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, 1996 Commission File # 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
739,584
<PAGE>
Part I Financial Information Financial Statements
Momed Holding Company
Unaudited Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
<TABLE>
<C> <C>
Assets 1996 1995
Investments (Note 1) $70,727,123 $71,774,201
Cash 0 89,917
Accrued investment income 1,160,540 1,022,768
Premiums receivable 389,956 419,122
Reinsurance recoverable on paid and
unpaid losses net of $9,547,735
in 1996 and $10,262,344 in 1995 of
reinsurance premiums attributed
to unpaid losses recoverable 2,847,560 2,791,317
Prepaid reinsurance premiums 651,651 599,434
Prepaid taxes 1,140,235 1,140,235
Deferred policy acquisition cost 156,408 154,955
Building, furniture and equipment at
cost less accumulated depreciation
of $457,936 in 1996 and $444,113
in 1995 838,062 851,402
Other assets 246,133 229,164
Deferred income taxes 2,540,216 2,202,678
Total assets $80,697,884 $81,275,193
Liability and Stockholder's Equity
Loss & loss adjustment
expenses (Note 2) $54,809,857 $54,903,753
Unearned premiums 6,671,391 6,553,559
Accounts payable & accrued expenses 979,206 1,025,060
Reinsurance premiums payable 0 221,200
Mortgage payable 681,533 693,643
Accrued Federal income tax 212,593 263,093
Total liabilities $63,354,580 $63,660,308
Class C, Non-voting Common Stock
$1.00 par value, authorized 24,185
shares, issued and outstanding
shares 24,185 (Note 5) 600,000 600,000
Stockholder's Equity (Note 6):
Class A Common Stock, $1.00 par
value, authorized 1,000,000 shares
issued and outstanding 739,584
shares in 1996 and 1995 739,584 739,584
Additional Paid-In Capital 852,504 852,504
Unrealized appreciation (depreciation)
of fixed maturity investment and
equity securities, net of tax 763,732 1,818,080
Retained earnings 14,437,774 13,655,007
16,793,594 17,065,175
Less Cost of 67,530 shares of
Class A common held in
Treasury in 1996 and 1995 (50,290) (50,290)
Total stockholders' equity 16,743,304 17,014,885
Total liabilities and
stockholders equity $80,697,884 $81,275,193
</TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Operations
For the Three Months Ended
March 31, 1996 and March 31, 1995
March 31, 1996 March 31, 1995
<TABLE>
<C> <C>
Three Three
Months Months
Revenues:
Net premiums earned $ 2,707,927 $2,886,625
Net investment income 1,061,887 1,030,943
Realized gains on investments 20,552 125,953
Other 27,565 24,322
Total Revenues 3,817,931 4,067,843
Expenses:
Losses and loss
adjustment expenses 2,121,421 3,331,638
Policy acquisition cost 146,876 167,686
Other underwriting expenses 437,978 446,509
Interest expense 23,777 15,730
Total Expenses 2,730,053 3,961,563
Earnings (loss) before
income taxes 1,087,878 106,280
Provision for income taxes
Current 99,500 2,000
Deferred 205,611 24,385
305,111 26,385
Net Earnings $ 782,767 $ 79,895
Earnings (loss) per data:
Earnings per share $ 1.16 $ .12
Earnings per share based on average
shares outstanding (Note 4 ) 672,054 672,054
</TABLE>
<PAGE>
Momed Holding Company
Unaudited Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1996 and March 31, 1995
1996 1995
<TABLE>
<C> <C>
Cash flows from operating activities:
Net earnings $ 782,767 $ 79,895
Adjustments to reconcile net income to net
cash provided from operating activities:
Changes in:
Accrued investment income (137,773) ( 44,322)
Premiums receivable 29,166 (391,875)
Reinsurance recoverable on paid and unpaid
losses (56,243) 1,091,475
Reserve for losses and loss adjustment exp. (93,896) (1,126,384)
Prepaid reinsurance premiums (52,217) (83,079)
Unearned premiums 117,832 238,996
Accounts payable and accrued expenses (45,854) 140,952
Reinsurance premiums payable (221,200) (47,397)
Deferred policy acquisition costs (1,453) (28,669)
Deferred income taxes 205,611 (269,159)
Other assets (16,969) 3,480
Prepaid taxes --- 293,545
Accrued Income Taxes (50,500) (65,000)
Depreciation of building, furniture
and equipment 15,676 18,862
Amortization of premiums on bonds 16,331 20,588
Net realized investment gains (20,552) (125,953)
Net cash provided (used) by operating
activities 470,727 (294,045)
