | | | | | 13,346 | | |
Equity securities
|
| | | | 261 | | | | | | 1,541 | | |
Derivatives
|
| | | | 206 | | | | | | 3 | | |
Policy loans
|
| | | | 134 | | | | | | 151 | | |
Costs of investments purchased:
|
| | | | | | | | | | | | |
Fixed maturity securities
|
| | | | (10,026 ) | | | | | | (18,938 ) | | |
Equity securities
|
| | | | (41 ) | | | | | | (167 ) | | |
Derivatives
|
| | | | (202 ) | | | | | | (90 ) | | |
Real estate additions
|
| | | | (61 ) | | | | | | (3 ) | | |
Other investing activies
|
| | | | 1,131 | | | | | | (277 ) | | |
Purchase of property and equipment
|
| | | | (92 ) | | | | | | (27 ) | | |
Net cash used in investing activities
|
| | | | (493 ) | | | | | | (4,461 ) | | |
Cash flows from financing activites: | | | | | | | | | | | | | |
Policyholder account balances:
|
| | | | | | | | | | | | |
Deposits
|
| | | | 8,388 | | | | | | 9,104 | | |
Withdrawals
|
| | | | (4,184 ) | | | | | | (4,749 ) | | |
Net transfers from separate acounts
|
| | | | 0 | | | | | | 260 | | |
Net cash provided by financing activities
|
| | | | 4,204 | | | | | | 4,615 | | |
Net decrease in cash
|
| | | | (172 ) | | | | | | (1,208 ) | | |
Cash, beginning of year
|
| | | | 4,085 | | | | | | 8,389 | | |
Cash, end of period
|
| | | $ | 3,913 | | | | | $ | 7,181 | | |
|
| | |
June 30, 2018
|
| |||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross Unrealized
|
| |
Fair
Value |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
U.S. government
|
| | | $ | 4,070 | | | | | $ | 162 | | | | | $ | (202 ) | | | | | $ | 4,030 | | |
States, political subdivisions, other
|
| | | | 28,262 | | | | | | 493 | | | | | | (534 ) | | | | | | 28,221 | | |
Corporate
|
| | | | 107,080 | | | | | | 1,034 | | | | | | (2,458 ) | | | | | | 105,656 | | |
Residential mortgage-backed securities
|
| | | | 42,039 | | | | | | 670 | | | | | | (1,046 ) | | | | | | 41,663 | | |
Commercial mortgage-backed securities
|
| | | | 3,796 | | | | | | 11 | | | | | | (128 ) | | | | | | 3,679 | | |
Total fixed maturity securities
|
| | | | 185,247 | | | | | | 2,370 | | | | | | (4,368 ) | | | | | | 183,249 | | |
Equity securities
|
| | | | 4,484 | | | | | | 1,878 | | | | | | — | | | | | | 6,362 | | |
Total fixed maturity and equity securities
|
| | | $ | 189,731 | | | | | $ | 4,248 | | | | | $ | (4,368 ) | | | | | $ | 189,611 | | |
|
| | |
December 31, 2017
|
| |||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross Unrealized
|
| |
Fair
Value |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
U.S. government
|
| | | $ | 4,075 | | | | | $ | 207 | | | | | $ | (120 ) | | | | | $ | 4,162 | | |
States, political subdivisions, other
|
| | | | 26,850 | | | | | | 876 | | | | | | (112 ) | | | | | | 27,614 | | |
Corporate
|
| | | | 106,479 | | | | | | 3,459 | | | | | | (543 ) | | | | | | 109,395 | | |
Residential mortgage-backed securities
|
| | | | 41,818 | | | | | | 1,480 | | | | | | (212 ) | | | | | | 43,086 | | |
Commercial mortgage-backed securities
|
| | | | 4,210 | | | | | | 26 | | | | | | (41 ) | | | | | | 4,195 | | |
Total fixed maturity securities
|
| | | | 183,432 | | | | | | 6,048 | | | | | | (1,028 ) | | | | | | 188,452 | | |
Equity securities
|
| | | | 4,443 | | | | | | 1,766 | | | | | | — | | | | | | 6,209 | | |
Total fixed maturity and equity securities
|
| | | $ | 187,875 | | | | | $ | 7,814 | | | | | $ | (1,028 ) | | | | | $ | 194,661 | | |
|
| | |
June 30, 2018
|
| |
December 31, 2017
|
| ||||||||||||||||||
| | |
Amortized
Cost |
| |
Fair
Value |
| |
Amortized
Cost |
| |
Fair
Value |
| ||||||||||||
Due in one year or less
|
| | | $ | 3,499 | | | | | $ | 3,554 | | | | | $ | 2,247 | | | | | $ | 2,288 | | |
Due after one year through five years
|
| | | | 41,230 | | | | | | 41,801 | | | | | | 40,926 | | | | | | 42,809 | | |
Due after five years through ten years
|
| | | | 68,467 | | | | | | 66,976 | | | | | | 66,739 | | | | | | 68,151 | | |
Due after ten years
|
| | | | 26,216 | | | | | | 25,576 | | | | | | 27,492 | | | | | | 27,923 | | |
Mortgage-backed securities
|
| | | | 45,835 | | | | | | 45,342 | | | | | | 46,028 | | | | | | 47,281 | | |
Total
|
| | | $ | 185,247 | | | | | $ | 183,249 | | | | | $ | 183,432 | | | | | $ | 188,452 | | |
|
| | |
for the six-month period ended
|
| |||||||||||||||
| | |
June 30, 2018
|
| |||||||||||||||
| | |
Fixed
Maturities |
| |
Equity
Securities |
| |
Derivative
Instruments |
| |||||||||
Proceeds from sales or maturities
|
| | | $ | 8,197 | | | | | $ | 261 | | | | | $ | 206 | | |
Gross gains from sales or maturities
|
| | | | 75 | | | | | | 261 | | | | | | 339 | | |
Other-than-temporary-impairment (OTTI) losses
|
| | | | (89 ) | | | | | | — | | | | | | — | | |
Gross losses from sales or maturities
|
| | | | (39 ) | | | | | | — | | | | | | (223 ) | | |
| | |
for the six-month period ended
|
| |||||||||||||||
| | |
June 30, 2017
|
| |||||||||||||||
| | |
Fixed
Maturities |
| |
Equity
Securities |
| |
Derivative
Instruments |
| |||||||||
Proceeds from sales or maturities
|
| | | $ | 13,346 | | | | | $ | 1,541 | | | | | $ | 3 | | |
Gross gains from sales or maturities
|
| | | | 143 | | | | | | 778 | | | | | | 9 | | |
Gross losses from sales or maturities
|
| | | | (19 ) | | | | | | — | | | | | | (7 ) | | |
| | |
for the
six-month period ended June 30, 2018 |
| |||
Balance at beginning of period
|
| | | $ | — | | |
Additions for credit related OTTI not previously reported
|
| | | | 89 | | |
Additions for increases in OTTI amounts previously recognized
|
| | | | — | | |
Balance at end of period
|
| | | $ | 89 | | |
June 30, 2018
|
| |
Less than 12 months
|
| |
12 months or longer
|
| |
Total
|
| |||||||||||||||||||||||||||
Description of securities
|
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| ||||||||||||||||||
U.S. government
|
| | | $ | 1,406 | | | | | $ | (85 ) | | | | | $ | 1,451 | | | | | $ | (117 ) | | | | | $ | 2,857 | | | | | $ | (202 ) | | |
States, political subdivisions, other
|
| | | | 16,345 | | | | | | (486 ) | | | | | | 694 | | | | | | (48 ) | | | | | | 17,039 | | | | | | (534 ) | | |
Corporate
|
| | | | 53,853 | | | | | | (1,921 ) | | | | | | 5,671 | | | | | | (537 ) | | | | | | 59,524 | | | | | | (2,458 ) | | |
Residential mortgage-backed securities
|
| | | | 19,331 | | | | | | (881 ) | | | | | | 1,795 | | | | | | (165 ) | | | | | | 21,126 | | | | | | (1,046 ) | | |
Commercial mortgage-backed securities
|
| | | | 3,611 | | | | | | (128 ) | | | | | | — | | | | | | — | | | | | | 3,611 | | | | | | (128 ) | | |
Total
|
| | | $ | 94,546 | | | | | $ | (3,501 ) | | | | | $ | 9,611 | | | | | $ | (867 ) | | | | | $ | 104,157 | | | | | $ | (4,368 ) | | |
|
2017
|
| |
Less than 12 months
|
| |
12 months or longer
|
| |
Total
|
| |||||||||||||||||||||||||||
Description of securities
|
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| |
Fair
Value |
| |
Gross
Unrealized Loss |
| ||||||||||||||||||
U.S. government
|
| | | $ | 1,161 | | | | | $ | (31 ) | | | | | $ | 1,782 | | | | | $ | (89 ) | | | | | $ | 2,943 | | | | | $ | (120 ) | | |
States, political subdivisions, other
|
| | | | 8,773 | | | | | | (86 ) | | | | | | 714 | | | | | | (26 ) | | | | | | 9,487 | | | | | | (112 ) | | |
Corporate
|
| | | | 10,935 | | | | | | (169 ) | | | | | | 6,853 | | | | | | (374 ) | | | | | | 17,788 | | | | | | (543 ) | | |
Residential mortgage-backed securities
|
| | | | 11,517 | | | | | | (126 ) | | | | | | 2,263 | | | | | | (86 ) | | | | | | 13,780 | | | | | | (212 ) | | |
Commercial mortgage-backed securities
|
| | | | 2,039 | | | | | | (27 ) | | | | | | 77 | | | | | | (14 ) | | | | | | 2,116 | | | | | | (41 ) | | |
Total
|
| | | $ | 34,425 | | | | | $ | (439 ) | | | | | $ | 11,689 | | | | | $ | (589 ) | | | | | $ | 46,114 | | | | | $ | (1,028 ) | | |
|
| | |
for the six-month
periods ended |
| |||||||||
| | |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Fixed maturity securities
|
| | | $ | 3,689 | | | | | $ | 3,752 | | |
Equity securities
|
| | | | 82 | | | | | | 94 | | |
Real estate
|
| | | | 72 | | | | | | 74 | | |
Cash equivalents
|
| | | | 19 | | | | | | 12 | | |
Policy loans
|
| | | | 356 | | | | | | 362 | | |
Other
|
| | | | 285 | | | | | | 300 | | |
Subtotal
|
| | | | 4,503 | | | | | | 4,594 | | |
Investment expense
|
| | | | (285 ) | | | | | | (302 ) | | |
Net investment income
|
| | | $ | 4,218 | | | | | $ | 4,292 | | |
|
| | |
June 30, 2018
|
| |||||||||||||||||||||
| | |
Fair
Value |
| |
Gross Unrealized
|
| |
Net
Unrealized Gain (Loss) |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
Fixed income securities
|
| | | $ | 183,249 | | | | | $ | 2,370 | | | | | $ | (4,368 ) | | | | | $ | (1,998 ) | | |
Equity securities
|
| | | | 6,362 | | | | | | 1,878 | | | | | | — | | | | | | 1,878 | | |
Net unrealized capital gains
|
| | | | | | | | | | | | | | | | | | | | | $ | (120 ) | | |
|
| | |
December 31, 2017
|
| |||||||||||||||||||||
| | |
Fair Value
|
| |
Gross Unrealized
|
| |
Net
Unrealized Gain (Loss) |
| |||||||||||||||
| | |
Gains
|
| |
Losses
|
| ||||||||||||||||||
Fixed income securities
|
| | | $ | 188,452 | | | | | $ | 6,048 | | | | | $ | (1,028 ) | | | | | $ | 5,020 | | |
Equity securities
|
| | | | 6,209 | | | | | | 1,766 | | | | | | — | | | | | | 1,766 | | |
Net unrealized capital gains
|
| | | | | | | | | | | | | | | | | | | | | $ | 6,786 | | |
|
| | |
Carrying\Fair
Value 06/30/2018 |
| |
Carrying\Fair
Value 12/31/2017 |
| ||||||
Financial instruments recorded as assets: | | | | | | | | | | | | | |
Fixed maturity securities
|
| | | $ | 183,249 | | | | | $ | 188,452 | | |
Equity securities
|
| | | | 6,362 | | | | | | 6,209 | | |
Policy loans
|
| | | | 9,718 | | | | | | 9,852 | | |
Derivative instruments
|
| | | | 398 | | | | | | 395 | | |
Cash and cash equivalents
|
| | | | 3,913 | | | | | | 4,085 | | |
Separate account
|
| | | | 23,690 | | | | | | 24,779 | | |
Financial instruments recorded as liabilities: | | | | | | | | | | | | | |
Policyholder account balance:
|
| | | | | | | | | | | | |
Interest sensitive life contracts
|
| | | | 41,217 | | | | | | 41,078 | | |
Annuities
|
| | | | 72,437 | | | | | | 68,745 | | |
Dividend accumulations and other
(1)
|
| | | | 6,906 | | | | | | 7,076 | | |
Separate account
|
| | | | 23,690 | | | | | | 24,779 | | |
| | |
Recurring Fair Value Measurements
at June 30, 2018 Using: |
| |||||||||||||||||||||
Description
|
| |
Fair Values
|
| |
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
| |
Significant
Other Obeservable Inputs (Level 2) |
| |
Significant
Unobservable Inputs (Level 3) |
| ||||||||||||
Fixed maturity securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. government
|
| | | $ | 4,030 | | | | | $ | 4,030 | | | | | $ | — | | | | | $ | — | | |
States, political subdivisions, other
|
| | | | 28,221 | | | | | | — | | | | | | 28,221 | | | | | | — | | |
Corporate
|
| | | | 105,656 | | | | | | — | | | | | | 105,656 | | | | | | — | | |
Residential mortgage-backed securities
|
| | | | 41,663 | | | | | | — | | | | | | 41,663 | | | | | | — | | |
Commercial mortgage-backed securities
|
| | | | 3,679 | | | | | | — | | | | | | 3,679 | | | | | | — | | |
Total fixed maturiities
|
| | | | 183,249 | | | | | | 4,030 | | | | | | 179,219 | | | | | | — | | |
Equities
|
| | | | 6,362 | | | | | | 4,123 | | | | | | — | | | | | | 2,239 | | |
Derivative instruments
|
| | | | 398 | | | | | | 398 | | | | | | — | | | | | | — | | |
Cash equivalents
(1)
|
| | | | 3,913 | | | | | | 3,913 | | | | | | — | | | | | | — | | |
Separate accounts
(2)
|
| | | | 23,690 | | | | | | 23,690 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 217,612 | | | | | $ | 36,154 | | | | | $ | 179,219 | | | | | $ | 2,239 | | |
|
| | |
Recurring Fair Value Measurements
at December 31, 2017 Using: |
| |||||||||||||||||||||
Description
|
| |
Fair Values
|
| |
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
| |
Significant
Other Obeservable Inputs (Level 2) |
| |
Significant
Unobservable Inputs (Level 3) |
| ||||||||||||
Fixed maturity securities: | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. government
|
| | | $ | 4,162 | | | | | $ | 4,162 | | | | | $ | — | | | | | $ | — | | |
States, political subdivisions, other
|
| | | | 27,614 | | | | | | — | | | | | | 27,614 | | | | | | — | | |
Corporate
|
| | | | 109,395 | | | | | | — | | | | | | 109,395 | | | | | | — | | |
Residential mortgage-backed securities
|
