1299210--3/14/2007--KMG_America

related topics

{loss, insurance, financial}

{financial, litigation, operation}

{stock, price, share}

{regulation, government, change}

{acquisition, growth, future}

{personnel, key, retain}

{system, service, information}

{product, market, service}

{tax, income, asset}

{condition, economic, financial}

{control, financial, internal}

{loan, real, estate}

{stock, price, operating}

{provision, law, control}

{capital, credit, financial}

{operation, natural, condition}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{product, liability, claim}

Risks Relating To Our Business We rely on independent agents and brokers and on internal sales representatives to market many of our products, and an inability to attract or retain these independent agents and brokers or internal sales representatives could impair our ability to compete and market our insurance products and services. We depend on our key executives and sales staff. We may not be able to hire and retain key employees or successfully integrate our new management team to fully implement our business strategy, which could delay or prevent us from fully implementing our business strategy and could significantly and negatively affect our business. The financial strength of Kanawha, our insurance subsidiary, is rated by A.M. Best and S P, and a decline in these ratings would likely negatively affect our standing in the insurance industry, cause our sales and earnings to decrease and our results of operations and financial condition would likely be materially adversely affected. The financial strength ratings of Kanawha, our insurance subsidiary, are not evaluations for the benefit of investors in our common stock and are not recommendations to buy, sell or hold shares of our common stock. We may require additional capital in the future which may not be available on favorable terms or at all. If we cannot obtain adequate capital, we may not be able to fund our growth in accordance with our business strategy. If we are unable to implement our business strategy or operate our business as we currently expect, our growth and profitability will be adversely affected. We may be unable to accurately predict benefits, claims and other costs or to manage those costs through our loss limitation methods, which could result in our incurring greater claims losses than we anticipate. Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves that may materially reduce our earnings, profitability and capital. We may incur losses if there are significant deviations from our assumptions regarding the period that our existing insurance policies will remain in force. We are incurring increased costs not incurred by our predecessor as a result of being a public company. Our future performance cannot be predicted based on the financial information included in our Form 10-K. Our services may expose us to professional liability in excess of our insurance coverage, which could cause us to incur material losses. Our investment portfolio is subject to several risks that may diminish the value of our invested assets and affect our sales and profitability. We may incur environmental liability as a result of our mortgage loan portfolio and real estate investments or as a result of our ownership of real property. The indemnification available to us under the Kanawha purchase agreement may not be sufficient to cover all our losses, claims or liabilities arising from breaches of the purchase agreement. A failure to effectively maintain and modernize our information systems could cause us to experience adverse consequences, including: inadequate information on which to base pricing, underwriting and reserving decisions; the loss of existing, or difficulties in attracting new, agents, brokers and customers; litigation exposure; or increases in administrative expenses, all of which could adversely affect our business. Failure to protect our clients confidential information and privacy could result in the loss of customers, reduce our profitability and/or subject us to fines and penalties. We may be required to accelerate the amortization of deferred acquisition costs and value of business acquired, which would increase our expenses and reduce our profitability. We may not find suitable acquisition candidates or new insurance ventures, and even if we do, we may not successfully integrate any acquired companies or successfully invest in new ventures, which may limit our potential for growth or have a material adverse effect on our results of operations and financial condition. The inability of Kanawha to pay dividends to us in sufficient amounts could harm our ability to meet our obligations and pay shareholder dividends. We may face losses if morbidity rates or mortality rates differ significantly from our pricing expectations. Our ability to retain existing long-term care insurance policyholders may be adversely affected if we raise premiums on our in force long-term care insurance products. Risks Relating To Our Industry Recent governmental investigations and litigation alleging the illegal use of bid-rigging schemes and contingent commissions by insurance companies and brokers may adversely affect our industry and us (1) by negatively impacting the level and volatility of stock prices of companies operating in the insurance industry, (2) if we become the subject of investigations or related litigation of this type, or (3) if industry regulation, practices and customs change in ways that are detrimental to the success of our business strategy. Consolidation in the insurance and reinsurance industry could lead to lower margins for us and less demand for our products and services. Our business, results of operations and financial condition may be adversely affected by many factors beyond our control, including factors affecting the insurance and reinsurance industry as a whole and general economic, financial market and political conditions, all of which may cause the market price of our common stock to decline. The insurance and related businesses in which we operate may be subject to periodic negative publicity, which may negatively impact our financial condition and operating results. Catastrophe losses, including man-made catastrophe losses, could cause unanticipated increases in claims frequency and severity, which could materially reduce our profitability and have a material adverse effect on our results of operations and financial condition. Reinsurance arrangements and any derivative instruments we use to hedge our business risks may not be available or adequate to protect us against our business risks, and we will be subject to the risk that the counterparties to our reinsurance arrangements and derivative instruments may default on their obligations, all of which could adversely affect our business, results of operations and financial condition. We face significant competitive pressures in our businesses, which may reduce premium rates and prevent us from pricing our products at rates that enable us to earn a profit. Our business is subject to risks related to litigation and regulatory actions that could have a material adverse effect on our business, results of operations and financial condition. We are subject to extensive governmental regulation, which increases our costs and could restrict how we conduct our business. Changes in regulation may reduce our profitability and limit our growth. The continued threat of terrorism, the occurrence of terrorist acts and ongoing military actions could adversely affect our business, results of operations and financial condition. Genetic mapping research and other medical advances could adversely affect the financial performance of our life insurance and long-term care insurance businesses. Risks Relating To Our Common Stock Future offerings of debt securities, which would be senior to our common stock upon liquidation, and future offerings of equity securities, which would dilute our existing shareholders and may be senior to our common stock for the purposes of dividend distributions, may adversely affect the market price of our common stock. We do not currently intend to pay dividends and any determination to pay dividends in the future will be at the discretion of our board of directors. Consequently, it is uncertain when, if ever, we will declare dividends to our shareholders. Applicable insurance laws and anti-takeover provisions under Virginia state law and in our amended and restated articles of incorporation and our bylaws may make it difficult to effect a change of control of us or change our board of directors and officers, which may negatively affect the price per share of our common stock. Our stock and the stock of other companies in the insurance industry are subject to stock price and trading volume volatility, and you may be unable to resell your shares of our common stock at or above the price you paid for them.

Full 10-K form ▸

1299210--3/14/2007--KMG_America_CORP