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 September 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 A Common Stock 739,584
<PAGE>
Part I Financial Information Financial Statements
Momed Holding Company
Unaudited Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
<TABLE>
Assets 1996 1995
<C> <C>
Investments (Notes 2) $72,650,059 71,774,201
Cash --- 89,917
Accrued investment income 1,135,572 1,022,768
Premiums receivable 131,159 419,122
Reinsurance recoverable on paid and
unpaid losses net of $8,875,129
in 1996 and $10,776,819 in 1995 of
reinsurance premiums attributed
to unpaid losses recoverable 3,316,083 2,791,317
Prepaid reinsurance premiums 520,376 599,434
Prepaid taxes 1,140,235 1,140,235
Deferred policy acquisition costs 152,979 154,955
Building, furniture and equipment at
cost less accumulated depreciation
of $486,328 in 1996 and $428,843
in 1995 816,383 851,402
Other assets 210,120 229,164
Deferred income taxes 2,580,718 2,202,678
Total assets $82,653,684 81,275,193
Liability and Stockholder's Equity
Loss & loss adjustment
expenses (Note 3) $54,652,390 54,903,753
Unearned premiums 6,778,210 6,553,559
Accounts payable & accrued expenses 655,026 1,025,060
Bank overdraft 127,039 ---
Reinsurance premiums payable 138,129 221,200
Mortgage payable 654,812 693,643
Accrued Federal income taxes 839,624 63,093
Total liabilities 63,845,230 63,660,308
Class C, Non-voting Common Stock
$1.00 par value, authorized 24,185
shares, issued and outstanding
shares 24,185 (Note 6) -0- 600,000
Stockholder's Equity:
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
of fixed maturity investment and
equity securities, net 646,449 1,818,080
Retained earnings 16,620,207 13,655,007
18,858,744 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 18,808,454 17,014,885
Total liabilities and
stockholders equity $82,653,684 81,275,193
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
Momed Holding Company
Unaudited Consolidated Statements of Operations
For the Three and Nine Month Periods Ended
September 30, 1996 and September 30, 1995
<TABLE>
September 30, 1996 September 30, 1995
Three Nine Three Nine
Months Months Months Months
<C> <C> <C> <C>
Revenues:
Net premiums earned $2,446,512 $8,185,820 $2,987,882 $8,551,087
Net investment income 1,120,297 3,247,273 1,077,211 3,145,513
Realized gains on
investments (1,020) 59,221 151,380 512,738
Other 24,476 87,018 23,235 77,881
Total Revenues 3,590,265 11,579,332 4,239,708 12,287,219
Expenses:
Losses and loss
adjustment expenses 1,069,143 5,250,758 2,905,767 9,168,911
Policy acquisition cost 155,924 472,078 168,623 503,646
Other underwriting
expenses 438,841 1,433,196 486,765 1,461,665
Interest expense 27,983 77,573 14,331 45,534
Total Expenses 1,691,891 7,233,605 3,575,486 11,179,756
Earnings before
income taxes 1,898,374 4,345,727 664,222 1,107,463
Provision for income taxes
Current 634,000 1,155,000 104,000 114,000
Deferred (773) 225,527 110,560 151,000
633,227 1,380,527 214,560 265,000
Net earnings $1,265,147 $2,965,200 $ 449,662 $ 842,463
Earnings per data:
Earnings per share $ 1.88 $ 4.41 $ .67 $ 1.25
Earnings per share
based on average
shares outstanding
(Note 5) 672,054 672,054 672,054 672,054
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
Momed Holding Company
Unaudited Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30, 1996 and September 30, 1995
<TABLE>
1996 1995
<C> <C>
Cash flows from
operating activities:
Net earnings $2,965,200 $ 842,463
Adjustments to reconcile
net income to net
cash provided from
operating activities:
Changes in:
Accrued investment income (112,804) (41,665)
Premiums receivable 287,963 123,040
Reinsurance recoverable
on paid and unpaid
losses (524,766) 1,822,909
Reserve for losses and
loss adjustment exp. (251,363) (2,107,930)
Prepaid reinsurance premiums 79,058 13,127
Unearned premiums 224,651 321,632
Accounts payable and accrued expenses (370,034) (234,282)
Bank overdraft 127,039 ---
Reinsurance premiums payable (83,071) 140,332
Deferred policy acquisition costs 1,976 (16,499)
Deferred income taxes 225,527 (142,825)
Other assets 19,044 14,583
Prepaid taxes -0- 229,307
Accrued Income taxes 576,531 (99,592)
Depreciation of building, furniture
and equipment 47,772 56,896