| | | | 43,086 | | | | | | — | | | | | | 43,086 | | | | | | — | | |
Commercial mortgage-backed securities
|
| | | | 4,195 | | | | | | — | | | | | | 4,195 | | | | | | — | | |
Total fixed maturiities
|
| | | | 188,452 | | | | | | 4,162 | | | | | | 184,290 | | | | | | — | | |
Equities
|
| | | | 6,209 | | | | | | 4,027 | | | | | | — | | | | | | 2,182 | | |
Derivative instruments
|
| | | | 395 | | | | | | 395 | | | | | | — | | | | | | — | | |
Cash equivalents
(1)
|
| | | | 4,085 | | | | | | 4,085 | | | | | | — | | | | | | — | | |
Separate accounts
(2)
|
| | | | 24,779 | | | | | | 24,779 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 223,920 | | | | | $ | 37,448 | | | | | $ | 184,290 | | | | | $ | 2,182 | | |
|
Fair value at June 30, 2018
|
| | | | | | | |
Primary Valuation
Technique(s) |
| |
Significant
Unobservable Inputs |
| |
Range
|
| |
Weighted
Average |
| ||||||||||||
|
Min
|
| |
Max
|
| ||||||||||||||||||||||||||
Rreef America REIT II
|
| | | $ | 2,202 | | | |
Discounted cash Flows
|
| | Discount Rate | | | | | 5.00 % | | | | | | 9.00 % | | | | | | 6.50 % | | |
| | | | | | | | | | | |
Terminal capitalization rate
|
| | | | 3.75 % | | | | | | 8.00 % | | | | | | 5.48 % | | |
Fair value at December 31, 2017
|
| | | | | | | |
Primary Valuation
Technique(s) |
| |
Significant Unobservable Inputs
|
| |
Range
|
| |
Weighted
Average |
| ||||||||||||
|
Min
|
| |
Max
|
| ||||||||||||||||||||||||||
Rreef America REIT II
|
| | | $ | 2,150 | | | |
Discounted cash Flows
|
| | Discount Rate | | | | | 5.00 % | | | | | | 9.00 % | | | | | | 6.61 % | | |
| | | | | | | | | | | |
Terminal capitalization rate
|
| | | | 4.00 % | | | | | | 8.25 % | | | | | | 5.62 % | | |
| | |
for the six-month
periods ended |
| |||||||||
| | |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Balance, beginning of year
|
| | | $ | 2,182 | | | | | $ | 3,169 | | |
Gains included in net income
|
| | | | — | | | | | | 396 | | |
Settlements
|
| | | | — | | | | | | (1,000 ) | | |
Unrealized gains (losses) in OCI
|
| | | | 57 | | | | | | (424 ) | | |
Balance, end of period
|
| | | $ | 2,239 | | | | | $ | 2,141 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Balance, beginning of year
|
| | | $ | 12,179 | | | | | $ | 11,940 | | |
Capitalization of commissions, sales and issue expenses
|
| | | | 1,011 | | | | | | 2,437 | | |
Accrual of interest
|
| | | | 275 | | | | | | 544 | | |
Amortization
|
| | | | (1,180 ) | | | | | | (2,659 ) | | |
Change in Shadow DAC
|
| | | | 1,035 | | | | | | (83 ) | | |
Balance end of period
|
| | | $ | 13,320 | | | | | $ | 12,179 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Balance, beginning of year
|
| | | $ | 867 | | | | | $ | 315 | | |
Capitalization of commissions and issue expenses
|
| | | | 201 | | | | | | 545 | | |
Accrual of interest
|
| | | | 15 | | | | | | 18 | | |
Amortization
|
| | | | (7 ) | | | | | | (11 ) | | |
Balance end of period
|
| | | $ | 1,076 | | | | | $ | 867 | | |
|
| | |
Unrealized
Investment Gains (losses) |
| |
Shadow DAC
|
| |
Accumulated
Other Comprehensive Income (loss) |
| |||||||||
Balance, December 31, 2016
|
| | | $ | 3,997 | | | | | $ | (448 ) | | | | | $ | 3,549 | | |
Available-for-sale investment gains (losses) arising during the year:
|
| | | | | | | | | | | | | | | | | | |
Fixed maturity securities net ot tax of $227
|
| | | | 440 | | | | | | | | | | | | 440 | | |
Equity securities net of tax of $9
|
| | | | 18 | | | | | | | | | | | | 18 | | |
Change in Shadow DAC net of tax benefit of $28
|
| | | | | | | | | | (55 ) | | | | | | (55 ) | | |
Cumulative effect of adoption of new accounting principle (see Note 3)
|
| | | | 904 | | | | | | (99 ) | | | | | | 805 | | |
Balance, December 31, 2017
|
| | | $ | 5,359 | | | | | $ | (602 ) | | | | | $ | 4,757 | | |
Available-for-sale investment gains (losses) arising during the year:
|
| | | | | | | | | | | | | | | | | | |
Fixed maturity securities net ot tax benefit of $276
|
| | | | (6,742 ) | | | | | | | | | | | | (6,742 ) | | |
Equity securities net of tax of $21
|
| | | | 79 | | | | | | | | | | | | 79 | | |
Change in Shadow DAC net of tax of $217
|
| | | | | | | | | | 817 | | | | | | 817 | | |
Balance, June 30, 2018
|
| | | $ | (1,304 ) | | | | | $ | 215 | | | | | $ | (1,089 ) | | |
|
| | |
June 30,
2018 |
| |
December 31,
2017 |
| ||||||
Balance, beginning of year
|
| | | $ | 24,779 | | | | | $ | 21,513 | | |
Cost of bonds and stocks acquired
|
| | | | — | | | | | | 299 | | |
Net realized and unrealized increase (decrease)
|
| | | | (200 ) | | | | | | 3,467 | | |
Deduction consideration for bonds and stocks disposed of
|
| | | | (952 ) | | | | | | (562 ) | | |
Change in other assets
|
| | | | 63 | | | | | | 62 | | |
Balance, end of period
|
| | | $ | 23,690 | | | | | $ | 24,779 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Traditional life contracts
|
| | | $ | 62,404 | | | | | $ | 62,311 | | |
Immediate annuities and pension plan
|
| | | | 6,704 | | | | | | 6,774 | | |
Supplemental contracts with life contingencies
|
| | | | 3,186 | | | | | | 2,522 | | |
Accident and health
|
| | | | 343 | | | | | | 386 | | |
Accident death benefits
|
| | | | 133 | | | | | | 132 | | |
Disability
|
| | | | 181 | | | | | | 188 | | |
| | | | $ | 72,951 | | | | | $ | 72,313 | | |
|
Product
|
| |
Mortality
|
| |
Interest Rate
|
| |
Estimation Method
|
|
Immediate fixed annuities | | | 1971, 1983, 2000, and 2012 annuity mortality tables | | | Rates range from 4% to 6.5% | | | Present value of expected future benefits based on historical experience | |
Traditional life insurance | | | Actual company experience plus loading | | | Rates range from 2.5% to 5.75% | | | Net level premium reserve method using the Company’s withdrawal experience | |
Accident and health | | | Actual company experience plus loading | | | n/a | | | Unearned premium; additional contract reserves for mortality risk | |
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Interest sensitive life contracts
|
| | | $ | 41,217 | | | | | $ | 41,078 | | |
Annuities
|
| | | | 72,437 | | | | | | 68,745 | | |
| | | | $ | 113,654 | | | | | $ | 109,823 | | |
|
Product
|
| |
Interest Rate
|
| |
Withdrawal/surrender charges
|
|
Interest-sensitive life insurance | | | Rates range from 3% to 7% | | | Either a percentage of account balance or a dollar amount grading off generally over 20 years | |
Fixed annuities | | | Rates range from 0% to 8% | | | Either a declining or level charge generally over 9 years or less | |
Other investment contracts | | | Rates range from 2% to 6% | | | No explicit charge assumed | |
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Balance, beginning of year
|
| | | $ | 109,823 | | | | | $ | 99,440 | | |
Deposits
|
| | | | 7,439 | | | | | | 17,994 | | |
Interest credited
|
| | | | 2,214 | | | | | | 4,353 | | |
Benefits
|
| | | | (1,432 ) | | | | | | (2,734 ) | | |
Surrenders and partial withdrawals
|
| | | | (2,279 ) | | | | | | (4,835 ) | | |
COI charges
|
| | | | (1,459 ) | | | | | | (2,973 ) | | |
Contract charges
|
| | | | (652 ) | | | | | | (1,307 ) | | |
Net transfers from separate accounts
|
| | | | — | | | | | | (115 ) | | |
Balance, end of period
|
| | | $ | 113,654 | | | | | $ | 109,823 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Payout annuities without life contingencies
|
| | | $ | 4,316 | | | | | $ | 3,774 | | |
Dividend accumulations and other
|
| | | | 6,906 | | | | | | 7,076 | | |
| | | | $ | 11,222 | | | | | $ | 10,850 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Land
|
| | | $ | 405 | | | | | $ | 405 | | |
Building and other
|
| | | | 8,439 | | | | | | 8,378 | | |
| | | | | 8,844 | | | | | | 8,783 | | |
Accumulated depreciation
|
| | | | (6,887 ) | | | | | | (6,828 ) | | |
Real Estate, net
|
| | | $ | 1,957 | | | | | $ | 1,955 | | |
|
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
EDP equipment
|
| | | $ | 3,973 | | | | | $ | 3,955 | | |
Furniture
|
| | | | 1,592 | | | | | | 1,522 | | |
EDP equipment & furniture cost
|
| | | | 5,565 | | | | | | 5,477 | | |
Accumulated depreciation
|
| | | | (5,356 ) | | | | | | (5,281 ) | | |
Property and Equipment, net
|
| | | $ | 209 | | | | | $ | 196 | | |
|
| | |
for the six-month
periods ended |
| |||||||||
| | |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Current
|
| | | $ | 9 | | | | | $ | 14 | | |
Deferred
|
| | | | — | | | | | | — | | |
Provision for income tax
|
| | | $ | 9 | | | | | $ | 14 | | |
|
| | |
for the six-month
periods ended |
| |||||||||
| | |
6/30/2018
|
| |
6/30/2017
|
| ||||||
Income tax benefits at statutory rate
|
| | | $ | (417 ) | | | | | $ | (338 ) | | |
Dividends received deduction
|
| | | | — | | | | | | — | | |
Other
|
| | | | 426 | | | | | | 352 | | |
Income tax (benefit) expense
|
| | | $ | 9 | | | | | $ | 14 | | |
Effective tax rate
|
| | | | 0.5 % | | | | | | 1.4 % | | |
| | |
6/30/2018
|
| |
12/31/2017
|
| ||||||
Deferred federal tax assets: | | | | | | | | | | | | | |
Difference between financial reporting and the tax basis of: | | | | | | | | | | | | | |
Operating loss carryforward
|
| | | $ | 6,180 | | | | | $ | 5,859 | | |
Other than temporary impairments
|
| | | | 966 | | | | | | 947 | | |
Deferred premiums
|
| | | | 850 | | | | | | 734 | | |
Life policy reserves
|
| | | | 702 | | | | | | 600 | | |
Other
|
| | | | 299 | | | | | | 380 | | |
Deferred reinsurance settlements
|
| | | | 594 | | | | | | 619 | | |
Total deferred tax assets
|
| | | | 9,591 | | | | | | 9,139 | | |
Deferred federal tax liabilities: | | | | | | | | | | | | | |
Difference between financial reporting and the tax basis of: | | | | | | | | | | | | | |
Deferred acquisition costs and sales inducements
|
| | | | 2,430 | | | | | | 2,147 | | |
Net unrealized gains
|
| | | | (32 ) | | | | | | 1,421 | | |
Reinsurance recoverable
|
| | | | 761 | | | | | | 766 | | |
Amortized discount on bonds
|
| | | | 123 | | | | | | 138 | | |
Other
|
| | | | 216 | | | | | | 143 | | |
Fixed assets
|
| | | | (12 ) | | | | | | 53 | | |
Total deferred tax liabilities
|
| | | | 3,486 | | | | | | 4,668 | | |
Net
|
| | | | 6,105 | | | | | | 4,471 | | |
Less valuation allowance
|
| | | | (5,610 ) | | | | | | (4,013 ) | | |
Net deferred tax asset
|
| | | $ | 495 | | | | | $ | 458 | | |
|
Expiring
|
| | |||||
2018
|
| | | $ | 167 | | |
2019
|
| | | | 1,590 | | |
2020
|
| | | | 2,296 | | |
2021
|
| | | | 651 | | |
2022
|
| | | | 520 | | |
2023
|
| | | | 861 | | |
2024
|
| | | | 1,762 | | |
2025
|
| | | | 7,836 | | |
2026
|
| | | | 2,188 | | |
2027
|
| | | | 1,353 | | |
2028
|
| | | | 2,664 | | |
2029
|
| | | | 509 | | |
2030
|
| | | | 2,240 | | |
2031
|
| | | | 1,119 | | |
2032
|
| | | | 596 | | |
Total
|
| | | $ | 26,352 | | |
|
|
SEC Registration Fee
|
| | | $ | 5,576 | | |
|
Printing, Postage and Mailing Expenses
|
| | | $ | 225,000 | | |
|
FINRA Filing Fees
|
| | | | 7,400 | | |
|
NASDAQ Listing Fee
|
| | | | 45,000 | | |
|
Legal Fees and Expenses
|
| | | | 175,000 | | |
|
Accounting Fees and Expenses
|
| | | | 255,000 | | |
|
Valuation Expenses
|
| | | | 124,000 | | |
|
Transfer and Offering Agent Fees and Expenses
|
| | | | 5,000 | | |
|
Underwriters’ Expense Reimbursement
|
| | | | 10,000 | | |
|
Blue Sky Fees and Expenses
|
| | | | 0 | | |
|
Miscellaneous Expenses
|
| | | | 3,024 | | |
|
Total
|
| | | $ | 855,000 | | |
|
Signature
|
| |
Title
|
| |
Date
|
|
/s/ Joseph D. Austin*
Joseph D. Austin
|
| |
Chairman and Chief Executive Officer
(Principal Executive Officer), Director |
| |
October 29, 2018
|
|
/s/ William S. Austin
William S. Austin
|
| | President and Chief Operating Officer, Director | | |
October 29, 2018
|
|
/s/ Anders Raaum*
Anders Raaum
|
| |
Chief Financial Officer
(Principal Financial Officer) |
| |
October 29, 2018
|
|
/s/ Michael Austin*
Michael Austin
|
| | Director | | |
October 29, 2018
|
|
/s/ Wayne R. Ebersberger*
Wayne R. Ebersberger
|
| | Director | | |
October 29, 2018
|
|
/s/ William H. Springer*
William H. Springer
|
| | Director | | |
October 29, 2018
|
|
/s/ James H. Stacke*
James H. Stacke
|
| | Director | | |
October 29, 2018
|
|
*By: /s/ William S. Austin
William S. Austin
Attorney in Fact |
| | |
Exhibit 8.1
Stevens & Lee
Lawyers & Consultants
620 Freedom Business Center, Suite 200
King of Prussia, PA 19406
(610) 205-6000 Fax (610) 337-4374
www.stevenslee.com
October 29, 2018
Board of Directors
Federal Life Group, Inc.