Cash flows from investing activities:
Due from broker --- (3,094,440)
Proceeds from investments sold or matured 1,630,968 4,213,370
Purchase of bonds and stocks (4,208,518) (1,156,465)
Purchase of property and equipment (484) (3,549)
Net cash (used) provided from investing
activities (2,578,034) (41,084)
Cash flows from financing activities:
Decrease in mortgage payable (12,110) (12,626)
Net cash (used) by financing activities (12,110) 12,626
Net increase (decrease) in cash and short-term
investments (2,119,417) (347,755)
Cash and short-term investments at beginning
of period 4,513,380 1,738,752
Cash and short-term investments at end of
period $2,393,963 $ 1,390,997
</TABLE>
<PAGE>
<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Changes in Stockholders' Equity
For Three Months Ended March 31, 1996 and March 31, 1995
Unrealized
Appreciation
(Depreciation)
of Fixed
Maturity Total
Additional Investments Stock-
Common Paid-in and Equity Retained Treasury holders'
Class A Capital Securities Earnings Stock Equity
<C> <C> <C> <C> <C> <C>
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
Balance at 12/31/95 $ 739,584 $ 852,504 $ 1,818,080 $13,655,007 $(50,290) $ 17,014,885
Net earnings 782,767 782,767
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments (1,106,094) (1,106,094)
Equity Securities 51,746 51,746
Balance at 3/31/95 $ 739,584 $ 852,504 $ 763,732 $14,437,774 $(50,290) $ 16,743,304
</TABLE>
<PAGE>
Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
March 31, 1996
1.Investments:
The following table summarizes the company's investments at March
31, 1996 and December 31, 1995. 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.
<TABLE>
Amount
at which
Estimated shown in Gross Gross
Market the balance unrealized unrealized
Type of Investments Cost Value sheet gains losses
March 31, 1996:
<C> <C> <C> <C> <C>
Fixed maturities $64,509,549 64,883,508 64,883,508 1,137,054 763,09
Equity securities 2,511,900 3,295,112 3,295,112 891,818 108,60
Investment Real Estate 154,540 154,540 154,540 --- ---
Short-term investments 2,393,963 2,393,963 2,393,963 --- ---
Total Investments $69,569,952 70,727,123 70,727,123 2,028,872 871,701
December 31, 1995:
Fixed maturities $62,117,379 64,167,237 64,167,237 2,288,499 238,641
Equity securities 2,322,300 3,027,109 3,027,109 818,556 113,747
Investment Real Estate 156,392 156,392 156,392 --- ---
Short-term investments 4,423,463 4,423,463 4,423,463 --- ---
Total Investments $69,019,534 71,774,201 71,774,201 3,107,055 352,388
</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.
<PAGE>
Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
March 31, 1996
4.Average Shares Outstanding:
Average shares outstanding at March 31, 1996 and March 31, 1995
were 672,054 after giving effect to a three-for-one stock split to
shareholders of record on November 8, 1995.
5.Class C Non-Voting Common Stock:
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
6.Subsequent Events
On February 2, 1996, the Company signed a letter of intent with
MAIC Holdings, Inc., of Birmingham, Alabama, wherein MOMED Holding
Co. would enter into negotiations to become a wholly owned
subsidiary of MAIC. The letter of intent with MAIC Holdings, Inc.
states that the Company will continue to operate from its current
location with the same management and employees, while providing
additional products and services to be marketed by MOMEDICO. The
proposed transaction requires approval by the Board of Directors,
Shareholders and the appropriate regulatory authorities and is
subject to the completion of Due Diligence and Definitive
Agreements.
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
<PAGE>
Liquidity and Capital Resources:
At March 31, 1996 and December 31, 1995, the Company had invested
assets of $70,727,123 and $71,774,201 which is 87.6 percent and
88.3 percent of total assets at each period end. 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 $373,959 more than amortized cost at
March 31, 1996. The market value of investments is $1,157,171 more
than cost or amortized cost at March 31, 1996. 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.
