SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1995 Commission File number 2-67099
Momed Holding Company
(Exact name of registrant as specified in its charter)
MISSOURI 43-1473496
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8630 Delmar Blvd., Suite 100, St. Louis MO 63124
Registrant's telephone number, including area code: 314-872-8000
*Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
Indicate the number of share outstanding of each of the insurer's
classes of common stock, as of the close of the period covered by this
report.
Class C Non-Voting Common Stock 24,185 Class A Common Stock 246,528
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<TABLE>
Part I Financial Information Financial Statements
Momed Holding Company
Unaudited Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
Assets 1995 1994
<S> <C> <C>
Investments (Note 1) $68,525,360 $65,379,445
Cash 204,011 343,624
Accrued investment income 986,749 1,067,151
Premiums receivable 358,432 391,217
Reinsurance recoverable on paid and
unpaid losses net of $11,183,694
in 1995 and $11,479,344 in 1994 of
reinsurance premiums attributed
to unpaid losses recoverable 3,112,817 4,849,475
Prepaid reinsurance premiums 562,298 659,036
Prepaid taxes 961,690 1,140,235
Deferred policy acquisition cost 141,756 146,503
Building, furniture and equipment at
cost less accumulated depreciation
of $410,066 in 1995 and $378,924
in 1994 866,472 889,744
Other assets 145,379 147,715
Deferred income taxes 1,630,933 2,509,782
Total assets $77,495,897 $77,523,927
Liability and Stockholders' Equity
Loss & loss adjustment
expenses (Note 2) $56,783,271 $58,764,316
Unearned premiums 6,187,303 6,343,858
Accounts payable & accrued expenses 618,941 723,662
Reinsurance premiums payable 107,780 354,183
Mortgage payable 720,213 799,640
Accrued Federal income tax 49,592 99,592
Total liabilities $64,467,100 $67,085,251
Class C, Non-voting Common Stock
$1.00 par value, authorized 24,185
shares, issued and outstanding
shares 24,185 (Note 6) 600,000 600,000
Stockholders' Equity:
Class A Common Stock, $1.00 par
value, authorized 500,000 shares
issued and outstanding 246,528
shares in 1995 and 1994 246,528 246,528
Additional Paid-In Capital 1,345,560 1,345,560
Unrealized appreciation (depreciation)
of fixed maturity investment and
equity securities, net 916,216 (1,281,104)
Retained earnings 9,970,783 9,577,982
12,479,087 9,888,966
Less Cost of 22,510 shares of
Class A common held in
Treasury in 1995 and 1994 (50,290) (50,290)
Total stockholders' equity 12,428,797 9,838,676
Total liabilities and
stockholders' equity $77,495,897 $77,523,927
</TABLE>
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<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Operations
For the Six Months Ended
June 30, 1995 and June 30, 1994
June 30, 1995 June 30, 1994
Three Six Three Six
Months Months Months Months
Revenues:
<S> <C> <C> <C> <C>
Net premiums earned $ 2,676,580 $ 5,563,205 $ 2,639,639 $ 5,075,724
Net investment income 1,037,359 2,068,302 959,953 1,943,458
Realized gains on
investments 235,405 361,358 81,733 351,241
Other 30,324 54,646 20,748 44,356
Total Revenues 3,979,668 8,047,511 3,702,073 7,414,779
Expenses:
Losses and loss
adjustment expenses 2,931,506 6,263,144 2,736,515 5,366,463
Policy acquisition cost 167,337 335,023 152,705 316,290
Other underwriting
expenses 528,391 974,900 461,750 960,979
Interest expense 15,473 31,203 16,475 33,010
Total Expenses 3,642,707 7,604,270 3,367,445 6,676,742
Earnings before
income taxes 336,961 443,241 334,628 738,037
Provision for income taxes
Current 8,000 10,000 4,300 8,500
Deferred 16,055 40,440 0 0
24,055 50,440 4,300 8,500
Net earnings $ 312,906 $ 392,801 $ 330,328 $ 729,537