3750 Deerfield Rd.
Riverwoods, IL 60015
Re: | Conversion of Federal Life Mutual Holding Company from Mutual Holding Company to Stock Company |
Ladies and Gentlemen:
We have been requested to provide this opinion concerning matters of U.S. federal income tax law in connection with (1) the proposed conversion of Federal Life Mutual Holding Company, a mutual holding company organized under the laws of Illinois (“Federal Life Mutual”) to a stock company (the “Conversion”) pursuant to the Plan of Conversion of Federal Life Mutual approved by the Board of Directors of Federal Life Mutual on March 8, 2018 (the “Plan of Conversion”); and (2) the issuance of all of the capital stock of the converted Federal Life Mutual to Federal Life Group, Inc., a Pennsylvania corporation (the “Company”) and the issuance of shares of common stock by the Company in an initial public offering in accordance with the Form S-1 Registration Statement filed by the Company on October 10, 2018 (the “S-1 Registration Statement”), and related exhibits thereto. This opinion is being provided solely in connection with the filing of the S-1 Registration Statement with the Securities and Exchange Commission.
For purposes of this opinion letter, capitalized words and phrases that are used but not defined herein shall have the meanings given to such terms in the Plan of Conversion.
For purposes of providing this opinion, we have examined and are relying upon (without any independent verification or review thereof) the truth and accuracy, at all relevant times, of the statements, covenants, representations and warranties contained in the following documents (including all schedules and exhibits thereto):
1. | the S-1 Registration Statement; |
2. | the Plan of Conversion; |
Allentown
·
Bala Cynwyd
·
Charleston
·
Cleveland
·
Fargo
·
Fort Lauderdale
·
Harrisburg
·
Lancaster
New York
·
Philadelphia
·
Princeton
·
Reading
·
Rochester
·
Scranton
·
Valley Forge
·
Wilkes-Barre
·
Wilmington
A PROFESSIONAL CORPORATION
Stevens & Lee
Lawyers & Consultants
October 29, 2018
Page 2
3. | the Officer’s Certificate provided to us by Federal Life Mutual; and |
4. | such other instruments and documents related to Federal Life Mutual and the Company and the Plan of Conversion as we have deemed necessary or appropriate. |
In addition, in connection with providing this opinion, we have assumed (without any independent investigation thereof) that:
1. original documents (including signatures) are authentic; documents submitted to us as copies conform to the original documents; and there has been (or will be by the Effective Date) due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof;
2. any representation or statement referred to above made “to the best of knowledge” or otherwise similarly qualified is correct without such qualification, and all statements and representations, whether or not qualified, are true and will remain true through the Effective Date and thereafter where relevant; and
3. all transactions that are related or incidental to the Conversion will be consummated pursuant to the Plan of Conversion, and will be effective under the laws of the State of Illinois and applicable federal and state insurance laws.
The opinion expressed herein is conditioned on the initial and continuing accuracy of the facts, information, representations and assumptions contained in the aforesaid documents or otherwise referred to above.
Based on the foregoing documents, materials, assumptions and information, and subject to the qualifications and assumptions set forth herein, if the Conversion is consummated in accordance with the provisions of the Plan of Conversion (and without any waiver, breach or amendment of any of the provisions thereof), it is our opinion that, under current law (i) the Conversion will constitute a “reorganization” within the meaning of Code Section 368(a), and (ii) the statements made regarding U.S. federal income tax consequences set forth in the S-1 Registration Statement under the heading “Federal Income Tax Considerations,” insofar as they constitute statements of law or legal conclusions, are the opinion of Stevens and Lee, P.C. with respect to such matters.
The opinion set forth above is based on the existing provisions of the Code, Treasury Regulations (including Temporary Treasury Regulations) promulgated under the Code, published Revenue Rulings, Revenue Procedures and other announcements of the Internal Revenue Service (the “Service”) and existing court decisions, any of which could be changed at any time. Any such changes might be retroactive with respect to transactions entered into prior to the date of such changes and could significantly modify the opinion set forth above. Nevertheless, we undertake no responsibility to advise you of any subsequent developments in the application, operation or interpretation of the U.S. federal income tax laws.
Stevens & Lee
Lawyers & Consultants
October 29, 2018
Page 3
As you are aware, no ruling has been or will be requested from the Service concerning the U.S. federal income tax consequences of the Conversion or the Offering. In reviewing this letter, you should be aware that the opinion set forth above represents our conclusion regarding the application of existing U.S. federal income tax law to the instant transaction. If the facts vary from those relied upon (or if any representation, covenant, warranty or assumption upon which we have relied is inaccurate, incomplete, breached or ineffective), our opinion contained herein could be inapplicable in whole or in part. You should be aware that an opinion of counsel represents only counsel’s best legal judgment, and has no binding effect or official status of any kind, and that no assurance can be given that contrary positions may not be taken by the Service or that a court considering the issues would not hold otherwise.
As stated above, this opinion is being delivered to the Board of Directors of the Company solely for the purpose of being included as an exhibit to the S-1 Registration Statement. We consent to the filing of this opinion as an exhibit to the S-1 Registration Statement and to the use of our name in the S-1 Registration Statement wherever it appears. In giving this consent, however, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules or regulations promulgated thereunder
Very truly yours,
STEVENS & LEE
/s/ Stevens & Lee
Exhibit 10.1
federal
life group, INC.
2018 equity Incentive Plan
federal
life group, INC.
2018 equity Incentive Plan
TABLE OF CONTENTS
ARTICLE | PAGE | |
ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS | 1 | |
ARTICLE 2. DEFINITIONS | 1 | |
ARTICLE 3. ADMINISTRATION | 5 | |
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN | 7 | |
ARTICLE 5. ELIGIBILITY | 8 | |
ARTICLE 6. STOCK OPTIONS IN GENERAL | 8 | |
ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS | 9 | |
ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT OR SERVICE | 10 | |
ARTICLE 9. RESTRICTED STOCK | 11 | |
ARTICLE 10. ADJUSTMENT PROVISIONS | 13 | |
ARTICLE 11. GENERAL PROVISIONS | 14 |
ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS
1.1 Purpose . The Federal Life Group, Inc. 2018 Equity Incentive Plan, adopted as of October 23, 2018, is intended to provide selected employees and non-employee directors of Federal Life Group, Inc. (the “Corporation”) and its Subsidiaries (as hereinafter defined) with an opportunity to acquire Common Stock of the Corporation. The Plan is designed to help the Corporation attract, retain, and motivate employees and non-employee directors to make substantial contributions to the success of the Corporation’s business and the businesses of its Subsidiaries. Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Corporation and its Subsidiaries.
1.2 Authorized Plan Awards . Incentive Stock Options, Nonqualified Stock Options, and Restricted Stock may be awarded within the limitations of the Plan herein described.
ARTICLE 2. DEFINITIONS
2.1 “ Agreement .” A written or electronic agreement between the Corporation and a Participant evidencing an Award. A Participant may be issued one or more Agreements from time to time, reflecting one or more Awards.
2.2 “ Award .” An award of a Stock Option or of Restricted Stock.
2.3 “ Board .” The Board of Directors of the Corporation.
2.4 “ Change in Control .” Except as otherwise provided in an Agreement, the first to occur of any of the following events:
(a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), except for (i) any of the Corporation’s employee benefit plans, or any entity holding the Corporation’s voting securities for, or pursuant to, the terms of any such plan (or any trust forming a part thereof) (collectively, the “Benefit Plans”) or (ii) Federal Life Group, Inc., is or becomes the beneficial owner, directly or indirectly, of the Corporation’s securities representing 25% or more of the combined voting power of the Corporation’s then outstanding securities other than pursuant to a transaction excepted in Clause (b);
(b) the shareholders of the Corporation approve a merger, consolidation, or other reorganization of the Corporation, unless:
(i) under the terms of the agreement providing for such merger, consolidation, or reorganization, the shareholders of the Corporation immediately before such merger, consolidation, or reorganization, will own, directly or indirectly immediately following such merger, consolidation, or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the Corporation resulting from such merger, consolidation, or reorganization (the “Surviving Corporation”);
(ii) under the terms of the agreement providing for such merger, consolidation, or reorganization, the individuals who were members of the Board immediately prior to the execution of such agreement will constitute at least a majority of the members of the board of directors of the Surviving Corporation after such merger, consolidation, or reorganization; and
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(iii) based on the terms of the agreement providing for such merger, consolidation, or reorganization, no Person (other than (i) the Corporation or any Subsidiary of the Corporation, (ii) any Benefit Plan, (iii) the Surviving Corporation or any Subsidiary of the Surviving Corporation, or (iv) any Person who, immediately prior to such merger, consolidation, or reorganization had beneficial ownership of 25% or more of the then outstanding voting securities) will have beneficial ownership of 25% or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities;
(c) Any Person (or more than one Person acting as a group), acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) assets from the Corporation that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately before such acquisition(s).
(d) a plan of liquidation or dissolution of the Corporation, other than pursuant to bankruptcy or insolvency laws, is adopted; or
(e) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board cease for any reason to constitute at least a majority of the Board unless the election, or the nomination for election by the Corporation’s shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.
