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, 1996 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
739,584
<PAGE>
Part I Financial Information Financial Statements
Momed Holding Company
Unaudited Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
<C> <C>
Assets 1996 1995
Investments (Note 1) $71,135,373 $71,774,201
Cash 185,095 89,917
Accrued investment income 1,073,351 1,022,768
Premiums receivable 236,963 419,122
Reinsurance recoverable on paid and
unpaid losses net of $9,248,556
in 1996 and $10,262,344 in 1995 of
reinsurance premiums attributed
to unpaid losses recoverable 2,869,737 2,791,317
Prepaid reinsurance premiums 493,649 599,434
Prepaid taxes 1,140,235 1,140,235
Deferred policy acquisition cost 127,782 154,955
Building, furniture and equipment at
cost less accumulated depreciation
of $470,756 in 1996 and $444,113
in 1995 831,955 851,402
Other assets 210,987 229,164
Deferred income taxes 2,706,811 2,202,678
Total assets $ 81,011,938 $81,275,193
Liabilities and Stockholders' Equity
Loss & loss adjustment
expenses (Note 2) $ 54,648,999 $54,903,753
Unearned premiums 6,244,320 6,553,559
Accounts payable & accrued expenses 1,009,523 1,025,060
Reinsurance premiums payable 15,631 221,200
Mortgage payable 667,334 693,643
Accrued Federal income tax 529,093 263,093
Total liabilities $ 63,114,900 $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
Stockholders' 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 400,180 1,818,080
Retained earnings 15,355,060 13,655,007
17,347,328 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 17,297,038 17,014,885
Total liabilities and
stockholders' equity $81,011,938 $81,275,193
</TABLE>
<PAGE>
Momed Holding Company
Unaudited Consolidated Statements of Operations
For the Six Months Ended
June 30, 1996 June 30, 1995
Three Six Three Six
Months Months Months Months
<TABLE>
<C> <C> <C> <C>
Revenues:
Net premiums earned $ 3,031,381 $ 5,739,308 $ 2,676,580 $ 5,563,205
Net investment income 1,065,089 2,126,976 1,037,359 2,068,302
Realized gains on
investments 39,689 60,241 235,405 361,358
Other 34,977 62,542 30,324 54,646
Total Revenues 4,171,136 7,989,067 3,979,668 8,047,511
Expenses:
Losses and loss
adjustment expenses 2,060,194 4,181,615 2,931,506 6,263,144
Policy acquisition cost 169,278 316,154 167,337 335,023
Other underwriting
expenses 556,377 994,355 528,391 974,900
Interest expense 25,812 49,590 15,473 31,203
Total Expenses 2,811,661 5,541,714 3,642,707 7,604,270
Earnings before
income taxes 1,359,475 2,447,353 336,961 443,241
Provision for income taxes
Current 421,500 521,000 8,000 10,000
Deferred 20,689 226,300 16,055 40,440
442,189 747,300 24,055 50,440
Net earnings $ 917,286 $ 1,700,053 $ 312,906 $ 392,801
Earnings per share
data:
Earnings per share $ 1.36 $ 2.53 $ .47 $ .58
Earnings per share based on
average shares outstanding
(Note 4) 672,054 672,054 672,054 672,054
</TABLE>
<PAGE>
Momed Holding Company
Unaudited Consolidated Statements of Cash Flows
For the Six Months Ended
June 30, 1996 and June 30, 1995
1996 1995
[S]
<TABLE> <C> <C>
Cash flows from operating
activities:
Net earnings $ 1,700,053 392,801
Adjustments to reconcile
net income to net cash
provided from operating activities:
Changes in:
Accrued investment
income (50,583) 80,402
Premiums receivable 182,159 32,785
Reinsurance recoverable
on paid and unpaid
losses (78,420) 1,736,658
Reserve for losses and loss
adjustment exp. (254,754)(1,981,045)
Prepaid reinsurance premiums 105,785 96,738
Unearned premiums (309,239) (156,555)
Accounts payable and accrued expenses (15,537) (104,721)
Reinsurance premiums payable (205,569) (246,403)
Deferred policy acquisition costs 27,173 4,747
Deferred income taxes 226,300 (253,386)
Other assets 18,177 2,336
Prepaid taxes --- 178,545
Accrued income taxes 266,000 (50,000)
Depreciation of building, furniture
