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 March 31, 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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Part I Financial Information Financial Statements
Momed Holding Company
Unaudited Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
Assets 1995 1994
<S> <C> <C>
Investments (Note 1) $63,582,786 $65,379,445
Cash 491,365 343,624
Due from broker 3,094,440 --
Accrued investment income 1,111,473 1,067,151
Premiums receivable 783,092 391,217
Reinsurance recoverable on paid and
unpaid losses net of $11,479,469
in 1995 and $11,479,344 in 1994 of
reinsurance premiums attributed
to unpaid losses recoverable 3,758,000 4,849,475
Prepaid reinsurance premiums 742,115 659,036
Prepaid taxes 846,690 1,140,235
Deferred policy acquisition cost 175,172 146,503
Building, furniture and equipment at
cost less accumulated depreciation
of $395,502 in 1995 and $378,924
in 1994 876,715 889,744
Other assets 144,235 147,715
Deferred income taxes 2,217,037 2,509,782
Total assets $77,823,120 $77,523,927
Liability and Stockholder's Equity
Loss & loss adjustment
expenses (Note 2) $57,637,932 $58,764,316
Unearned premiums 6,582,854 6,343,858
Accounts payable & accrued expenses 864,614 723,662
Reinsurance premiums payable 306,786 354,183
Mortgage payable 787,014 799,640
Accrued Federal income tax 34,592 99,592
Total liabilities 66,213,792 67,085,251
Class C, Non-voting Common Stock
$1.00 par value, 24,185 shares
authorized, issued and
outstanding (Note 5) 600,000 600,000
Stockholder's 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 (190,347) (1,281,104)
Retained earnings 9,657,877 9,577,982
11,059,618 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 11,009,328 9,838,678
Total liabilities and
stockholders equity $77,823,120 $77,523,927
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<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Operations
For the Three Months Ended
March 31, 1995 and March 31, 1994
March 31, 1995 March 31, 1994
Three Three
Months Months
Revenues:
<S> <C> <C>
Net premiums earned $2,886,625 $2,436,085
Net investment income 1,030,943 983,505
Realized gains on investments 125,953 269,508
Other 24,322 23,608
Total revenues 4,067,843 3,712,706
Expenses:
Losses and loss adjustment expenses 3,331,638 2,629,948
Policy acquisition cost 167,686 163,585
Other operating expenses 446,509 499,229
Interest expense 15,730 16,535
Total expenses 3,961,563 3,309,297
Earnings (loss) before income taxes
and cumulative effect of a change in
accounting principle 106,280 403,409
Provision for income taxes
Current 2,000 4,200
Deferred 24,385 ---
26,385 4,200
Net earnings $ 79,895 $ 399,209
Earnings (loss) per share date:
Earnings per share $ .36 $1.77
Earnings per share based on average shares
outstanding (Note 4) 224,018 224,934
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Momed Holding Company
Unaudited Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1995 and March 31, 1994
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 79,895 $ 537,228
Adjustments to reconcile net income to net
cash provided from operating activities:
Changes in:
Accrued investment income (44,322) (113,689)
Premiums receivable (391,875) (409,083)
Reinsurance recoverable on paid and unpaid
losses 1,091,475 (63,119)
Reserve for losses and loss adjustment exp. (1,126,384) 122,588
Prepaid reinsurance premiums (83,079) 97,621
Unearned premiums 238,996 200,303
Accounts payable and accrued expenses 140,952 32,525
Reinsurance premiums payable (47,397) (178,026)
Deferred policy acquisition costs (28,669) 31,352
Deferred income taxes (269,159) ---
Other assets 3,480 (22,190)
Prepaid taxes 293,545 (47,800)
Accrued income taxes (65,000) ---
Depreciation of building, furniture
and equipment 18,862 16,217
Amortization of premiums on bonds 20,588 31,672
Net realized investment gains (125,953) (269,508)
Net cash provided (used) by operating activities (294,045) (171,928)
Cash flows from investing activities:
Due from broker (3,094,440) ---
Cost of bonds and stocks sold or matured 4,213,370 3,997,507
Purchase of bonds and stocks (1,156,465) (5,162,885)
Purchase of property and equipment (3,549) ---
Net cash (used) provided from investing
activities (41,084) (1,165,378)
Cash flows from financing activities:
Decrease in mortgage payable (12,626) (12,589)
Net cash (used) provided by financing activities 12,626) (12,589)
Net increase (decrease) in cash and short-term
investments (347,755) (1,349,895)
Cash and short-term investments at beginning
of period 1,738,752 3,354,990
Cash and short-term investments at end of
period $ 1,390,997 $ 2,005,095
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Momed Holding Company
Unaudited Consolidated Statements of Changes in Stockholders' Equity
For Three Months Ended March 31, 1995 and March 31, 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 399,209 399,209
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments 340,128 340,128
Equity Securities (38,247) (38,247)
Balance at 3/31/94 $ 222,343 $ 604,625 $1,200,450 $ 407,643 $8,464,735 $(50,290) $10,849,506
Balance at 12/31/94 $ 246,528 $ --- $1,345,560 $(1,281,104) $9,577,982 $(50,290) $ 9,838,676
Net earnings 79,895 79,895
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments 990,059 990,059
Equity Securities 100,698 100,698
Balance at 3/31/95 $ 246,528 $ -- $1,345,560 $(190,347) $9,657,877 $(50,290) $11,009,328
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Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
March 31, 1995
1. Investments:
The following table summarizes the company's investments at March 31,
1995 and December 31, 1994. Fixed maturity investments are classified
as available for sale and reported in the financial statements at fair
market 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.