Notwithstanding Clause (a), a Change in Control shall not be deemed to have occurred if a Person becomes the beneficial owner, directly or indirectly, of the Corporation’s securities representing 25% or more of the combined voting power of the Corporation’s then outstanding securities solely as a result of the Corporation’s acquisition of its voting securities that, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 25% or more of the combined voting power of the Corporation’s then outstanding securities; provided, however, that if a Person becomes a beneficial owner of 25% or more of the combined voting power of the Corporation’s then outstanding securities by reason of share purchases by the Corporation and shall, after such share purchases by the Corporation, become the beneficial owner, directly or indirectly, of any additional voting securities of the Corporation (other than as a result of a stock split, stock dividend or similar transaction), then a Change in Control of the Corporation shall be deemed to have occurred with respect to such Person under Clause (a). In no event shall a Change in Control of the Corporation be deemed to occur under Clause (a) by virtue of the acquisition of the Corporation’s securities by Benefit Plans. In no event shall the purchase by Insurance Capital Group LLC of a majority of the outstanding shares of Common Stock in connection with the conversion offering constitute a Change in Control.
2.5 “ Code .” The Internal Revenue Code of 1986, as amended.
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2.6 “ Code of Conduct .” The policies and procedures related to employment of Employees or Non-Employee Directors set forth in the Corporation’s employee handbook or any similar document, as amended and updated from time to time. The term “Code of Conduct” shall also include any other policy or procedure that may be adopted by the Corporation or a Subsidiary and communicated to Employees and/or Non-Employee Directors.
2.7 “ Committee .” The Compensation Committee of the Board, which Committee shall be composed of two or more members of the Board, all of whom are (a) “non-employee directors” as such term is defined under the rules and regulations that the Securities and Exchange Commission may adopt from time to time pursuant to Section 16(b) of the Exchange Act, and (b) independent under any applicable stock listing agreement with, or rules of, any exchange or electronic trading system. The Board may from time to time remove members from, or add members to, the Committee. The Board shall fill all vacancies on the Committee, however caused.
2.8 “ Common Stock .” The common stock of the Corporation (par value $0.01 per share) as described in the Corporation’s Articles of Incorporation, or such other stock as shall be substituted therefor.
2.9 “ Corporation .” Federal Life Group, Inc., a Pennsylvania corporation.
2.10 “ Disability .” “Permanent and total disability” (as defined in Code Section 22(e)(3)).
2.11 “ Employee .” Any common law employee of the Corporation or a Subsidiary. An Employee does not include any individual who: (i) does not receive payment for services directly from the Corporation’s or a Subsidiary’s payroll; (ii) is employed by an employment agency that is not a Subsidiary; or (iii) who renders services pursuant to a written arrangement that expressly provides that the service provider is not eligible for participation in the Plan, regardless if the Internal Revenue Service or a court of law later determines such person to be a common law employee.
2.12 “ Exchange Act .” The Securities Exchange Act of 1934, as amended.
2.13 “ Fair Market Value .” The Fair Market Value of a share of Common Stock means:
(a) If the Common Stock is listed on an established securities market (within the meaning of Code Section 409A), the Fair Market Value per share of the Common Stock shall be the closing sale price for such a share on the relevant day. If no sale of Common Stock has occurred on that day, the Fair Market Value shall be determined by reference to such price for the next preceding day on which a sale occurred.
(b) In the event that the Common Stock is not traded on an established securities market (within the meaning of Code Section 409A), then the Fair Market Value per share of Common Stock will be the price that the Committee establishes in good faith by application of a reasonable valuation method (within the meaning of Code Section 409A).
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(c) Notwithstanding the foregoing, (i) in the event of any change in law or interpretation of law, including but not limited to Code Section 409A and the regulations and guidance promulgated thereunder, the Fair Market Value shall be determined in accordance with such law or interpretation of law and (ii) in connection with determining the Fair Market Value, the Committee may use any source that it deems reliable; and its determination shall be final and binding on all affected persons, absent clear error.
2.14 “ Incentive Stock Option .” A Stock Option intended to satisfy the requirements of Code Section 422(b).
2.15 “ Non-Employee Director .” A member of the Board, or of the board of directors of a Subsidiary, or any other body performing the function of a board of directors, who is not an Employee.
2.16 “ Nonqualified Stock Option .” A Stock Option which does not satisfy the requirements of Code Section 422(b).
2.17 “ Optionee .” A Participant who is awarded a Stock Option pursuant to the provisions of the Plan.
2.18 “ Participant .” An Employee or Non-Employee Director to whom an Award has been made and remains outstanding.
2.19 “ Performance Goal .” One or more goals that the Committee may establish, with respect to an Award intended to constitute a Performance Award, that relate to one or more performance criteria. The Committee may specify a period of time to which a Performance Goal may relate. The terms of the applicable Performance Goal(s) shall be set forth in an applicable Agreement at the time the related Performance Award is made.
2.20 “ Performance Award .” An Award, the vesting or receipt without restriction of which is conditioned on the satisfaction of one or more Performance Goals.
2.21 “ Plan .” The Federal Life Group, Inc. 2018 Equity Incentive Plan
2.22 “ Restricted Stock .” An Award of Common Stock pursuant to the provisions of the Plan, which award is subject to such restrictions and other conditions, as the Committee may specify at the time of such award and set forth in an applicable Agreement.
2.23 “ Retirement .” Termination of employment or service on or after attainment of age 65.
2.24 “ Securities Act .” The Securities Act of 1933, as amended.
2.25 “ Stock Option ” or “ Option .” An Award of a right to purchase Common Stock pursuant to the provisions of the Plan.
2.26 “ Subsidiary .” A subsidiary corporation, as defined in Code Section 424(f), that is a subsidiary of a relevant corporation.
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2.27 “ Termination or Dismissal For Cause .” “Termination or Dismissal For Cause” shall have the meaning ascribed to such term (or a similar term) set forth in an applicable employment, severance, or other similar agreement between an individual and the Corporation or a Subsidiary, or if no such agreement exists, the Corporation’s or Subsidiary’s termination or dismissal of a Participant after:
(a) any government regulatory agency recommends or orders in writing that the Corporation or a Subsidiary terminate the employment of such Employee or dismiss him or her of his or her duties;
(b) such Employee or Non-Employee Director is convicted of or enters a plea of guilty or nolo contendere to a felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or the actual incarceration of the Employee or Non-Employee Director for a period of 45 consecutive days;
(c) in the case of an Employee, the Committee’s determination that such Employee willfully failed to follow the lawful instructions of the Board or any officer of the Corporation or a Subsidiary after such Employee’s receipt of written notice of such instructions, other than a failure resulting from the Employee’s incapacity because of a Disability;
(d) the Committee’s determination that the willful or continued failure by such Employee or Non-Employee Director to substantially and satisfactorily perform his duties with the Corporation or a Subsidiary (other than any such failure resulting from the Employee’s or Non-Employee Director’s Disability), within a reasonable period of time after a demand for substantial performance or notice of lack of substantial or satisfactory performance is delivered to the Employee or Non-Employee Director, which demand identifies the manner in which the Employee or Non-Employee Director has not substantially or satisfactorily performed his or her duties; or
(e) the Committee’s determination that such Employee or Non-Employee Director has failed to conform to an applicable Code of Conduct.
For purposes of the Plan, no act, or failure to act, on an Employee’s or Non-Employee Director’s part shall be deemed “willful” unless done, or omitted to be done, by such Employee or Non-Employee Director not in good faith and without reasonable belief that such Employee’s or Non-Employee Director’s action or omission was in the best interest of the Corporation or a Subsidiary.
ARTICLE 3. ADMINISTRATION
3.1 Administration of the Plan . The Committee shall administer the Plan.
3.2 Powers of the Committee .
(a) The Committee shall be vested with full authority to make such rules and regulations as it deems necessary or desirable to administer the Plan and to interpret the provisions of the Plan, unless otherwise determined by a majority of the disinterested members of the Board. Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive, and binding upon all Participants and any person claiming under or through a Participant, unless otherwise determined by a majority of the disinterested members of the Board.
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(b) Subject to the terms, provisions, and conditions of the Plan and subject to review and approval by a majority of the disinterested members of the Board, the Committee shall have exclusive jurisdiction to:
(i) determine and select the Employees and Non-Employee Directors to receive Awards (it being understood that more than one Award may be made to the same person);
(ii) determine the number of shares subject to each Award;
(iii) determine the date or dates when the Awards will be made;
(iv) determine the exercise price of shares subject to an Option in accordance with Article 6;
(v) determine the date or dates when an Option may be exercised within the term of the Option specified pursuant to Article 7;
(vi) determine whether an Option constitutes an Incentive Stock Option or a Nonqualified Stock Option;
(vii) determine the performance criteria and establish Performance Goals with respect thereto, to be applied to an Award; and
(viii) prescribe the form, which shall be consistent with the Plan document, of the Agreement evidencing any Awards made under the Plan.
3.3 Indemnification . In addition to such other rights of indemnification as the Board or the Committee or a member of the Board of the Committee may have, the Corporation shall indemnify the Board and the Committee (and each member thereof) against any liability, including reasonable attorneys’ fees, actually incurred in connection with any suit, action, or proceeding or in connection with any appeal therein, to which the Board or the Committee (or such member thereof) may be a party by reason of any action or failure to act under or in connection with the Plan or any award granted under the Plan, and any amounts that the Committee, the Board, or a member thereof, as applicable, may pay (a) in settlement thereof or (b) in satisfaction of a judgment in any such suit, action, or proceeding, except in with respect to matters where it shall be adjudged in such suit, action, or proceeding, that the Committee, the Board, or a member thereof, as applicable, did not act in good faith and in a manner that such person reasonably believed to be in the Corporation’s best interest, or in the case of a criminal proceeding, had no reason to believe that the applicable conduct was unlawful.
3.4 Establishment and Certification of Performance Goals . The Committee shall establish, prior to award, Performance Goals with respect to each Award intended to constitute a Performance Award. Except as may otherwise be provided in Articles 6 and 7 hereof, as applicable, no Option that is intended to constitute a Performance Award may be exercised until the Performance Goal or Goals applicable thereto is or are satisfied.
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3.5 Performance Awards Not Mandatory . Nothing herein shall be construed as requiring that any Award be made a Performance Award.
3.6 Binding Determination . A decision that the Committee makes pursuant to the provisions of the Plan shall be final and binding on the Corporation and Participants, except to the extent that a court having jurisdiction determines such decision to be arbitrary and capricious.
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized .
(a) The total aggregate number of shares of Common Stock that Awards may be made under the Plan shall not exceed 480,000 shares. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 10.
(b) The maximum aggregate number of shares of Common Stock that may be issued under the Plan pursuant to the vesting of Awards of Restricted Stock shall not exceed 140,000 shares. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 10.
(c) The maximum aggregate number of shares of Common Stock that may be awarded under the Plan as Options shall not exceed 340,000 shares. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 10.
(d) Subject to adjustment in accordance with Section 10, no Participant shall be granted, during any one-year period, more than 125,000 shares of common stock in the aggregate.
(e) If any Option is exercised by tendering Common Stock, either actually or by attestation, to the Corporation as full or partial payment in connection with the exercise of such Option under the Plan, or if the tax withholding requirements are satisfied through such tender, only the number of shares of Common Stock issued net of the Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares available for Awards under the Plan.
4.2 Shares Available . The Common Stock to be issued under the Plan shall be the Corporation’s Common Stock, which shall be made available in the Board’s discretion either from authorized but unissued Common Stock, treasury shares, or shares acquired by the Corporation, including shares purchased on the open market. In the event that any outstanding Award under the Plan for any reason expires, terminates, or is forfeited, the shares of Common Stock allocable to such expiration, termination, or forfeiture may thereafter again be made subject to an Award under the Plan.
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ARTICLE 5. ELIGIBILITY
5.1 Participation . The Committee shall make Awards only to persons who are Employees or Non-Employee Directors.
5.2 Incentive Stock Option Eligibility . The Committee shall make Incentive Stock Option Awards only to Employees of the Corporation. Notwithstanding any other provision of the Plan to the contrary, an individual who owns more than ten percent of the total combined voting power of all classes of outstanding stock of the Corporation shall not be eligible for the award of an Incentive Stock Option, unless the special requirements set forth in Sections 6.1 and 7.1 are satisfied. For purposes of this Section 5.2, in determining stock ownership, an individual shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. “Outstanding stock” shall include all stock actually issued and outstanding immediately before the award of the Option. For purposes of this Section 5.2, “outstanding stock” shall not include shares authorized for issue under outstanding Options held by the Optionee or by any other person.
ARTICLE 6. STOCK OPTIONS IN GENERAL
6.1 Exercise Price . The exercise price of an Option to purchase a share of Common Stock shall be, in the case of an Incentive Stock Option, not less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is awarded, except that the exercise price shall be not less than 110% of such Fair Market Value in the case of an Incentive Stock Option awarded to any individual described in the second sentence of Section 5.2. The exercise price of an Option to purchase a share of Common Stock shall be, in the case of a Nonqualified Stock Option, not less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is awarded. The exercise price shall be subject to adjustment pursuant to the limited circumstances set forth in Article 10.
6.2 Limitation on Incentive Stock Options . The aggregate Fair Market Value (determined as of the date an Option is awarded) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any individual in any calendar year (under the Plan and all other plans maintained by the Corporation or Subsidiaries) shall not exceed $100,000.
6.3 Transferability of Options .
(a) Except as provided in Subsection (b), an Option awarded hereunder shall not be transferable other than by will or the laws of descent and distribution, and such Option shall be exercisable, during the Optionee’s lifetime, only by him or her.