and equipment 30,348 36,267
Amortization of premiums on bonds 26,287 41,700
Net realized investment gains (60,241) (361,358)
Net cash provided (used) by
operating activities 1,607,939 (550,489)
Cash flows from investing activities:
Due from broker --- 7,076,623
Proceeds from investments sold
or matured 3,916,604 54,001
Purchase of bonds and stocks (8,569,047)(4,161,635)
Purchase of property and equipment (7,197) (8,546)
Net cash (used) provided from investing
activities (4,659,640) 2,960,443
Cash flows from financing activities:
Decrease in mortgage payable (26,309) (79,427)
Net cash used by
financing activities (26,309) (79,427)
Net increase (decrease) in cash and short-term
investments (3,078,010) 2,330,527
Cash and short-term investments at beginning
of period 4,513,380 1,738,752
Cash and short-term investments at end of
period $ 1,435,370 $4,069,279
</TABLE>
<PAGE>
<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Changes in Stockholders' Equity
For Six Months Ended June 30, 1996 and June 30, 1995
Unrealized Total
Additional Appreciation Stock-
Common Stock Paid-in of Equity Retained Treasury holders'
Class A Class B Capital Securities Earnings Stock Equity
Balance at <C> <C> <C> <C> <C> <C> <C>
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
Balance at
12/31/95 739,584 $ --- $ 852,504 $1,818,080 $13,655,007 $(50,290) $17,014,885
Net earnings 1,700,053 1,700,053
Unrealized
appreciation
(depreciation of:
Fixed maturity
investments (1,530,743) (1,530,743)
Equity Securities 112,843 112,843
Balance at
6/30/96 $ 739,584 $ --- $ 852,504 $ 400,180 $15,355,060 $(50,290)$17,297,038
</TABLE>
<PAGE>
Momed Holding Company
Notes to Consolidated Financial Statements
Unaudited
June 30, 1996
1. Investments:
The following table summarizes the company's investments at June
30, 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
June 30, 1996:
<C> <C> <C> <C> <C>
Fixed maturities $66,346,959 66,077,509 66,077,509 901,821 1,171,271
Equity securities 2,779,118 3,654,902 3,654,902 991,901 116,117
Investment Real Estate 152,687 152,687 152,687 --- ---
Short-term investments 1,250,275 1,250,275 1,250,275 --- ---
Total Investments $70,529,039 71,135,373 71,135,373 1,893,722 1,287,388
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.
4. Average Shares Outstanding:
Average shares outstanding at June 30, 1996 and June 30, 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. Merger Agreement
On June 11, 1996, the Company signed an agreement and plan of
merger with MAIC Holdings, Inc., of Birmingham, Alabama, wherein
MOMED Holding Co. would become a wholly owned subsidiary of MAIC.
The plan of merger with MAIC Holdings, Inc. provides that the
Company will continue to operate from its current location with the
same management and employees. The transaction still requires approval
by the Board of Directors, Shareholders and appropriate regulatory authorities.
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.
<PAGE>
Management's Analysis of Consolidated Quarterly Income Statements
Liquidity and Capital Resources:
At June 30, 1996 and December 31, 1995, the Company had invested
assets of $71,135,373 and $71,774,201 which is 87.8 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 $269,450 less than amortized cost at
June 30, 1996. The market value of all invested assets is $606,334
more than cost or amortized cost at June 30, 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, 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, 1996, the Company had fixed maturity investments in
the amount of $66,077,509 with an average date to maturity of
approximately 6.01 years. All bonds are "A-" rated or higher,
except for three bonds with a book value of $2,483,441 of which two
are rated BBB+ and one is BBB. Further, the Company has no
investment in high yield or non-investment grade securities.