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Amount
at which
Estimated shown in Gross Gross
Market the balance unrealized unrealized
Type of Investments Cost Value sheet gains losses
March 31, 1995:
<S> <C> <C> <C> <C> <C>
Fixed maturities $60,455,770 59,906,599 59,906,599 1,039,203 1,588,374
Equity securities 2,301,771 2,562,537 2,562,537 420,991 160,225
Investment Real Estate 214,018 214,018 214,018 --- ---
Short-term investments 899,632 899,632 899,632 --- ---
Total Investments $63,871,191 63,582,786 63,582,786 1,460,194 1,748,599
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
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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
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Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
March 31, 1995
for share basis, less the 22,510 shares of Class A Treasury Stock at
March 31, 1994. Average shares withstanding at March 31, 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 common
stock 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 March 31, 1995 and December 31, 1994, the Company had invested assets of
$63,582,786 and $65,379,445 which is 81.7 percent and 84.3 percent of total
assets at each period end. Had the amount due from broker of $3,094,440 been
received prior to month end, the invested assets to total assets would have
been 85.7% at March 31, 1995. On January 1, 1994, the Company implemented
the provision 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 investments have been classified as available for sale and reported
at their fair value which is $549,171 less than amortized cost. Market value
of all invested assets is $288,405 less than cost or amortized cost at March
31, 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 various reinsurance agreements to protect itself
against significant decreases 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.
<PAGE>
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
deductible 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 March 31, 1995, the Company had fixed maturity investments in the
amount of $60,455,770 with an average date to maturity of approximately 3.78
years. All bonds are "A" rated or higher, except for one bond with a book
value of $998,882 which is rated BBB+. Further, the Company has no
investment in high yield or non-investment grade securities. Short-term
investments totaling $899,632 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 was implemented in 1994.
This model applies to virtually all property and casualty insurance companies
and mandates 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 requirement. 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 $40,000 for
furniture and data processing equipment during 1995.
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Management's Analysis of Consolidated Quarterly Income Statements
Revenues:
Premium revenues increased approximately 10.0% from the fourth quarter of
1994, due to all policies reflecting the 12% rate increase effective October
1, 1993 for new business and November 1, 1993 for renewal business and the
variation in renewal dates of policies inforce. Premium revenues increased
by 18.5% over the first quarter of 1994, due primarily to the 12% rate
increase effective October 1, 1993, which had an insignificant impact on
premium income during the first quarter of 1994. The first quarter of 1995
reflects this increase for all policies.
Investment Income:
Net investment income for the first quarter of 1995 decreased approximately
3.0% over the fourth quarter of 1994. This is attributed primarily to the
decrease in short-term investments of approximately $260,000 per month during
the first quarter of 1995. Net investment income increased approximately
4.8% over the first quarter of 1994 due primarily to the increase in interest
rates since March 31, 1994 and the reinvestment of funds at these higher
rates.
Expenses:
The Company's provision for loss and loss adjustment expenses as of March 31,
1995 and December 31, 1994 is based upon MOMEDICO's experience. The
percentage of losses and loss adjustment expenses to net earned premiums at
March 31, 1995 is 115.4 compared to 94.7% for the year 1994. The percentage
for the quarter ended March 31, 1994 was 108.0% The increase between March
31, 1995 and 1994 results primarily from an increase in the frequency of
reported losses during the first three months of 1995.
Policy acquisition costs as a percent of net premiums earned were 5.8% and
6.7% for the period ended March 31, 1995 and 1994, respectively. The
percentage for the fourth quarter of 1994 was 6.7%. The change in policy
acquisition cost as a percent of earned premiums results primarily from
changes in underwriting expenses and commission arrangements.
Other operating expenses decreased approximately 10.6% from the quarter ended
March 31, 1994 and is attributed to decreases in accounting, legal and
building maintenance expenses. Other operating expenses decreased by
approximately 9.0% from the fourth quarter of 1994. This decrease is due to
decreases in legal and building maintenance expense during the first quarter
of 1995.
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Part II - Other Information
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 first 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 5/12/95 Richard V. Bradley, M.D.,President
DATE 5/12/95 James M. Stokes, M.D.
Chief Accounting Officer