(b) An Optionee may, with the prior approval of the Committee, transfer a Nonqualified Stock Option for no consideration to or for the benefit of one or more members of the Optionee’s “immediate family” (including a trust, partnership, or limited liability company for the benefit of one or more of such members), subject to such limits as the Committee may impose, and the transferee shall remain subject to all terms and conditions applicable to the Option prior to its transfer. The term “immediate family” shall mean an Optionee’s spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers, and grandchildren (and, for this purpose, shall also include the Optionee).
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ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS
7.1 Term . Each Option awarded under the Plan shall terminate on the date as the Committee may determine and set forth in an Agreement; provided, however, that:
(a) each intended Incentive Stock Option awarded to an individual described in the second sentence of Section 5.2 shall terminate not later than five years after the date of the Award,
(b) each other intended Incentive Stock Option shall terminate not later than ten years after the date of the Award, and
(c) each Option awarded under the Plan which is intended to be a Nonqualified Stock Option shall terminate not later than ten years and one month after the date of the Award.
7.2 Vesting . Each Option awarded under the Plan shall be subject to such terms and conditions as the Committee may provide and set forth in the Agreement issued to a Optionee to evidence such Option; provided, however, that, unless the Committee may otherwise provide and set forth in an applicable Agreement, each Option shall be fully exercisable (i.e., become 100% vested) after the earlier of the date on which:
(a) a Change in Control occurs, unless;
(i) the successor company assumes the award, or
(ii) the award is subject to performance criteria, in which case it will vest on a pro rate basis based on performance to date, or
(b) the Optionee terminates employment or service by reason of Retirement, death, or Disability; or
(c) the Corporation or a Subsidiary terminates an Optionee’s employment or service other than by reason of a Termination or Dismissal For Cause
Except as provided in Article 8 or 10.2, an Option may be exercised only during the continuance of the Optionee’s employment or service with the Corporation or a Subsidiary.
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7.3 Exercise .
(a) A person electing to exercise an Option shall give notice to the Corporation of such election and of the number of shares he or she has elected to purchase and shall at the time of exercise tender the full exercise price of the shares he or she has elected to purchase. The exercise notice shall be delivered to the Corporation in person, by certified mail, or by such other method (including electronic transmission) and in such form as the Committee may determine. The exercise price shall be paid in full, in cash, upon the exercise of the Option; provided, however, that in lieu of cash, an Optionee may exercise an Option by tendering to the Corporation shares of Common Stock owned by him or her and having a Fair Market Value equal to the cash exercise price applicable to the Option (with the Fair Market Value of such stock to be determined in the manner provided in Section 6.3) or by delivering such combination of cash and such shares as the Committee in its sole discretion may approve; further provided, however, that no such manner of exercise shall be permitted if such exercise would violate Section 402 of the Sarbanes-Oxley Act of 2002. Notwithstanding the foregoing, Common Stock acquired pursuant to the exercise of an Incentive Stock Option may not be tendered as payment unless the holding period requirements of Code Section 422(a)(1) have been satisfied, and Common Stock not acquired pursuant to the exercise of an Incentive Stock Option may not be tendered as payment unless it has been held, beneficially and of record, for at least six months (or such longer time as may be required by applicable securities law or accounting principles to avoid adverse consequences to the Corporation or a Participant).
(b) At the request of the Participant and to the extent permitted by applicable law, the Committee shall approve an arrangement whereby the Participant irrevocably authorizes a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon the exercise of an Option and to remit to the Corporation a sufficient portion of the sales proceeds to pay the entire exercise price and any tax withholding required as a result of such exercise.
(c) At the request of the Participant and to the extent permitted by applicable law, the Committee shall approve a “net exercise” arrangement whereby the Corporation will reduce the number of shares of Common Stock issued upon exercise of a Nonqualified Stock Option by the largest whole number of shares of Common Stock with a Fair Market Value that does not exceed the exercise price of the Option; provided, however, that the Optionee provide cash to the Corporation to the extent of any remaining balance of the exercise price. Shares of Common Stock will no longer be subject to such Option and such Option will no longer be exercisable thereafter to the extent of the number of shares used to pay the exercise price pursuant to the net exercise, the number of shares delivered to the Optionee as a result of such net exercise and the number of shares, if any withheld to satisfy any tax withholding obligations.
(d) A person holding more than one Option at any relevant time may, in accordance with the provisions of the Plan, elect to exercise such Options in any order.
ARTICLE
8. EXERCISE OF OPTIONS FOLLOWING TERMINATION
OF EMPLOYMENT OR SERVICE
8.1 Other Termination by Corporation or Subsidiary . In the event of an Optionee’s termination of employment or service by the Corporation or a Subsidiary other than Termination or Dismissal for Cause such Optionee’s Option shall lapse at the earlier of the expiration of the term of such Option or:
(a) in the case of an Incentive Stock Option, three months from the date of such termination of employment; and
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(b) in the case of a Nonqualified Stock Option, 24 months from the date of such termination of employment or service.
8.2 Death or Total Disability . In the event of an Optionee’s termination of employment or service by reason of death or Disability, such Optionee’s vested Options shall lapse at the earlier of the expiration of the term of such Option or:
(a) in the case of an Incentive Stock Option, 12 months from the date of such termination of employment; and
(b) in the case of a Nonqualified Stock Option,12 months from the date of such termination of employment or service; and
(c) in the case of a Nonqualified Stock Option, a three-year period if the participant is eligible for Retirement at the time of death or disability
8.3 Termination or Dismissal For Cause; Other Termination/Resignation by Optionee . In the event of an Optionee’s Termination or Dismissal For Cause or in the event of the Optionee’s termination of employment or service at the election of an Optionee (other than Retirement), such Optionee’s right to exercise a vested or unvested Incentive or Nonqualified Option, shall be forfeited and immediately expire.
8.4 Retirement . In the event of an Optionee’s Retirement, such vested options shall lapse at the earlier of the term of such Option or:
(a) in the case of an Incentive Stock Option, three months from the Optionee’s Retirement; and
(b) in the case of a Nonqualified Stock Option, 12 months from the Optionee’s Retirement, unless the Optionee enters into an agreement with the consent of the Committee, which could extend the exercise period for five years.
ARTICLE 9. RESTRICTED STOCK
9.1 In General . Each Restricted Stock Award shall be subject to such terms and conditions as may be specified in the Agreement issued to a Participant to evidence such Award. Subject to Section 3.5, a Restricted Stock Award shall be subject to a vesting schedule or Performance Goals, or both.
9.2 Vesting . Each Restricted Stock Award shall vest under such terms and conditions the Committee may provide and set forth in an applicable Agreement; provided, however, that, each Restricted Stock Award shall become fully vested upon the earlier of the date on which: (a) a Change in Control occurs; (b) the Participant terminates employment or service by reason of death or Disability; or (c) the Corporation terminates the Participant’s employment or service other than Termination or Dismissal For Cause.
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9.3 Waiver of Vesting Requirements for Certain Restricted Stock Awards . In the event that a Participant’s employment or service is terminated and the Committee deems it equitable to do so, the Committee may, in its discretion and subject to the approval of a majority of the disinterested members of the Board, waive any minimum vesting period (but not any Performance Goals) with respect to a Restricted Stock Award held by such Participant. The Committee may make any such waiver with retroactive effect, provided it makes it within 60 days following such Participant’s termination of employment or service.
9.4 Issuance and Retention of Share Certificates By Corporation . Shares of restricted stock issued pursuant to a Restricted Stock award may be evidenced by book entry on the Corporation’s stock transfer records or by one or more physical stock certificates issued in the Participant’s name.; but until such time as the Restricted Stock shall vest or otherwise become distributable by reason of satisfaction of one or more Performance Goals, the Corporation shall retain such share certificates.
9.5 Stock Powers . At the time of the award of Restricted Stock, the Participant to whom the award is made shall deliver such stock powers, endorsed in blank, as the Corporation may request.
9.6 Release of Shares . Within 30 days following the date on which a Participant becomes entitled under an Agreement to receive shares of previously Restricted Stock, the Corporation shall deliver to such Participant one or more certificates evidencing the ownership of such shares. Notwithstanding any other provision of this Plan to the contrary, the Corporation may elect to satisfy any requirement under this Plan for the delivery or release of certificates through the use of book-entry.
9.7 Forfeiture of Restricted Stock Awards . In the event of the forfeiture of a Restricted Stock Award, by reason of a Participant’s termination of employment or termination of service prior to vesting, the failure to achieve a Performance Goal or otherwise, the Corporation shall take such steps as may be necessary to cancel the affected shares and return the same to its treasury.
9.8 Assignment, Transfer, Etc. of Restricted Stock Rights . The potential rights of a Participant to shares of Restricted Stock may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed of until such time as the Participant receives unrestricted certificates for such shares.
9.9 Shareholder Rights . Unless the Committee otherwise provides and sets forth in an applicable Agreement, Participants who have been awarded shares of Restricted Stock shall not have voting or dividend rights until such time as the Participant receives unrestricted certificates for such shares.
9.10 Additional Holding Periods . Nothing in this Article 9 shall preclude the Committee from providing in an Agreement for additional (a) restrictions on the transfer or assignment of Common Stock acquired by reason of the vesting of a Restricted Stock Award or (b) forfeiture provisions with respect to Common Stock acquired by reason of the vesting of a Restricted Stock Award.
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ARTICLE 10. ADJUSTMENT PROVISIONS
10.1 Share Adjustments .
(a) In the event that the shares of Common Stock of the Corporation, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split, or reverse stock split, then (i) the shares of Common Stock authorized hereunder to be made the subject of Awards, (ii) the shares of Common Stock then subject to outstanding Awards and the exercise price thereof (where relevant), (iii) the maximum number of Awards that may be made within a 12-month period and (iv) the nature and terms of the shares of stock or securities subject to Awards hereunder shall be increased, decreased, or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events.
(b) If there shall be any other change in the number or kind of the outstanding shares of the Common Stock of the Corporation, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, and if a majority of the disinterested members of the Board shall, in its sole discretion, determine that such change equitably requires an adjustment in any Award which was theretofore granted or which may thereafter be granted under the Plan, then such adjustment shall be made in accordance with such determination.
(c) An Award pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, to merge, to consolidate, to dissolve, to liquidate, or to sell or transfer all or any part of its business or assets.
10.2 Change in Control . In the event of a Change in Control of the Company, the Committee may, in its discretion, (i) arrange for the cancellation of outstanding awards in consideration of a payment in cash, property, or both, with an aggregate value equal to each award; (ii) substitute other property, including cash or other securities of the Company or another entity, in exchange for our shares underlying outstanding awards; (iii) arrange for the assumption of outstanding awards by another entity or the replacement of awards with other awards for securities of another entity; and (iv) after providing notice to Participants and an opportunity to exercise outstanding options and rights, provide that all unexercised options and rights will be cancelled upon the date of the Change in Control or such other date as specified by it. In the event a successor company assumes an award (or issues a substitute award) and the Participant is terminated without cause within 12 months following the Change in Control, then: (i) all options held by the Participant will be fully vested and may be exercised for two years after the termination, or, if sooner, until the expiration of the applicable award; and (ii) all Restricted Stock held by the participant shall be vested.
10.3 Fractional Shares . Fractional shares resulting from any adjustment in Awards pursuant to this article may be settled as the Committee shall determine.
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ARTICLE 11. GENERAL PROVISIONS
11.1 Effective Date . The Plan shall become effective upon the Board’s adoption of the Plan, provided that, subject to applicable law, any Award made hereunder shall be subject to the Plan’s approval by the shareholders of the Corporation within 12 months of the Board’s adoption of the Plan.
11.2 Termination of the Plan . Unless previously terminated by the Board, the Plan shall terminate on, and no Awards shall be made after, the day immediately preceding the 10th anniversary of the Board’s adoption of the Plan.
11.3 Limitation on Termination, Amendment, or Modification .
(a) The Board may at any time terminate, amend, modify or suspend the Plan, provided that, without the approval of the shareholders of the Corporation, the Board may make no amendment or modification that:
(i) increases the maximum number of shares of Common Stock subject to Awards under the Plan (except as provided in Section 10.1);
(ii) changes the class of eligible Participants; or
(iii) otherwise requires the approval of shareholders under applicable state law or under applicable federal law to avoid potential liability or adverse consequences to the Corporation or a Participant.
(b) No amendment, modification, suspension, or termination of the Plan shall in any manner adversely affect any Award theretofore made under the Plan without the applicable Participant’s consent.
11.4 No Right to an Award or Continued Employment or Service . Nothing contained in this Plan or otherwise shall be construed to (a) require that an Award be made to an individual who qualifies as an Employee or Non-Employee Director, or (b) confer upon a Participant any right to continue in the employ or service of the Corporation or any Subsidiary or limit in any respect the right of the Corporation or of any Subsidiary to terminate the Participant’s employment or service at any time and for any reason.
11.5 No Obligation . No exercise of discretion under this Plan with respect to an event or person shall create an obligation to exercise such discretion in any similar or same circumstance, except as otherwise provided or required by law.
11.6 Withholding Taxes .
(a) Subject to the provisions of Subsection (b), the Corporation will require, where sufficient funds are not otherwise available, that a Participant who is an Employee pay or reimburse to it any withholding taxes when withholding is required by law.
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(b) Subject to the Committee’s consent, a Participant who is an Employee may satisfy the withholding obligation described in Subsection (a), in whole or in part, by electing to have the Corporation withhold shares of Common Stock (otherwise issuable to him or her) having a Fair Market Value equal to the maximum amount of tax permitted to be withheld without resulting in adverse financial accounting consequences to the Corporation. An election by a Participant who is an Employee to have shares withheld for this purpose shall be subject to such conditions as may then be imposed thereon by any applicable securities law.