Earnings per data:
Earnings per share $ 1.40 $ 1.75 $ 1.48 $ 3.26
Earnings per share based on
average shares outstanding
(Note 4) 224,018 224,018 224,018 224,018
</TABLE>
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<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Cash Flows
For the Six Months Ended
June 30, 1995 and June 30, 1994
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 392,801 $ 729,537
Adjustments to reconcile net income to net
cash provided from operating activities:
Changes in:
Accrued investment income 80,402 (9,015)
Premiums receivable 32,785 74,475
Reinsurance recoverable on paid and unpaid
losses 1,736,658 (143,811)
Reserve for losses and loss adjustment exp. (1,981,045) 571,527
Prepaid reinsurance premiums 96,738 115,282
Unearned premiums (156,555) (2,258)
Accounts payable and accrued expenses (104,721) (365,688)
Reinsurance premiums payable (246,403) (192,599)
Deferred policy acquisition costs 4,747 31,715
Deferred income taxes (253,386) ---
Other assets 2,336 (19,761)
Prepaid taxes 178,545 (49,500)
Accrued income taxes (50,000) ---
Depreciation of building, furniture
and equipment 36,267 25,900
Amortization of premiums on bonds 41,700 63,414
Net realized investment gains (361,358) (351,241)
Net cash provided (used) by operating activities (550,489) 477,977
Cash flows from investing activities:
Proceeds of bonds and stocks sold or matured 7,076,623 4,261,631
Proceeds from sale of investment property 54,001 ---
Purchase of bonds and stocks (4,161,635) (5,487,008)
Purchase of property and equipment (8,546) (8,248)
Net cash (used) provided from investing
activities 2,960,443 (1,233,625)
Cash flows from financing activities:
Decrease in mortgage payable (79,427) (25,171)
Net cash (used) provided by financing activities (79,427) (25,171)
Net increase (decrease) in cash and short-term
investments 2,330,527 (780,819)
Cash and short-term investments at beginning
of period 1,738,752 3,354,990
Cash and short-term investments at end of
period $ 4,069,279 $ 2,574,171
Momed Holding Company
Unaudited Consolidated Statements of Changes in Stockholders' Equity
For Six Months Ended June 30, 1995 and June 30, 1994
Unrealized Total
Additional Appreciation Stock-
Common Stock Pain-in of Equity Retained Treasury holders'
Class A Class B Capital Securities Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 12/31/93 $ 222,343 $ 604,625 $1,200,450 $105,762 $8,065,526 $(50,290) $10,148,416
Net earnings 729,537 729,537
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments (557,836) (557,836)
Equity Securities (176,040) (176,040)
Balance at 6/30/94 $ 222,343 $ 604,625 $1,200,450 $(628,114) $8,795,063 $(50,290) $10,144,077
Balance at 12/31/94 $ 246,528 $ --- $1,345,560 $(1,281,104) $9,577,982 $(50,290) $9,838,676
Net earnings 392,801 392,801
Unrealized
appreciation
(depreciation of:
Fixed maturity
investments 2,083,335 2,083,335
Equity Securities 113,985 113,985
Balance at 6/30/95 $ 246,528 $ --- $1,345,560 $ 916,216 $9,970,783 $(50,290) $12,428,797
</TABLE>
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Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
June 30, 1995
1. Investments:
The following table summarizes the company's investments at June 30, 1995
and December 31, 1994. Fixed maturity investments are classified as
available for sale and reported in the financial statements at fair mar-
ket value, with the unrealized gains (losses) excluded form earnings and
reported as a separate component of stockholders equity pursuant to the
provision of FASB Statement 115 "Accounting for Certain Investments in
Debt and Equity Securities. Equity securities are carried at market
value for each period.