Amortization of premiums on bonds 35,706 60,164
Net realized investment gains (59,221) (512,738)
Net cash provided by operating activities 3,189,208 468,922
Cash flows from investing activities:
Proceeds from investments sold
or matured 4,043,900 9,903,598
Purchase of bonds and stocks (8,886,735) (6,968,960)
Purchase of property and equipment (7,197) (17,201)
Net cash (used) provided from investing
activities (4,850,032) 2,917,437
Cash flows from financing activities:
Redemption of Class C Stock (600,000) -0-
Decrease in mortgage payable (38,831) (93,292)
Net cash used by financing activities (638,831) (93,292)
Net increase (decrease) in
cash and short-term investments 2,299,655) 3,293,067
Cash and short-term investments
at beginning of period 4,513,380 1,738,752
Cash and short-term investments
at end of period $2,213,725 $ 5,031,819
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
<TABLE>
Momed Holding Company
Unaudited Consolidated Statements of Stockholders' Equity
For Nine Months Ended September 30, 1996 and September 30, 1995
Unrealized
Appreciation Total
Additional (Depreciation) Stock-
Common Stock Paid-in of Equity Retained Treasury holders'
Class A Class B Capital Securities Earnings Stock Equity
<C> <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 842,463 842,463
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments, net 2,044,636 2,044,636
Equity Securities,net 183,351 183,351
Balance at 9/30/95 $ 246,528 $ --- $1,345,560 $ 946,883 $10,420,445 $(50,290) $12,909,126
Balance at 12/31/95 $ 739,584 $ --- $ 852,504 $1,818,080 $13,655,007 $(50,290) $17,014,885
Net earnings 2,965,200 2,965,200
Unrealized
appreciation
(depreciation) of:
Fixed maturity
investments, net (1,498,861) (1,498,861)
Equity Securities,net 327,230 327,230
Balance at 9/30/96 $ 739,584 $ --- $ 852,504 $ 646,449 $16,620,207 $(50,290) $18,808,454
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
Momed Holding Company
Notes to Unaudited Consolidated Financial
Statements
September 30, 1996
1. Basis of Presentation:
The unaudited consolidated financial statements of MOMED
Holding Co. and its Subsidiaries have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. MOMED
believes that the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly MOMED's consolidated
financial position as of September 30, 1996 and the consolidated
results of operations and the consolidated cash flows for the
nine month periods ended September 30, 1996 and 1995.
The results of operations for the nine month period ended September
30, 1996 are not necessarily indicative of the results to be
expected for the full year.
2. Investments:
The following table summarizes the company's investments at
September 30, 1996 and December 31, 1995. Fixed maturity and
equity security investments are classified as available for sale
and reported in the financial statements at fair market value, with
the unrealized gains (losses) excluded from earnings and reported
as a separate component of stockholders equity, net of tax,
pursuant to the provision of FASB Statement 115 "Accounting for
Certain Investments in Debt and Equity Securities.
<TABLE>
Amount
at which
Estimated shown in Gross Gross
Market the balance unrealized unrealized
Type of Investments Cost Value sheet gains losses
September 30, 1996:
<C> <C> <C> <C> <C>
Fixed maturities $66,209,389 65,988,247 65,988,247 868,751 1,089,893
Equity securities 3,096,640 4,297,252 4,297,252 1,293,335 92,723
Investment Real Estate 150,835 150,835 150,835 --- ---
Short-term investments 2,213,725 2,213,725 2,213,725 --- ---
Total Investments $71,670,589 72,650,059 72,650,059 2,162,086 1,182,616
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>
<PAGE>
Momed Holding Company
Notes to Unaudited Consolidated Financial
Statements
September 30, 1996
3. 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.
4. Cash and Short-term Investments:
Cash and short-term investments, as reported in the statement of
cash flows represents cash and short term investments with maturity
dates of ninety days or less.
5. Average Shares Outstanding:
Average shares outstanding at September 30, 1996 and September 30,
1995 were 672,054 after giving effect to a three-for-one stock
split to shareholders of record on November 8, 1995.