11.7 Code Section 409A . This Plan is intended to be exempt from the provisions of Code Section 409A by reason of not being deemed a “nonqualified deferred compensation plan” within the meaning of Code Section 409A(d)(1). Each of the provisions of this Plan document, however, are qualified by reference to provisions of Code Section 409A, and the guidance promulgated thereunder, to the extent such section applies to this Plan. Notwithstanding anything herein to the contrary, if Code Section 409A is applicable, the exercise of any discretionary authority and the implementation or carrying out of each other provision of the Plan shall be conditioned upon the conditions and limitations of Code Section 409A and compliance with its specific terms, as the same may have been interpreted by regulatory, case law, or other governing authority. Further, if this Plan or any Option granted hereunder is, or shall become subject to the provisions of Code Section 409A, each such affected Option shall be deemed exercised on the date it vests, or the date the Plan or such Option, as applicable, becomes subject to Code Section 409A; provided, however, that if an Optionee is unable to deliver the exercise price and required withholding taxes to the Corporation, such Optionee shall be paid in one lump sum as soon as practicable, to the extent permitted by tax, corporate, securities, and any other relevant laws, (a) the excess (if any) of the Fair Market Value of the Option at the relevant time over the exercise price, less (b) the required tax withholdings.
11.8 Listing and Registration of Shares .
(a) No Option awarded pursuant to the Plan shall be exercisable in whole or in part, and no share certificate with respect to any Award shall be delivered, if at any relevant time the Committee determines in its discretion that the listing, registration, or qualification of the shares of Common Stock subject to an Award on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, such Award, until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
(b) If a registration statement under the Securities Act with respect to the shares issuable under the Plan is not in effect at any relevant time, as a condition of the issuance of the shares, a Participant (or any person claiming through a Participant) shall give the Committee a written or electronic statement, satisfactory in form and substance to the Committee, that he or she is acquiring the shares for his or her own account for investment and not with a view to their distribution. The Corporation may place on each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, a legend or book entry notation substantially in the form of the following, in addition to any other information the Corporation deems appropriate, to prevent disposition of the shares in violation of the Securities Act, other applicable law, or the terms of the Plan or an applicable Agreement:
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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (“ACT”) AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED.”
11.9 Disinterested Director . For purposes of this Plan, a director shall be deemed “disinterested” if such person could qualify as a member of the Committee under Section 3.1.
11.10 Clawback . Notwithstanding any other provisions in this Plan, any Award that is subject to recovery under any law, government regulation, or stock exchange listing requirement shall be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy that the Corporation adopts pursuant to any such law, government regulation, or stock exchange listing requirement).
11.11 Beneficiary Designation . Notwithstanding Section 6.3(a), each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation shall revoke all the Participant’s prior designations, shall be in a form that the Committee may reasonably prescribe, and shall be effective only when filed by the Participant in writing with the Corporation during the Participant’s lifetime.
11.12 Gender; Number . Words of one gender, wherever used herein, shall be construed to include each other gender, as the context requires. Words used herein in the singular form shall include the plural form, as the context requires, and vice versa.
11.13 Applicable Law . Except to the extent preempted by federal law, this Plan document, and the Agreements issued pursuant hereto, shall be construed, administered, and enforced in accordance with the domestic internal law of the Commonwealth of Pennsylvania.
11.14 Headings . The headings of the several articles and sections of this Plan document have been inserted for convenience of reference only and shall not be used in the construction of the same.
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Exhibit 10.2
NONQUALIFIED STOCK OPTION AGREEMENT
This Agreement dated __, between Federal Life Group, Inc. (the “Corporation”) and __________________ (the “Optionholder”).
WITNESSETH:
1. | Award of Option |
Pursuant to the provisions of the Federal Life Group, Inc. 2018 Equity Incentive Plan (the “Plan”) the Corporation hereby awards to the Optionholder, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Corporation all or any part of an aggregate of ______ shares of common stock (par value $0.01 per share) of the Corporation (“Common Stock”) at the exercise price of $ ______ per share; such option to be exercised as hereinafter provided.
2. | Terms and Conditions |
It is understood and agreed that the Option evidenced hereby is subject to the following terms and conditions:
(a) | Expiration Date . Subject to the provisions of Paragraph 2(d) hereof, the Option awarded hereby shall expire on __________. |
(b) | Exercise of Option . Except as may be provided below, no part of this Option may be exercised until the Optionholder has remained in the continuous employ or service with the Corporation or of a Subsidiary for the following periods after the date hereof: |
Vesting Date |
% of Shares Vesting |
Number of Shares Vesting |
25.0% | ______ shares | |
25.0% | ______ shares | |
25.0% | ______ shares | |
25.0% | ______ shares |
This Option may be exercised in whole at any time, or from time to time in part, to the extent vested, prior to the expiration date specified in Paragraph 2(a) hereof. Any exercise shall be accompanied by a written notice to the Corporation specifying the number of shares as to which the Option is being exercised. Notwithstanding the foregoing:
(1) | upon the occurrence of a Change in Control, all unvested Options then held by the Optionholder shall vest and become immediately exercisable; |
(2) | if the Optionholder terminates employment or service with the Corporation or a Subsidiary due to death, Disability, or Retirement, all unvested Options then held by the Optionholder shall vest and become immediately exercisable; and |
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(3) | if the Corporation or a Subsidiary terminates the Optionholder’s employment or service other by reason of a Termination or Dismissal for Cause, all unvested Options then held by the Optionholder shall vest and become immediately exercisable. |
(c) | Payment of Exercise Price Upon Exercise . At the time of any exercise, the exercise price of the shares as to which this Option may be exercised shall be paid in cash or, subject to the conditions and limitations described in the Plan, by one of the methods of payment set forth in the Plan for the exercise of a Nonqualified Stock Option. |
(d) | Exercise Upon Death, Being Disabled, or Other Termination of Employment . |
(1) | In the event of the termination of the Optionholder’s employment or service with the Corporation or of a Subsidiary by reason of death, Disability, or Retirement, this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment or service due to such cause, in whole at any time, or from time to time in part, within 12 months after the Optionholder’s death, Disability, or Retirement but in no event later than the expiration date specified in Paragraph 2(a) hereof. |
(2) | If the Corporation or a Subsidiary terminates the employment or service of the Optionholder (other than if the termination is a Termination or Dismissal for Cause), this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment or service, in whole at any time, or from time to time in part, within 24 months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof. |
(3) | If the Optionholder’s employment or service with the Corporation or a Subsidiary is voluntarily terminated by the Optionholder other than for Retirement, then the option shall lapse on the date of such termination of employment. |
(4) | Notwithstanding anything herein to the contrary, if the Optionholder’s termination of employment or service is a Termination or Dismissal for Cause, all rights to exercise this Option shall lapse on the date of such termination of employment or service. |
(e) | Nontransferability . Except as set forth in Section 6.3 of the Plan, this Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Optionholder, this Option shall be exercisable only by the Optionholder. |
(f) | Adjustments . In the event that the shares of Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split, or reverse stock split, then the shares of Common Stock then subject to this Option and the exercise price thereof shall be increased, decreased, or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events. If there shall be any other change in the number or kind of the outstanding shares of the Common Stock, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, and if a majority of the disinterested members of the Board shall, in its sole discretion, determine that such change equitably requires an adjustment to the terms of this Option, then such adjustment shall be made in accordance with such determination. Any adjustment so made shall be final and binding upon the Optionholder. |
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(g) | No Rights as Shareholder . The Optionholder shall have no rights as a shareholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance of a certificate or certificates for such shares. |
(h) | No Right To Continued Employment or Service . This Options shall not confer upon the Optionholder any right to continue in the employ or service with the Corporation or any Subsidiary or limit in any respect the right of the Corporation or of any Subsidiary to terminate the Participant’s employment or service at any time and for any reason. |
(i) | Compliance with Law and Regulations . This Option and the obligation of the Corporation to sell and deliver shares hereunder shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to issue or deliver any certificates for shares of Common Stock prior to (1) the listing of such shares on any stock exchange on which the Common Stock may then be listed and (2) the completion of any registration or qualification of such shares under any federal or state law, or any rule or regulation of any government body which the Corporation shall, in its sole discretion, determine to be necessary or advisable. |
3. | Optionholder Bound by Plan |
The Optionholder acknowledges receipt of a copy of the Plan and agrees that this Award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.
4. | Withholding of Taxes |
The Corporation will require that, as a condition precedent to the exercise of this Option, appropriate arrangements be made for the withholding of any applicable taxes, if applicable. The obligation of the Optionholder under this paragraph to provide for the payment of withholding taxes may be satisfied, subject to the provisions of Section 7.2 of the Plan, by electing to have the Corporation withhold certain of the shares that would otherwise be issuable pursuant to the exercise of the Option awarded hereby.
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5. | Notices |
Any notice hereunder to the Corporation shall be addressed to it at its office, [ADDRESS]; Attention: , (or to such different address as the Corporation may designate in writing) and any notice hereunder to Optionholder shall be addressed to him or her at the most recent address as shown in the employment or stock records of the Corporation.
IN WITNESS WHEREOF , Federal Life Group, Inc. has caused this Agreement to be executed by a duly authorized officer and the Optionholder has executed this Agreement, both as of the day and year first above written.
FEDERAL LIFE GROUP, INC. | OPTIONHOLDER | |||
By | ||||
(Signature) | ||||
[Title] |
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Exhibit 10.3
RESTRICTED STOCK AGREEMENT
AGREEMENT , made as of the ______, (the “Grant Date”) between Federal Life Group, Inc. (the “Corporation”), and ____________ (the “Participant”).
1. Award .
(a) Grant of Restricted Stock . Pursuant to the provisions of the Federal Life Group, Inc. Stock Incentive Plan (the “Plan”), _____ shares (the “Restricted Shares”) of the Corporation’s common stock, par value $0.01 per share (“Common Stock”), shall be issued as hereinafter provided in the Participant’s name subject to the restrictions described herein.
(b) Issuance of Restricted Shares . The Restricted Shares shall be issued upon acceptance of this Agreement by the Participant and upon satisfaction of the Vesting Schedule as set forth in Section 2(b) herein.
(c) Plan Incorporated by Reference. The Participant acknowledges receipt of a copy of the Plan and agrees that this award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.
2. Terms and Conditions . The Participant hereby accepts the Restricted Shares when issued and agrees as follows:
(a) Restrictions . The potential rights of the Participant to the Restricted Shares may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed until such time as the Participant receives unrestricted certificates for such shares. Except as provided in Section 2(c) below, in the event of termination of the Participant’s employment or service with the Corporation or a Subsidiary for any reason prior to vesting in all or any portion of the Restricted Shares, the Participant shall, for no consideration, forfeit to the Corporation all Restricted Shares to the extent then subject to the Restrictions (as hereinafter defined). The prohibition against transfer and the obligation to forfeit and surrender Restricted Shares to the Corporation upon termination of employment or service prior to satisfaction of the Vesting Schedule (as set forth in Section 2(b)) are referred to herein as the “Restrictions.”
(b) Vesting Schedule . Except as provided in Section 2(c) below, the Restrictions shall lapse and cease to apply to the Restricted Shares provided that the Participant remains in the continuous employ or service with the Corporation or a Subsidiary for the following periods (the “Vesting Schedule”) after the Grant Date:
Vesting Date |
% of Shares Vesting |
Number of Shares Vesting |
25.0% | ______ shares | |
25.0% | ______ shares | |
25.0% | ______ shares | |
25.0% | ______ shares |
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(c) Acceleration of Vesting . Notwithstanding Section 2(b) above, with respect to any or all Restricted Shares still subject to Restrictions, (i) upon the occurrence of a Change in Control, the Restrictions shall lapse and cease to apply to such Restricted Shares; (ii) if the Participant’s employment or service with the Corporation or a Subsidiary terminates due to death or Disability, the Restrictions shall lapse and cease to apply to such Restricted Share and (iii) if the Corporation or a Subsidiary terminates the Participant’s employment or service (other than by reason of a Termination or Dismissal for Cause), the Restrictions shall lapse and cease to apply to such Restricted Shares.
(d) Certificates . One or more share certificates evidencing the Restricted Shares shall be issued by the Corporation in the name of a nominee of the Corporation. The certificate shall bear a legend evidencing the nature of the Restricted Shares, and the Corporation may cause the certificate to be delivered upon issuance to the Secretary of the Corporation or to such other depository as may be designated by the Corporation as a depository for safekeeping until the forfeiture occurs pursuant to this award. At the time of award and upon request of the Corporation, the Participant shall deliver to the Corporation a stock power, endorsed in blank, relating to the Restricted Shares. Within 30 days of the vesting of all or part of the Restricted Shares, and upon satisfaction of all other terms and conditions set forth in this Agreement, the Corporation shall cause a new certificate or certificates to be issued without legend in the name of the Participant for the shares that have vested, together with an amount of cash (without interest) equal to the dividends that have been paid, if any, on such shares with respect to record dates occurring on or after the Grant Date. Notwithstanding the foregoing, the Restricted Shares may be evidenced by uncertificated shares or otherwise in book entry form in which case the Participant shall receive a statement of holdings evidencing ownership of the Restricted Shares. In addition, notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of stock (whether vested or unvested) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares. The Corporation shall not be obligated to issue or deliver any shares of Common Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.
