<PAGE> 1
EXHIBIT 99.5
Board of Directors
June 20, 2000
Page 1
RP FINANCIAL, LC.
Financial Services Industry
June 20, 2000
Board of Directors
MICOA Holdings, Inc.
MICOA Group, Inc.
1301 North Hagadorn Road
East Lansing, Michigan 48823
Members of the Board:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the Common
Stock which is to be offered in connection with the conversion transaction
described below (hereinafter referred to as the "Conversion"). This Appraisal
may be relied upon by the Office of Financial and Insurance Services for the
State of Michigan ("OFIS") in its review of the Conversion.
Description of Conversion and Stock Issuance
We understand that the Mutual Insurance Corporation of America ("MICOA" or
the "Company") will reorganize into a stock insurance company, as a wholly-owned
subsidiary of MICOA Holdings, Inc. ("Holdings"). As part of this process, the
Company is offering common stock of Holdings through a "subscription offering"
to eligible MICOA policyholders, officers and directors (the "subscription
participants") based on the appraised value of MICOA. Concurrently, through
placement agents, Holdings' shares will offered to selected other policyholders,
former policyholders, employees and insurance agents of MICOA and its
subsidiaries, and various medical societies, who will be able to purchase
unsubscribed shares in the "best efforts offering". If unsubscribed shares
remain following the subscription and best efforts offerings, such shares may be
offered to the public in an underwritten offering. Immediately following the
offering, the primary assets of Holdings will be the capital stock of MICOA and
the net conversion proceeds.
RP Financial, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for companies undertaking the demutualization
process including mutual companies, including insurance companies and savings
institutions. RP Financial is a nationally recognized valuation expert in stock
conversion transactions for mutually owned financial services companies. The
background and experience of RP Financial is detailed in Exhibit V-1. We believe
that, except for the fee we will receive for our appraisal, we are independent
of MICOA and the other parties engaged by the Company to assist in the
conversion process.
WASHINGTON HEADQUARTERS
Rosslyn Center Telephone
1700 North Moore Street, Suite 2210 Fax No
Arlington, VA 22209 E-Mail: mail
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Board of Directors
June 20, 2000
Page 2
Valuation Methodology
In preparing our appraisal, we have reviewed the related applications,
including the Form S-1 to be filed with the Securities and Exchange Commission
("SEC") and the OFIS. We have conducted a financial analysis of the Company that
has included a review of its audited financial information for fiscal years
ended December 31, 1995 through 1999 and unaudited financial and other
information through March 31, 2000. We have conducted due diligence related
discussions with the Company's management and directors; PricewaterhouseCoopers,
LLP, the Company's independent auditor; Dykema Gossett, PLLC, the Company's
counsel in conjunction with the Conversion and offering; ABN AMRO Rothschild, a
division of ABN AMRO Incorporated and Sandler O'Neill & Partners, L.P., the
financial and marketing advisors in connection with Holdings' stock offering;
and Sidley & Austin, underwriters' counsel. All conclusions set forth in the
Appraisal were reached independently from such discussions. In addition, where
appropriate, we have considered information based on other available published
sources that we believe are reliable. While we believe the information and data
gathered from all these sources are reliable, we cannot guarantee the accuracy
and completeness of such information.
We have investigated the competitive environment within which the Company
operates and have assessed the Company's relative strengths and weaknesses. We
have kept abreast of the changing regulatory and legislative environment for
insurance companies, including those with a similar line of business, and
analyzed the potential impact on the Company and the industry as a whole. We
have analyzed the potential effects of the Conversion and stock offering on the
Company's operating characteristics and financial performance as they relate to
the pro forma market value. We have reviewed the economy in the Company's
primary market area and have compared the Company's financial performance and
condition with publicly-traded insurance companies sharing similar lines of
business. We have reviewed conditions in the securities markets in general and
in the market for insurance company stocks in particular, including the market
for existing insurance companies and the market for the newly issued stock
offered by demutualized insurance companies. We have also considered the
expected market for Holdings' shares. We have excluded from such analyses
insurers subject to announced or rumored acquisition, and/or those institutions
that exhibit other unusual characteristics.
Our Appraisal is based on the Company's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Company, its independent auditors and actuaries, legal counsel and
other authorized agents are truthful, accurate and complete. We did not
independently verify the financial statements and other information provided by
the Company, its independent auditors and actuaries, legal counsel and other
authorized agents nor did we independently value the assets or liabilities of
the Company. The valuation considers the Company only as a going concern and
should not be considered as an indication of the Company's liquidation value.