<TABLE>
Amount
at which
Estimated shown in Gross Gross
Market the balance unrealized unrealized
Type of Investments Cost Value sheet gains losses
June 30, 1995:
<S> <C> <C> <C> <C> <C>
Fixed maturities $61,338,061 62,445,369 62,445,369 1,678,565 571,257
Equity securities 1,773,727 2,054,626 2,054,626 412,049 131,150
Investment Real Estate 160,097 160,097 160,097 --- ---
Short-term investments 3,865,268 3,865,268 3,865,268 --- ---
Total Investments $67,137,153 68,525,360 68,525,360 2,090,614 702,407
December 31, 1994:
Fixed maturities $63,565,035 61,515,774 61,515,774 649,597 2,698,858
Equity securities 2,144,046 2,252,240 2,252,240 284,965 176,771
Investment Real Estate 216,303 216,303 216,303 --- ---
Short-term investments 1,395,128 1,395,128 1,395,128 --- ---
Total Investments $67,320,512 65,379,445 65,379,445 934,562 2,875,629
</TABLE>
2. Losses and Loss Adjustment Expenses:
The Company retains the services of an independent actuary to analyze the
Company's reserves for losses and loss adjustment expenses on a quarterly
basis. Due to the inherent risk involved in projecting ultimate cost for
losses and loss adjustment expenses for long tail lines of business, such
as medical malpractice, the Company would anticipate that the ultimate
cost to settle claims will vary from the amounts provided in the
accompanying financial statements.
3. Cash and Short-term Investments:
Cash and short-term investments, as reported in the statement of cash
flows represents cash and cash investments with maturity dates of ninety
days or less.
4. Average Shares Outstanding:
Average shares outstanding represent the 222,343 Class A shares plus
24,185 Class B shares which are convertible to Class A shares on a share
<PAGE>
Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
June 30, 1995
for share basis, less the 22,510 shares of Class A Treasury Stock at June
30, 1994. Average shares withstanding at June 30, 1995 represent the
246,528 Class A shares less the 22,510 shares of Class A Treasury Stock.
5. The Class C non-voting common stock was issued to Missouri State Medical
Association (MSMA) in connection with the exchange of Class B commonstoc
for Class A common stock. MSMA shall have an option to sell the Class C
shares and the Company shall be required to purchase such shares at a per
share consideration of $24.81, with the aggregate cash consideration not
to exceed $600,000.
Period No. of Shares Amount
August 16, 1994
to August 15, 1995 4,031 $100,009
August 16, 1995
to August 15, 1996 4,031 $100,009
August 16, 1996
to August 15, 1997 8,062 $200,018
August 16, 1997 and
after 8,061 $199,964
24,185 $600,000
In the opinion of management, the accompanying financial statements
reflect all adjustments necessary to a fair statement of the results for
the interim period presented.
Management's Analysis of Consolidated Quarterly Income Statements
Liquidity and Capital Resources:
At June 30, 1995 and December 31, 1994, the Company had invested assets of
$68,525,360 and $65,379,445 which is 88.4 percent and 84.3 percent of total
assets at each period end. On January 1, 1994, the Company implemented the pro-
vison of FASB Statement 115 "Accounting for Certain Investments in Debt and
Equity Securities" which requires that fixed maturity investments be reported at
fair value in the financial statements. The Company's fixed maturity investment
have been classified as available for sale and reported at their fair value
which is $1,107,308 more than amortized cost. Market value of all invested
assets is $1,388,207 more than cost or amortized cost at June 30, 1995. The
Company feels that it has sufficient invested assets to meet both its short-
term and long term capital requirements. In addition, the Company has
entered into reinsurance agreements to protect itself against significant de-
creases in invested assets. The reinsurance agreements generally limit the
Company's maximum liability to $400,000 per claim for policies issued or
renewed after July 1, 1991.