(e) No Rights as Shareholder . The Participant shall not have voting rights and shall not be entitled to receive dividends unless and until the Restricted Shares vest pursuant to the provisions of this Agreement.
3. Withholding of Tax . To the extent that the receipt of the Restricted Shares or the vesting thereof results in income to the Participant for federal or state income tax purposes, the Participant shall deliver to the Corporation at the time of such receipt or expiration, as the case may be, such amount of money or shares of unrestricted Common Stock as the Corporation may require to meet its withholding obligation, if any, under applicable tax laws or regulations, and, if the Participant fails to do so, the Corporation is authorized to withhold from any cash or stock remuneration then or thereafter payable to the Participant any tax required to be withheld by reason of such resulting compensation income.
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4. Status of Common Stock . The Participant agrees that the Restricted Shares will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. The Participant also agrees (a) that the certificates representing the Restricted Shares may bear such legend or legends as the Corporation deems appropriate in order to assure compliance with applicable securities laws; (b) that the Corporation may refuse to register the transfer of the Restricted Shares on the stock transfer records of the Corporation if such proposed transfer would, in the opinion of counsel satisfactory to the Corporation, constitute a violation of any applicable securities law; and (c) that the Corporation may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Shares.
5. Relationship Between the Parties . Nothing contained in this Agreement or otherwise shall be construed to confer upon the Participant any right to continue in the employ or service with the Corporation or any Subsidiary or limit in any respect the right of the Corporation or of any Subsidiary to terminate the Participant’s employment or service at any time and for any reason. Any question as to whether and when there has been a termination of such employment or service, and the cause of such termination, shall be determined by the Corporation and its determination shall be final.
6. Section 83(b) Election . The Participant may make an election under Code Section 83(b) (a “Section 83(b) Election”) with respect to the Restricted Shares. The Participant must make such Section 83(b) Election within 30 days after the Grant Date. If the Participant elects to make a Section 83(b) Election, the Participant shall provide the Corporation with a copy of an executed version of the Section 83(b) Election and satisfactory evidence (in the Committee’s sole determination) of the filing of the Section 83(b) Election with the United States Internal Revenue Service. The Participant agrees to assume full responsibility for ensuring that the Section 83(b) Election is actually and timely filed with the United States Internal Revenue Service and for all tax consequences resulting thereof.
7. Corporation’s Powers . No provision contained in this Agreement shall in any way terminate, modify, or alter, or be construed or interpreted as terminating, modifying, or altering any of the powers, rights or authority vested in the Corporation or, to the extent delegated, in its delegate including, without limitation, the right to make certain determinations and elections with respect to the Restricted Shares.
8. Binding Effect . This Agreement shall be binding upon and inure to the benefit of any successors to the Corporation and all persons lawfully claiming under the Participant.
9. Notices . All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail (or by such other method as the Committee may from time to time deem appropriate), return receipt requested, postage prepaid, and addressed, if to the Corporation,_________________; Attention: _______ (or to such different address as the Corporation may designate in writing) or, if to the Participant, at the Participant’s most recent address as shown in the employment or stock records of the Corporation.
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10. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all the parties reflected hereon as the signatories. Copies of such signed counterparts may be used in lieu of the originals for any purpose.
11. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has executed this Agreement, all as of the date first above written.
FEDERAL LIFE GROUP, INC. | PARTICIPANT | |||
HOLDING CORPORATION | ||||
By | ||||
(Signature) |
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Exhibit 10.5(a)
Second AMENDMENT TO STANDBY STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STANDBY PURCHASE AGREEMENT (“ Amendment ”) is made effective as of October 29, 2018, by and among by and among Federal Life Group, Inc., a Pennsylvania corporation (the “ Company ”), Federal Life Insurance Company, an Illinois insurance company (“ Federal Life ”), Federal Life Mutual Holding Company, an Illinois corporation (“ FLMHC ”), and Insurance Capital Group, LLC (the “ Standby Purchaser ”).
BACKGROUND
A. The parties have entered into a Standby Stock Purchase Agreement dated as of March 8, 2018 (the “ Agreement ”), pursuant to which, among other things, the Standby Purchaser agreed to purchase Shares of the Company’s Common Stock in the Offerings.
B. The Parties desire to modify and amend the provisions of Section 14 of the Agreement.
NOW, THEREFORE, the parties hereto, each intending to be legally bound, hereby covenant and agree as follows:
1. Background . The Background provisions set forth above (including, but not limited to, the defined terms set forth therein) are hereby incorporated by reference into this Amendment and made a part hereof as if set forth in their entirety in this Section 1. Capitalized terms used in this Amendment which are not otherwise defined herein, but which are defined in the Agreement, shall have the respective meanings given to such terms in the Agreement.
2. Amendment to Section 14 of the Agreement . Section 14(a) of the Agreement shall be amended by deleting such paragraph (a) in its entirety and replacing the same with the following:
(a) After the occurrence of a Standstill Termination Event, if a Stockholder who holds no less than 51% of the outstanding Common Stock of the Company (a “ Dragging Stockholder ”), receives a bona fide offer from a non-affiliated Third Party Purchaser to consummate, in one transaction, or a series of related transactions, a Change of Control (a “ Drag-along Sale ”), the Dragging Stockholder shall have the right to require that Joseph D. Austin and William S. Austin (each, a “ Drag-along Stockholder ”) participate in such Transfer in the manner set forth in this Section 14, provided , however , that no Drag-along Stockholder shall be required to participate in the Drag-along Sale if the consideration for the Drag-along Sale is other than cash or registered securities listed on an established U.S. securities exchange or traded on the NASDAQ Stock Market. Notwithstanding anything to the contrary in this Agreement, each Drag-along Stockholder shall vote in favor of the transaction and take all actions to waive any dissenters, appraisal or other similar rights.
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3. Ratification of Agreement . The Agreement, as modified and amended hereby, and all of the respective liabilities, obligations, covenants, conditions, representations, and warranties set forth therein are hereby ratified and affirmed by each of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Standby Stock Purchase Agreement.
FEDERAL LIFE GROUP, INC. | ||
By: | /s/ William S. Austin | |
William S. Austin | ||
President | ||
FEDERAL LIFE MUTUAL HOLDING COMPANY | ||
By: | /s/ William S. Austin | |
William S. Austin | ||
President | ||
FEDERAL LIFE INSURANCE COMPANY | ||
By: | /s/ William S. Austin | |
William S. Austin | ||
President | ||
INSURANCE CAPITAL GROUP, LLC | ||
By: ICG Management, LLC, its managing member | ||
By: | /s/ Craig A. Huff | |
Name: | Craig A. Huff | |
Title: | Co-Managing Member | |
By: | /s/ Matthew T. Popoli | |
Name: | Matthew T. Popoli | |
Title: | Co-Managing Member | |
/s/ Joseph D. Austin | ||
Joseph D. Austin | ||
/s/ William S. Austin | ||
William S. Austin |
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Exhibit 99.2
[ FEDERAL LIFE LOGO ]
QUESTIONS AND
ANSWERS
ABOUT OUR CONVERSION
AND STOCK OFFERING
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This pamphlet answers questions about the mutual to stock conversion of Federal Life Mutual Holding Company and the related common stock offering of Federal Life Group, Inc.
ABOUT THE PLAN OF CONVERSION
The board of directors of Federal Life Mutual Holding Company (“ Federal Life Mutual ”) adopted a Plan of Conversion on March 8, 2018 (the “ Plan of Conversion ”), whereby Federal Life Mutual will convert from a mutual holding company to a stock company. In connection with the conversion, Federal Life Group, Inc. (“ Federal Life Group ”), a corporation newly formed by Federal Life Mutual, is conducting an initial public offering of up to 4,600,000 shares of common stock at a purchase price of $10.00 per share. Such shares will constitute all of the outstanding shares of Federal Life Group following completion of the conversion and the stock offering. Immediately following the conversion, all of the outstanding shares of common stock of Federal Life Mutual, as converted to a stock company, will be issued to Federal Life Group. As a result of the conversion, policyholders of Federal Life Insurance Company will no longer be members of Federal Life Mutual.
There will be no change in your premium or in the rights of policyholders to insurance coverage under their existing policies of insurance with Federal Life Insurance Company as a result of the conversion.
The Plan of Conversion has been approved by the Illinois Insurance Commissioner, subject to approval of the Plan of Conversion by the members of Federal Life Mutual. In order to complete the conversion, it is necessary for the Plan of Conversion to receive the affirmative vote of at least two-thirds of the votes cast by the voting members of Federal Life Mutual, so YOUR VOTE IS VERY IMPORTANT. Please return your proxy in the enclosed [COLOR] postage-paid envelope marked “PROXY RETURN.”
THE BOARD OF DIRECTORS OF FEDERAL LIFE MUTUAL URGES MEMBERS TO VOTE “FOR” THE PLAN OF CONVERSION. PLEASE PROMPTLY VOTE, SIGN AND MAIL YOUR PROXY(S).
MUTUAL TO STOCK CONVERSION
Q: Why is Federal Life Mutual converting from mutual to stock form?
A: Federal Life Mutual’s conversion from mutual to stock form and the related stock offering will provide Federal Life Group with additional capital that will enable it to take advantage of anticipated future growth opportunities and provide a source of additional capital for Federal Life Insurance Company. The additional capital raised will also permit Federal Life Insurance Company to develop and offer new insurance and annuity products.
Q: Will the conversion affect my coverage with Federal Life Insurance Company?
A: No. Neither the premium you pay nor the insurance coverage under any Federal Life Insurance Company policy that you own will be affected by the conversion.
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Q: Will any policy or annuity that I hold with Federal Life Insurance Company be converted to stock?
A: No. All policies and annuities will remain as they were prior to the conversion. Eligible members of Federal Life Mutual have a right to purchase shares of common stock of Federal Life Group during the subscription offering. Eligible members of Federal Life Mutual consist of named insureds under issued and in force Federal Life Insurance Company policies and owners of annuities in force as of the close of business on March 8, 2018. These rights to purchase stock cannot be transferred.
ABOUT VOTING RIGHTS
Q: Who is eligible to vote on the conversion?
A: The members of Federal Life Mutual of record as of March 8, 2018 (“ Eligible Voting Members ”) are eligible to vote on the conversion.
Q: Am I required to vote?
A: No. Eligible Voting Members are not required to vote. However, because the conversion will produce a fundamental change in Federal Life Mutual’s corporate structure and the rights of the members of Federal Life Mutual, the board of directors of Federal Life Mutual encourages all Eligible Voting Members to vote.
Q: How can I vote?
A: You may vote by mailing your signed proxy(s) in the [COLOR] postage-paid envelope marked “PROXY RETURN.” Should you choose to attend the special meeting of members or you decide to change your vote, you may do so by revoking any previously signed proxy.
Q: Why did I receive more than one proxy?
A: Each life insurance policyholder is entitled to cast one vote for each $1,000 of life insurance, and each accident and health policyholder is entitled to cast one vote for each $25 of annual premium on each proposal considered at the Special Meeting. If you have more than one policy, you may have received more than one proxy depending upon who is named as an insured on your policy. PLEASE VOTE, SIGN AND RETURN ALL PROXYS THAT YOU RECEIVED.
Q: Does my vote for the Plan of Conversion require me to buy common stock of Federal Life Group, Inc.?
A: No. Voting for the Plan of Conversion does not obligate you to buy shares of common stock of Federal Life Group. You can also vote against the Plan of Conversion and still elect to buy shares of Federal Life Group common stock in the offering. However, if a quorum is not obtained for the special meeting of members or if sufficient votes in favor of approving the Plan of Conversion are not cast at the special meeting, the conversion will not occur and no stock of Federal Life Group will be sold.
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ABOUT THE STOCK OFFERING AND PURCHASING SHARES
Investment in our common stock involves certain risks. For a discussion of certain of such risks and other factors, you are urged to read the accompanying Prospectus.
Q: How many shares are being offered and at what price?
A: In the stock offering, Federal Life Group is offering up to 4,600,000 shares of common stock for sale at $10.00 per share. All shares will be sold at the same price, and no sales commission will be charged to purchasers in the stock offering.
Q: Who is eligible to purchase stock in the Offering?
A: Pursuant to the Plan of Conversion, the right to purchase shares of common stock at $10.00 per share in a subscription offering has been granted in the following order of priority:
Priority #1 – Eligible members of Federal Life Mutual, who consist of named insureds under an issued and in force Federal Life Insurance Company policy as of the close of business on March 8, 2018 and holders of annuities issued by Federal Life in force as of the close of business on March 8, 2018; and
Priority #2 – Directors and officers of Federal Life Mutual who are not eligible members.
Common stock that is not sold in the subscription offering is expected to be sold to employees of Federal Life Insurance Company, to a limited number of strategic investors, and to Insurance Capital Group LLC, which has agreed to act as the standby purchaser for the offering at $10.00 per share. Unlike the subscription offering, there are no rights to purchase common stock in the community offering. We have the right to accept or reject any order received in the community offering.
In the event that orders are received for more shares than are available for sale in the stock offering, shares will be allocated as described in the Prospectus.
Q: How can I buy shares during the Offering?