Our appraised value is predicated on a continuation of the current
operating environment
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Board of Directors
June 20, 2000
Page 3
for the Company and Holdings' and for all insurance companies and their holding
companies. Changes in the local, state and national economy, the legislative and
regulatory environment for insurance companies and medical professional
liability insurers, the stock market, interest rates, and other external forces
(such as natural disasters or significant world events) may occur from time to
time, often with great unpredictability, and may materially impact the value of
insurers as a whole or MICOA's value alone. It is our understanding that there
are no current or long-term plans for selling control of Holdings or the Company
following the offering. To the extent that such factors can be foreseen, they
have been factored into our analysis.
Pro forma market value is defined as the price at which Holdings' stock,
immediately upon completion of the offering, would change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy or
sell and both having reasonable knowledge of relevant facts.
Valuation Conclusion
It is our opinion that, based on stock prices as of June 20, 2000 and
financial statements through March 31, 2000, the estimated aggregate pro forma
market value of the shares to be issued immediately following the offering, was
$155,000,000 (the "midpoint value"). Incorporating the impact of shares which
may be issued to the stock compensation plans (350,000 shares issued pursuant to
employee stock awards and the Management Recognition Plan), the pro forma market
capitalization at the midpoint is equal to $160,425,000. A range of value will
be established based on the midpoint value to be responsive to moderate changes
in market conditions. Based on the number of shares to be offered of 10,000,000,
the price at the midpoint value is $15.50 per share. Pursuant to the Company's
structure of the offering, the price per share at the lower and upper portions
of the range, the "minimum value" and the "maximum value", respectively, is
$13.00 and $18.00 per share.
If there is an underwritten offering, Holdings will have the ability to
grant the underwriters the option to purchase, for 30 days after the completion
of the underwritten offering, additional common stock in an aggregate amount not
to exceed 15% of the total number of shares offered in the underwritten offering
(i.e. the "Greenshoe"). The price for the shares purchased through the
over-allotment option will be the price for the shares sold in the underwritten
offering, less an underwriting discount.
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Board of Directors
June 20, 2000
Page 4
Based on the foregoing, the offering range of value, i.e., before the
issuance of shares to the stock compensation plans, is as follows:
<TABLE>
<CAPTION>
Price Aggregate
Per Offering
Shares Share Value
------ ----- -----
<S> <C> <C> <C>
Minimum 10,000,000 $13.00 $130,000,000
Midpoint 10,000,000 $15.50 $155,000,000
Maximum 10,000,000 $18.00 $180,000,000
Greenshoe (1) 11,500,000 $18.00 $207,000,000
</TABLE>
(1) Reflects the maximum possible proceeds which could be raised
and assumes closing the offering at the maximum of the
offering range, all the stock is sold in the underwritten
offering and that the underwriter is granted the ability to
fully exercise the Greenshoe or over-allotment provision.
Taking into account the full impact of the stock grants from authorized but
unissued shares at a price equivalent to the IPO price, the resulting market
capitalization, based on the $155 million midpoint value is as follows:
<TABLE>
<CAPTION>
Price Aggregate
Per Market
Shares Share Capitalization
------ ----- --------------
<S> <C> <C> <C>
Minimum 10,350,000 $13.00 $134,550,000
Midpoint 10,350,000 $15.50 $160,425,000
Maximum 10,350,000 $18.00 $186,300,000
Greenshoe (1) 11,850,000 $18.00 $213,300,000
</TABLE>
(1) Reflects the maximum possible proceeds which could be raised
and assumes closing the offering at the maximum of the
offering range, all the stock is sold in the underwritten
offering and that the underwriter is granted the ability to
fully exercise the Greenshoe or over-allotment provision.
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Board of Directors
June 20, 2000
Page 5
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
Common Stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the offering will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Company as of March 31, 2000, the date of the financial
data included in the Form S-1.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
At MICOA's request, the valuation will be updated and such updates will
consider, among other things, any developments or changes in the Company's
financial performance and condition, management policies, and current conditions
in the equity markets for the shares of insurers. These updates may also
consider changes in other external factors which impact value including, but not
limited to: various changes in the legislative and regulatory environment, the
stock market and interest rates. Should any such new developments or changes be
material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
Ronald S. Riggins
President and Managing Director
/s/ James P. Hennessey
James P. Hennessey
Senior Vice President