Short-term investments totaling $1,250,275 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. 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, 1994
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 increased approximately 11.9% from
the first quarter of 1996, due primarily to a decrease in
actuarially projected reinsurance premiums payable during the first
and second quarters of 1996. Premiums earned for the quarter ended
June 30, 1996 increased by 13.3% from the quarter ended June
30, 1995. This increase is also attributed to the decrease in
reinsurance premiums payable which reduces reinsurance premiums
ceded.
Investment Income:
Net investment income for the second quarter of 1996 increased
approximately .3% from the first quarter of 1996. This is
attributed primarily to an increase in invested assets of
approximately $1,000,000 during the second quarter of 1996. Net
investment income increased approximately 2.7% over the second
quarter of 1995 due primarily to the increase in invested assets of
3.6%, based on cost or amortized cost between June 30, 1996 and
June 30, 1995.
Expenses:
The Company's provision for loss and loss adjustment expenses as of
June 30, 1996 and December 31, 1995 is based upon MOMEDICO's
experience. The percentage of losses and loss adjustment expenses
to net earned premiums at June 30, 1996 is 72.9% compared to 92.0%
for the year 1995. The percentage for the quarter ended June 30,
1995 was 109.5% The decrease between June 30, 1996 and the results
for the year 1995 and the quarter ended June 30, 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 5.6%
and 6.2% for the periods ended June 30, 1996 and June 30, 1995,
respectively. The percentage for the first quarter of 1996 was
5.4% 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 2.0% from the
quarter ended June 30, 1995 and is attributed to reorganization expenses
incurred during the second quarter related to the proposed merger with
MAIC Holdings, Inc. Other operating expenses for the second quarter of 1996
increased approximately 27.0% over the first quarter of 1996, and results
primarily from reorganization expenses of $96,106 related to accounting and
legal fees incurred in connection with proposed merger with MAIC Holdings, Inc.
during the second quarter of 1996.
<PAGE>
Part II - Other Information
Item 4. Submission of Matter to Vote of Security Holders:
a) Annual Meeting of Shareholders, May 3, 1996
b) The following were elected as directors:
Richard V. Bradley,MD Norman Knowlton,III MD
Dale E. Darnell, MD Garth S. Russell, MD
R.J. King
Directors whose terms continued after the meeting:
Thomas J. Cooper, MD H. Peter Ekern,MD
Leonard L. Davis, MD Eugene T. Hansbrough,MD
Gary A. Dyer, MD John I. Matthews, MD
Howard E. Linville, MD Meredith J. Payne, MD
James M. Stokes, MD
c) Election of KPMG Peat Marwick LLP as auditors:
Votes: For 538,116 Against 9,255 Abstain 5,400
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 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 8/13/96 Richard V. Bradley, M.D., President
DATE 8/13/96 James M. Stokes, M.D.
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 66,077,509
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3,654,902
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 71,135,373
<CASH> 185,095
<RECOVER-REINSURE> 2,869,737
<DEFERRED-ACQUISITION> 127,782
<TOTAL-ASSETS> 81,011,938
<POLICY-LOSSES> 54,648,999
<UNEARNED-PREMIUMS> 6,244,320
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 667,334
0
0
<COMMON> 739,584
<OTHER-SE> 16,607,744
<TOTAL-LIABILITY-AND-EQUITY> 81,011,938
5,739,308
<INVESTMENT-INCOME> 2,126,976
<INVESTMENT-GAINS> 60,241
<OTHER-INCOME> 62,542
<BENEFITS> 4,181,615
<UNDERWRITING-AMORTIZATION> 316,154
<UNDERWRITING-OTHER> 898,249
<INCOME-PRETAX> 2,543,459
<INCOME-TAX> 747,300
<INCOME-CONTINUING> 1,796,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,796,159
<EPS-PRIMARY> 2.67
<EPS-DILUTED> 2.67
<RESERVE-OPEN> 42,175,111
<PROVISION-CURRENT> 5,404,163
<PROVISION-PRIOR> (1,222,548)
<PAYMENTS-CURRENT> 209,513
<PAYMENTS-PRIOR> 3,609,502
<RESERVE-CLOSE> 42,537,711
<CUMULATIVE-DEFICIENCY> (1,432,061)
</TABLE>