A: Shares may be purchased by completing a Stock Order Form and returning it, with full payment, so that it is received (not postmarked) by 12:00 noon, Central Time, on ______, 2018, unless the offering is extended as described in the Prospectus. Delivery of a Stock Order Form may be made in one of the following ways: (1) by mail, using the Order Reply Envelope provided, or (2) by overnight delivery to the Stock Information Center address noted on the Stock Order Form.
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Q: How many shares of common stock can I purchase?
A: The minimum purchase is 50 shares ($500). The maximum allowable purchase for any person or entity, together with associates, affiliates or persons acting in concert with such person or entity, is 50,000 shares ($500,000). Please review the section in the prospectus entitled “The Offering – Limitations on Purchases of Common Stock” for more information regarding purchase limitations.
Q: How can I pay for the shares?
A: Payment for shares can be remitted by personal check, bank check or money order in U.S. dollars, payable to “_____________ on behalf of Federal Life Group, Inc.” These will be cashed upon receipt. Cash, wire transfers and third party checks will not be accepted.
Q: What is the deadline for purchasing shares in the Subscription and Community Offerings?
A: An executed Stock Order Form, with full payment, must be received by us, using an accepted method of delivery as described above, by no later than 12:00 noon, Central Time, on _____, 2018, unless the offering is extended as described in the Prospectus.
Q: Is it possible that I will not receive any or all of the shares I ordered?
A: Yes. If we receive orders in the offering for more shares than we have available to sell, we will allocate shares as described in the Prospectus. If we are unable to fill your order, in whole or in part, you will receive a refund check.
Q: Will payments for common stock earn interest?
A: No. Payments that you submit will not earn interest.
Q: May I change my mind after I place an order to subscribe for stock?
A: No. After receipt, your order cannot be modified or withdrawn unless the offering is extended beyond _____, 2018, or the offering range is amended to below 3,400,000 shares or above 4,600,000 shares.
Q: I am eligible to subscribe for shares of common stock in the Subscription Offering, but I am not interested in purchasing any shares. May I allow someone else to use my Stock Order Form to take advantage of my Subscription Offering priority?
A: No, you cannot transfer any of your subscription rights, and any attempted transfer will be void and not recognized.
On occasion, people attempt to persuade eligible members to transfer subscription rights, or to purchase shares in the offering based on an understanding that the shares will be subsequently transferred to others. Participation in such schemes is against the law and may subject involved parties to prosecution. If you become aware of any such activities, we ask that you notify us promptly so that we can take the necessary steps to protect subscription rights.
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Q: Will my common stock be insured?
A: No. Like all stock, the common stock cannot be insured or guaranteed by any government agency, nor will it be insured or guaranteed by Federal Life Group.
Q: Will dividends be paid on the stock?
A: We have not yet determined whether or not we will pay any cash dividends, the amount that may be paid, or when the payment of dividends may begin. Our dividend policy will depend upon our financial condition, results of operations and future prospects, as well as that of our subsidiaries.
Q: How will Federal Life Group shares trade?
A: Upon completion of the offering, Federal Life Group expects the stock to be traded on the NASDAQ Capital Market under the symbol “FLF.” Once the shares have begun trading, you may contact a firm offering investment services in order to buy or sell Federal Life Group shares in the future. Upon completion of the offering, a statement setting forth the number of Federal Life Group shares owned will be mailed to purchasers in the stock offering. Shareholders may not be able to sell their shares of common stock until such statement is delivered to them, even though the common stock will have begun trading. Shares will be issued in book entry form only, and you will not receive a stock certificate representing the shares you purchase in the offering.
Q: Are officers and directors planning to purchase stock?
A: Yes. Our executive officers and directors, together with their affiliates and associates, plan to purchase approximately 372,000 shares of common stock in the offering.
WHERE TO GET MORE INFORMATION
Q: How can I get more information?
A: A Stock Information Center has been established to process orders to purchase stock and to answer any questions related to the conversion and the offering. You may call the Stock Information Center at (610) 205-6005 from 10:00 a.m. to 4:00 p.m., Central Time, Monday through Friday or email us at federallife@griffinfingroup.com. The Stock Information Center is not open on weekends or bank holidays.
This brochure is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offer is made only by means of the Prospectus.
The shares of common stock are not insured and are not guaranteed by Federal Life Group, Inc. or any of its affiliates or by any Federal or state government or agency.
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[ FEDERAL LIFE LOGO ]
QUESTIONS AND
ANSWERS
ABOUT OUR CONVERSION
AND STOCK OFFERING
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This pamphlet answers questions about the mutual to stock conversion of Federal Life Mutual Holding Company and the related common stock offering of Federal Life Group, Inc.
ABOUT THE PLAN OF CONVERSION
The board of directors of Federal Life Mutual Holding Company (“ Federal Life Mutual ”) adopted a Plan of Conversion on March 8, 2018 (the “ Plan of Conversion ”), whereby Federal Life Mutual will convert from a mutual holding company to a stock company. In connection with the conversion, Federal Life Group, Inc. (“ Federal Life Group ”), a corporation newly formed by Federal Life Mutual, is conducting an initial public offering of up to 4,600,000 shares of common stock at a purchase price of $10.00 per share. Such shares will constitute all of the outstanding shares of Federal Life Group following completion of the conversion and the stock offering. Immediately following the conversion, all of the outstanding shares of common stock of Federal Life Mutual, as converted to a stock company, will be issued to Federal Life Group. As a result of the conversion, policyholders of Federal Life Insurance Company will no longer be members of Federal Life Mutual.
There will be no change in your premium or in the rights of policyholders to insurance coverage under their existing policies of insurance with Federal Life Insurance Company as a result of the conversion.
The Plan of Conversion has been approved by the Illinois Insurance Commissioner, subject to approval of the Plan of Conversion by the members of Federal Life Mutual.
MUTUAL TO STOCK CONVERSION
Q: Why is Federal Life Mutual converting from mutual to stock form?
A: Federal Life Mutual’s conversion from mutual to stock form and the related stock offering will provide Federal Life Group with additional capital that will enable it to take advantage of anticipated future growth opportunities and provide a source of additional capital for Federal Life Insurance Company. The additional capital raised will also permit Federal Life Insurance Company to develop and offer new insurance and annuity products.
Q: Will the conversion affect my coverage with Federal Life Insurance Company?
A: No. Neither the premium you pay nor the insurance coverage under any Federal Life Insurance Company policy that you own will be affected by the conversion.
Q: Will any policy or annuity that I hold with Federal Life Insurance Company be converted to stock?
A: No. All policies and annuities will remain as they were prior to the conversion. Eligible members of Federal Life Mutual have a right to purchase shares of common stock of Federal Life Group during the subscription offering. Eligible members of Federal Life Mutual consist of named insureds under issued and in force Federal Life Insurance Company policies and owners of annuities in force as of the close of business on March 8, 2018. These rights to purchase stock cannot be transferred.
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ABOUT THE STOCK OFFERING AND PURCHASING SHARES
Investment in our common stock involves certain risks. For a discussion of certain of such risks and other factors, you are urged to read the accompanying Prospectus.
Q: How many shares are being offered and at what price?
A: In the stock offering, Federal Life Group is offering up to 4,600,000 shares of common stock for sale at $10.00 per share. All shares will be sold at the same price, and no sales commission will be charged to purchasers in the stock offering.
Q: Who is eligible to purchase stock in the Offering?
A: Pursuant to the Plan of Conversion, the right to purchase shares of common stock at $10.00 per share in a subscription offering has been granted in the following order of priority:
Priority #1 – Eligible members of Federal Life Mutual, who consist of named insureds under an issued and in force Federal Life Insurance Company policy as of the close of business on March 8, 2018 and holders of annuities issued by Federal Life in force as of the close of business on March 8, 2018; and
Priority #2 – Directors and officers of Federal Life Mutual who are not eligible members.
Common stock that is not sold in the subscription offering is expected to be sold to employees of Federal Life Insurance Company, to a limited number of strategic investors, and to Insurance Capital Group LLC, which has agreed to act as the standby purchaser for the offering at $10.00 per share. Unlike the subscription offering, there are no rights to purchase common stock in the community offering. We have the right to accept or reject any order received in the community offering.
In the event that orders are received for more shares than are available for sale in the stock offering, shares will be allocated as described in the Prospectus.
Q: How can I buy shares during the Offering?
A: Shares may be purchased by completing a Stock Order Form and returning it, with full payment, so that it is received (not postmarked) by 12:00 noon, Central Time, on ______, 2018, unless the offering is extended as described in the Prospectus. Delivery of a Stock Order Form may be made in one of the following ways: (1) by mail, using the Order Reply Envelope provided, or (2) by overnight delivery to the Stock Information Center address noted on the Stock Order Form.
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Q: How many shares of common stock can I purchase?
A: The minimum purchase is 50 shares ($500). The maximum allowable purchase for any person or entity, together with associates, affiliates or persons acting in concert with such person or entity, is 50,000 shares ($500,000). Please review the section in the prospectus entitled “The Offering – Limitations on Purchases of Common Stock” for more information regarding purchase limitations.
Q: How can I pay for the shares?
A: Payment for shares can be remitted by personal check, bank check or money order in U.S. dollars, payable to “Computershare Trust Company, N. A., escrow agent, on behalf of Federal Life Group, Inc.” These will be cashed upon receipt. Cash, wire transfers and third party checks will not be accepted.
Q: What is the deadline for purchasing shares in the Subscription and Community Offerings?
A: An executed Stock Order Form, with full payment, must be received by us, using an accepted method of delivery as described above, by no later than 12:00 noon, Central Time, on _____, 2018, unless the offering is extended as described in the Prospectus.
Q: Is it possible that I will not receive any or all of the shares I ordered?
A: Yes. If we receive orders in the offering for more shares than we have available to sell, we will allocate shares as described in the Prospectus. If we are unable to fill your order, in whole or in part, you will receive a refund check.
Q: Will payments for common stock earn interest?
A: No. Payments that you submit will not earn interest.
Q: May I change my mind after I place an order to subscribe for stock?
A: No. After receipt, your order cannot be modified or withdrawn unless the offering is extended beyond _____, 2018, or the offering range is amended to below 3,400,000 shares or above 4,600,000 shares.
Q: I am eligible to subscribe for shares of common stock in the Subscription Offering, but I am not interested in purchasing any shares. May I allow someone else to use my Stock Order Form to take advantage of my Subscription Offering priority?
A: No, you cannot transfer any of your subscription rights, and any attempted transfer will be void and not recognized.
On occasion, people attempt to persuade eligible members to transfer subscription rights, or to purchase shares in the offering based on an understanding that the shares will be subsequently transferred to others. Participation in such schemes is against the law and may subject involved parties to prosecution. If you become aware of any such activities, we ask that you notify us promptly so that we can take the necessary steps to protect subscription rights.
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Q: Will my common stock be insured?
A: No. Like all stock, the common stock cannot be insured or guaranteed by any government agency, nor will it be insured or guaranteed by Federal Life Group.
Q: Will dividends be paid on the stock?
A: We have not yet determined whether or not we will pay any cash dividends, the amount that may be paid, or when the payment of dividends may begin. Our dividend policy will depend upon our financial condition, results of operations and future prospects, as well as that of our subsidiaries.
Q: How will Federal Life Group shares trade?
A: Upon completion of the offering, Federal Life Group expects the stock to be traded on the NASDAQ Capital Market under the symbol “FLF.” Once the shares have begun trading, you may contact a firm offering investment services in order to buy or sell Federal Life Group shares in the future. Upon completion of the offering, a statement setting forth the number of Federal Life Group shares owned will be mailed to purchasers in the stock offering. Shareholders may not be able to sell their shares of common stock until such statement is delivered to them, even though the common stock will have begun trading. Shares will be issued in book entry form only, and you will not receive a stock certificate representing the shares you purchase in the offering.
Q: Are officers and directors planning to purchase stock?
A: Yes. Our executive officers and directors, together with their affiliates and associates, plan to purchase approximately 372,000 shares of common stock in the offering.
WHERE TO GET MORE INFORMATION
Q: How can I get more information?
A: A Stock Information Center has been established to process orders to purchase stock and to answer any questions related to the conversion and the offering. You may call the Stock Information Center at (610) 205-6005 from 10:00 a.m. to 4:00 p.m., Central Time, Monday through Friday or email us at federallife@griffinfingroup.com. The Stock Information Center is not open on weekends or bank holidays.
This brochure is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offer is made only by means of the Prospectus.
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The shares of common stock are not insured and are not guaranteed by Federal Life Group, Inc. or any of its affiliates or by any Federal or state government or agency.
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Exhibit 99.7
October 26, 2018
Federal Life Group, Inc.
3750 West Deerfield Road
Riverwoods, Illinois 60015
Gentlemen:
I hereby consent to being named as a person who will serve as a director of Federal Life Group, Inc. (the “Company”) in the Registration Statement on Form S-1 of the Company (333-227790) upon completion of the Company’s offering of its common stock as described in such registration statement.
Sincerely, | |
/s/ Matthew T. Popoli | |
Matthew T. Popoli |
Exhibit 99.8
October 26, 2018
Federal Life Group, Inc.
3750 West Deerfield Road
Riverwoods, Illinois 60015
Gentlemen:
I hereby consent to being named as a person who will serve as a director of Federal Life Group, Inc. (the “Company”) in the Registration Statement on Form S-1 of the Company (333-227790) upon completion of the Company’s offering of its common stock as described in such registration statement.
Sincerely,
/s/ Craig A. Huff
Craig A. Huff