Management's Analysis of Consolidated Quarterly Income Statements
For claims against policies issued or renewed between July 1, 1987 and June 30,
1991, losses are subject to a 5% deductible based on gross collected premiums
and a retention of $250,000 per claim after the deductible provision has been
satisfied, indexed $25,000 per year. For policies issued or renewed between
July 1, 1986 and June 30, 1987 losses are subject to a 10% deductible based on
gross collected premiums and a retention of $300,000 per claim after the deduct-
ible provision has been satisfied. On policies issued prior to July 1, 1986 the
Company's maximum lability is $200,000 per insured and $231,500 per claim
involving up to six insureds. Rates charged for such protection were as follows:
Prior to June 30, 1986, 40% of collected premiums
July 1, 1986 to June 30, 1987, 30% of collected premiums
July 1, 1987 to June 30, 1988, 17.5% of collected premiums
July 1, 1988 to June 30, 1991, 15% of collected premiums
July 1, 1991 to June 30, 1995 12.5% of collected premiums
Payments to reinsurers under contracts effective July 1, 1988 and subsequent
have been by quarterly deposits as follows:
July 1, 1988 through June 30, 1990, $775,000
July 1, 1990 through June 30, 1991, $687,500
July 1, 1991 through June 30, 1994, $400,000
July 1, 1994 through June 30, 1995, $266,667 (for 6 quarterly
payments)
As of June 30, 1995, the Company had fixed maturity investments at amortized
cost in the amount of $61,338,061 with an average date to maturity of approxim-
ately 3.78 years. All bonds are "A" rated or higher, except for one bond with a
boo kvalue of $999,108 which is rated BBB+. Further, the Company has no invest-
ment in high yield or non-investment grade securities. Short-term investments
totaling $3,865,268 are expected to provide sufficient liquidity for payment of
losses and loss adjustment expenses.
On December 6, 1993, the NAIC adopted a risk-based capital "RBC" model for the
property and casualty insurance industry, which will be implemented in 1994.
This model will be applied to virtually all property and casualty insurance
companies and will mandate certain minimum capital requirements, based on the
underwriting, investment, and other business risks inherent in an individual
insurer's operations. Under the model law, any property and casualty insurance
company which does not exceed RBC action levels will be subject to varying
degrees of regulatory scrutiny and ultimately would be subject to mandatory
rehabilitation or liquidation. The four RBC action levels are (i) Company
Action Level (2 x Authorized Control Level), (ii) Regulatory Action Level (1.5 x
Authorized Control Level), (iii) Authorized Control Level (40.0% of calculated
RBC), and (iv) Mandatory Control Level (70.0% x Authorized Control Level). The
first Company Action Level takes place when a property and casualty insurance
company's adjusted actual statutory surplus is equal to 80.0% of it RBC require-
ment. Under this event, the insurer's management is required to file and obtain
approval of a comprehensive financial plan for improving its RBC. Based on the
"RBC" model adopted on December 6, 1993, by the NAIC the Company's statutory
capital and surplus at December 31, 1994 exceeded all regulatory requirements.
The Company anticipates capital expenditure of approximately $60,000 for
furniture and data processing equipment during 1995.
<PAGE>
Management's Analysis of Consolidated Quarterly Income Statements
Revenues:
Premium revenues decreased approximately 7.3 over the first quarter of 1995, due
primarily to the significant changes taking place in the make-up of provider
groups which has effected the amount and timing of income recognition. Premium
revenues increased by 9.6% over the first six months of 1994 due to the above
mentioned change in provider groups plus a decrease in accrued reinsurance
premiums in excess of provisional reinsurance premiums paid.
Investment Income:
Net investment income for the second quarter of 1995 increased approximately .6%
over the first quarter of 1995. This increase is attributed to a slight in-
crease in short-term rates during the second quarter and additional investments
in bonds in lieu of common stocks. Net investment income increased 6.4% over
the first six months of 1994 due to increases in investment rates and invested
assets between June 30, 1994 and June 30, 1995.