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, 1996 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, 1996 $267,000 (for 6
quarterly payments)
As of March 31, 1996, the Company had fixed maturity investments in
the amount of $64,883,508 with an average date to maturity of
approximately 5.85 years. All bonds are "A-" rated or higher,
except for one bond with a book value of $499,874 which is rated
BBB. Further, the Company has no investment in high yield or non-
investment grade securities. Short-term investments totaling
$2,393,963 are expected to provide sufficient liquidity for payment
of losses and loss adjustment expenses.
<PAGE>
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. The first Company Action Level takes place when a
property and casualty insurance company's adjusted actual statutory
surplus is equal to 90.0% 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, 1995 exceeded all
regulatory requirements.
The Company anticipates capital expenditure of approximately
$50,000 for furniture and data processing equipment during 1996.
Revenues:
Premium earned for the quarter decreased approximately 13.1% from
the fourth quarter of 1995, due primarily to a significant decrease
in actuarially projected reinsurance premiums payable during the
fourth quarter of 1995. Premiums earned for the quarter ended
March 31, 1996 decreased by 6.2% from the quarter ended March 31,
1995. This decrease is attributed to a 2.7% decrease in premiums
inforce from March 31, 1995 to March 31, 1996, and changes in
reinsurance premiums ceded.
Investment Income:
Net investment income for the first quarter of 1996 decreased
approximately 2.7% from the fourth quarter of 1995. This is
attributed primarily to the sale or maturity of $4,000,000 of par
value bonds with coupon rates of 6.0% or higher during the fourth
quarter of 1995. These funds were held in a money market account
which was yielding approximately 5.0% during the first half of the
quarter ended March 31, 1996. Net investment income increased
approximately 3.0% over the first quarter of 1995 due primarily to
the increase in invested assets of 8.9%, based on cost or amortized
cost between March 31, 1996 and March 31, 1995.
Expenses:
The Company's provision for loss and loss adjustment expenses as of
March 31, 1996 and December 31, 1995 is based upon MOMEDICO's
experience. The percentage of losses and loss adjustment expenses
to net earned premiums at March 31, 1996 is 78.3% compared to 92.0%
for the year 1995. The percentage for the quarter ended March 31,
1995 was 115.4% The decrease between March 31, 1996 and the
results for the year 1995 and the quarter ended March 31, 1995,
arise primarily from the continuing decline in frequency of
reported claims and favorable development of claim reserves of
prior accident years.
Policy acquisition costs as a percent of premiums earned were 5.4%
and 5.8% for the periods ended March 31, 1996 and March 31, 1995,
respectively. The percentage for the fourth quarter of 1995 was
5.5% The change in policy acquisition cost as a percent of earned
premiums results primarily from changes in underwriting expenses
and commission arrangements.
<PAGE>
Other operating expenses decreased approximately 1.9% from the
quarter ended March 31, 1995 and is attributed to normal
fluctuations in the utilizations of supplies and services in the
day-to-day operations of the business. Other operating expenses
for the first quarter of 1996 increased approximately 4.8% over the
fourth quarter of 1995, and results primarily from increases in
accounting and actuarial services and travel during the first
quarter of 1996 compared to the fourth quarter of 1995.
<PAGE>
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 1996.
<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 5/13/96 Richard V. Bradley, M.D. President
DATE 5/13/96 James M. Stokes, M.D.,
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 64883508
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3295112
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 70727123
<CASH> 0
<RECOVER-REINSURE> 2847560
<DEFERRED-ACQUISITION> 156408
<TOTAL-ASSETS> 80697884
<POLICY-LOSSES> 54809857
<UNEARNED-PREMIUMS> 6671391
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 681533
0
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<COMMON> 739584
<OTHER-SE> 16054010
<TOTAL-LIABILITY-AND-EQUITY> 80697884
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<INVESTMENT-INCOME> 1061887
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<OTHER-INCOME> 27565
<BENEFITS> 2121421
<UNDERWRITING-AMORTIZATION> 146876
<UNDERWRITING-OTHER> 437978
<INCOME-PRETAX> 1087878
<INCOME-TAX> 305111
<INCOME-CONTINUING> 782767
<DISCONTINUED> 0
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<EPS-DILUTED> 1.16
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</TABLE>