6. Class C Non-Voting Common Stock:
On September 4, 1996, the Class C non-voting common stock held by
Missouri State Medical Association (MSMA) was redeemed pursuant to
the share exchange agreement. The consideration was $600,000 plus
accrued interest at prime plus 1% from August 16, 1994 through
September 4, 1996 in the amount of $107,877.
7. 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
Shareholder approval. A Special Meeting of Shareholders is being
held on November 22, 1996 to vote on this issue.
Management's Analysis of Consolidated Quarterly Income Statements
Liquidity and Capital Resources:
At September 30, 1996 and December 31, 1995, the Company had
invested assets of $72,650,059 and $71,774,201 which is 88.0
percent and 88.3 percent of total assets at each period end. The
Company's fixed maturity investments have been classified as
available for sale and reported at their fair value which is
$229,142 less than amortized cost. The market value of all
invested assets is $979,470 more than cost or amortized cost at
September 30, 1996. The Company believes 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.
<PAGE>
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
September 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, 1997 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, $267,000 }for 6
quarterly
July 1, 1995 through June 30, 1996, $266,667 }payments
July 1, 1996 through June 30, 1997, $266,667 }
As of September 30, 1996, the Company had fixed maturity
investments in the amount of $65,988,247 with an average date to
maturity of approximately 6.01 years. All bonds are "A-" rated or
higher, except for five bonds with a book value of $4,475,838 of
which three are rated BBB+ and two are BBB. Further, the Company
has no investment in high yield or non-investment grade securities.
Short-term investments totaling $2,213,725 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. 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 and September 30, 1996
exceeded all regulatory requirements.
The Company anticipates capital expenditures of approximately
$20,000 for furniture and data processing equipment during the
fourth quarter of 1996.
<PAGE>
Revenues:
Premiums earned for the nine months ended September 30, 1996
decreased approximately 4.3% from the nine months ended September
30, 1995, due to intensive price competition which reduced the
number of insured physicians and, accordingly resulted in a
decrease in direct written premiums The decrease in direct written
premiums is partially offset by a decrease in actuarially projected
reinsurance premiums payable, which reduces reinsurance premiums
ceded.
Investment Income:
Net investment income for the nine months ended September 30, 1996
increased approximately 3.2% from the nine months ended September
30, 1995. This is attributed primarily to an increase in invested
assets of 4.6% based on cost or amortized cost between September
30, 1996 and September 30, 1995.
Expenses:
The Company's provision for loss and loss adjustment expenses as of
September 30, 1996 and December 31, 1995 is based upon MOMEDICO's
experience. The percentage of losses and loss adjustment expenses
to net earned premiums for the nine months ended September 30, 1996
is 64.1% compared to 92.0% for the year 1995. The percentage for
the nine months ended September 30, 1995 was 107.2%. The decrease
between September 30, 1996 and the results for the year 1995 and
the nine months ended September 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 5.8%
and 5.9% for the periods ended September 30, 1996 and September 30,
1995, respectively. 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 decreased approximately 1.9% from the
period ended September 30, 1995 and is attributed to normal
fluctuation in the utilization of services.
<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 third quarter of 1996.
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 11/13/96 Richard V. Bradley, MD
President
DATE 11/13/96 James M. Stokes, MD
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 65988247
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4297252
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 72650059
<CASH> 0
<RECOVER-REINSURE> 3316083
<DEFERRED-ACQUISITION> 152979
<TOTAL-ASSETS> 82653684
<POLICY-LOSSES> 54652390
<UNEARNED-PREMIUMS> 6778210
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 654812
0
0
<COMMON> 739584
<OTHER-SE> 18119160
<TOTAL-LIABILITY-AND-EQUITY> 82653684
8185820
<INVESTMENT-INCOME> 3247273
<INVESTMENT-GAINS> 59221
<OTHER-INCOME> 87018
<BENEFITS> 5250758
<UNDERWRITING-AMORTIZATION> 472078
<UNDERWRITING-OTHER> 1433196
<INCOME-PRETAX> 4345727
<INCOME-TAX> 1380527
<INCOME-CONTINUING> 2965200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2965200
<EPS-PRIMARY> 4.41
<EPS-DILUTED> 4.41
<RESERVE-OPEN> 42175111
<PROVISION-CURRENT> 7762689
<PROVISION-PRIOR> (2511931)
<PAYMENTS-CURRENT> 331809
<PAYMENTS-PRIOR> 4185697
<RESERVE-CLOSE> 42462173
<CUMULATIVE-DEFICIENCY> (2843740)
</TABLE>