Expenses:
The Company's provision for loss and loss adjustment expenses as of 6/30/95
and June 30, 1994 is based upon MOMEDICO's experience. The percentage of losses
and loss adjustment expenses to net earned premiums at June 30, 1995 is 112.6%
compared to 105.7% at June 30, 1994. The percentage for the quarter ended June
30, 1995 was 109.5% compared to 115.4 for the quarter ended March 31, 1995. The
percentage of losses and loss adjustment expense to net earned premiums was
94.7% for the year 1994 compared to 135.6% for the year 1993. The increases and
decreases in the percentages of losses and loss adjustment expenses for the six
months ended June 30, 1995 compared to the six months ended June 30, 1994 and
the quarter ended March 31, 1995, result primarily from the fluctuation in the
frequency of reported claims during the various periods.
Policy acquisition costs as a percent of net premiums earned were 6.0% and 6.2%
for the period ended June 30, 1995 and 1994, respectively.The percentage for the
quarter ended June 30, 1995 was 6.2%. The change in policy acquisition cost as
a percent of earned premiums results primarily from changes in underwriting
expenses and commission arrangements.
Other underwriting expenses increased approximately 18.3% from the quarter ended
March 31, 1995. This increase results primarily from the utilization of outside
consultants for policy development and an evaluation of the Company's business
and assets compared to its book value. Other underwriting expenses for the 6
months ended June 30, 1995 increased by 1.4% over the six months ended June 30,
1994. This increase is attributed to inflation reflected in the cost of goods
and services acquired.
<PAGE>
Part II - Other Information
Item 4. Submission of Matter to Vote of Security Holders:
a) Annual Meeting of Shareholders, May 5, 1995
b) The following were elected as directors:
H. Peter Ekern, MD Meredith J. Payne, MD
Eugene T. Hansbrough, MD James M. Stokes, MD
John I. Matthews, MD
Directors whose terms continued after the meeting:
Richard V. Bradley, MD Thomas J. Cooper, MD
Dale E. Darnell, MD Leonard L. Davis, MD
Gary A. Dyer, MD Robert T. Gibbons, MD
Howard E. Linville, MD Garth S. Russell, MD
Norman Knowlton, MD R.J. King
c) Election of KPMG Peat Marwick, LLP as auditors:
Votes: For 179,955 Against 0 Abstain 777
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Securities Exchange Act of 1934-10Q:
None
(b) Reports on Form 8-K
There were no reports required to be filed on Form 8-K
during the second quarter of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MOMED HOLDING COMPANY
DATE 8/10/95 Richard V. Bradley, M.D., President
DATE 8/10/95 James M. Stokes, M.D.
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 62,445,369
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,054,626
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 68,525,360
<CASH> 204,011
<RECOVER-REINSURE> 3,112,817
<DEFERRED-ACQUISITION> 141,756
<TOTAL-ASSETS> 77,495,897
<POLICY-LOSSES> 56,783,271
<UNEARNED-PREMIUMS> 6,187,303
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 720,213
<COMMON> 246,528
0
0
<OTHER-SE> 12,232,559
<TOTAL-LIABILITY-AND-EQUITY> 77,495,897
5,563,205
<INVESTMENT-INCOME> 2,068,302
<INVESTMENT-GAINS> 361,351
<OTHER-INCOME> 54,646
<BENEFITS> 6,263,144
<UNDERWRITING-AMORTIZATION> 335,023
<UNDERWRITING-OTHER> 974,900
<INCOME-PRETAX> 443,241
<INCOME-TAX> 501,440
<INCOME-CONTINUING> 392,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,801
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.75
<RESERVE-OPEN> 42,586,063
<PROVISION-CURRENT> 7,219,640
<PROVISION-PRIOR> (956,496)
<PAYMENTS-CURRENT> 179,597
<PAYMENTS-PRIOR> 6,152,337
<RESERVE-CLOSE> 42,517,273
<CUMULATIVE-DEFICIENCY> (1,136,093)
</TABLE>
