<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report under section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarter ended
June 30, 1998.
or
( ) Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934. For the transition
period from to .
Commission File Number: 1-11920
MMI Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3263253
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
540 Lake Cook Road, Deerfield, Illinois 60015-5290
(Address of principal executive offices)
(847) 940-7550
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 18,964,418 shares outstanding of the registrant's
common stock, $0.10 par value, as of August 11,1998.
<PAGE>
MMI Companies, Inc. and Subsidiaries
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of 4
Income
Consolidated Statements of 5
Stockholders' Equity
Consolidated Statements of 6
Cash Flows
Notes to Consolidated 7-9
Financial Statements
Item 2. Management's Discussion 10-11
and Analysis of
Financial Condition and
Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on 12
Form 8-K
Signatures 13
EXHIBITS:
10.11 First Amendment to Employment
Agreement
27. Financial Data Schedule.
</TABLE>
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS
Short-term investments $ 56,638 $ 52,219
Fixed maturities 1,132,016 1,135,702
Preferred stocks 59,098 42,879
1,247,752 1,230,800
OTHER ASSETS
Cash 15,098 6,698
Premium and fees receivable 209,985 165,906
Reinsurance receivables 310,144 300,077
Prepaid reinsurance premiums 36,147 21,514
Accrued investment income 18,467 17,045
Cost in excess of net
assets of purchased subsidiaries,
less accumulated amortization 38,887 37,257
Furniture and equipment -
at cost,less accumulated
depreciation 14,616 14,258
Deferred income taxes 44,317 42,979
Other 59,408 47,533
$1,994,821 $1,884,067
LIABILITIES AND STOCKHOLDERS'
EQUITY LIABILITIES
Policy liabilities:
Loss and loss adjustment
expense reserves:
Medical malpractice
liability $ 636,961 $ 613,063
International 485,909 500,032
Other 21,070 12,051
1,143,940 1,125,146
Unearned premium reserves 195,646 134,188
Future life policy benefits 8,142 8,723
1,347,728 1,268,057
Accrued expenses and other
liabilities 51,484 50,071
Amounts due to reinsurers 59,913 48,213
Company-obligated,
mandatorily redeemable
preferred capital securities
of subsidiary trust holding
solely junior subordinated
debentures of the Company 118,825 118,724
1,577,950 1,485,065
STOCKHOLDERS' EQUITY
Common Stock, par value $.10
per share:
Authorized shares: - 30,000
Issued and outstanding
shares: 1998 - 18,964;
1997 - 18,857 1,896 1,886
Additional paid-in capital 220,167 217,855
Retained earnings 169,067 154,929
Accumulated other
comprehensive income,
net of taxes:
1998 - $13,563; 1997 - $12,812 25,741 24,332
416,871 399,002
$1,994,821 $1,884,067
</TABLE>See notes to consolidated financial statements.
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Insurance premiums earned:
Medical malpractice
liability $40,975 $34,910 $110,236 $75,885
International 30,753 35,301 60,715 64,448
Life and health 3,543 1,125 6,686 2,426
75,091 71,336 177,637 142,759
Consulting and fee
income 13,061 13,241 25,373 25,308
Net investment
income 18,966 18,886 37,738 36,980
Net realized gains on
investments 204 369 1,033 970
TOTAL REVENUES 107,322 103,832 241,781 206,017
LOSSES AND EXPENSES
Losses and loss adjustment
expenses:
Medical malpractice
liability 35,959 28,517 98,011 62,094
International 19,704 22,182 38,265 39,409
Life and health 2,548 1,058 5,036 2,264
58,211 51,757 141,312 103,767
Insurance and administrative
expenses 36,972 36,673 75,545 72,013
Interest expense 2,462 1,466 4,897 2,916
TOTAL LOSSES AND
EXPENSES 97,645 89,896 221,754 178,696 6
INCOME BEFORE INCOME
TAXES AND
EXTRAORDINARY LOSS 9,677 13,936 20,027 27,321
LOSS
Income taxes 1,193 2,854 2,848 5,614
INCOME BEFORE
EXTRAORDINARY LOSS 8,484 11,082 17,179 21,707
Extraordinary loss,
net of tax - 267 - 267
NET INCOME $ 8,484 10,815 17,179 21,440
Earnings per common and common
equivalent share:
Basic:
Income before extraordinary
loss $ 0.45 $ 0.59 $ 0.91 $1.16
Extraordinary loss, net of
tax - (0.01) - (0.01) )
NET INCOME $ 0.45 $ 0.58 $ 0.91 $1.15
Diluted:
Income before extraordinary
loss 0.44 0.57 0.88 1.12
Extraordinary loss,
net of tax - (0.01) - (0.01)
NET INCOME $ 0.44 $ 0.56 $ 0.88 $ 1.11
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated
Other
Common Stock Additional Comprehensive Total
Number Par Paid-In Retained Income, Stockholders'
of Shares Value Capital Earnings Net of Taxes Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,1996 18,681 $1,868 $215,091 $124,751 $13,456 $355,166 $
Year ended
December 31, 1997:
Net income 34,360 34,360
Issuance of Common
Stock in connection
with acquisition
of subsidiar 85 9 1,942 1,951
Issuance of Common
Stock in connection
with employee
benefit plans and
exercise of employee
stock options 212 21 3,650 3,671
Common Stock
repurchased (121) (12) (2,828) (2,840)
Change in
accumulated other
comprehensive
income, net of
taxes of $5,595 10,876 10,876
Common cas
dividends
($.22 per share) (4,182) (4,182)
Balance at
December 31, 1997 18,857 1,886 217,855 154,929 24,332 399,002
Six months ended
June 30, 1998 (unaudited):
Net income 17,179 17,179
Issuance of Common
Stock in connection
with acquisition
of subsidiary 66 6 1,393 1,399
Issuance of Common
Stock in connection
with employee
benefit plans
and exercise of
employee stock
options 41 4 919 923
Change in
accumulated other
comprehensive
income, net of
taxes of $751 1,409 1,409
Common cash
dividends
($.16 per share) (3,041) (3,041)
Balance at
June 30, 1998
(unaudited) 18,964 $1,896 $220,167 $169,067 $25,741 $416,871
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $17,179 $21,440
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Increase in policy liabilities 79,671 61,852
Change in reinsurance balances (13,000) (21,313)
Increase in premium and fees
receivable (44,036) (54,648)
Increase in deferred income
taxes (2,128) (1,286)
Increase in accrued investment
income and other assets (15,580) (11,569)
Change in accrued expenses and other
liabilities 1,468 (15,713)
Net realized gains on investments (1,033) (970)
Depreciation and amortization on
investments and goodwill 4,249 2,710
Net cash provided (used) by
operating activities 26,790 (19,497)
INVESTING ACTIVITIES
Net sale of short-term
investments (4,624) 10,747
Purchases of available-for-sale
investments (345,962) (340,094)
Sales of available-for-sale
investments 301,731 336,012
Maturities of available-for-sale
investments 35,831 26,782
Acquisitions of subsidiaries - (8,281)
Furniture and equipment
additions (3,248) (3,791)
Net cash (used) provided by
investing activities (16,272) 21,375
FINANCING ACTIVITIES
Issuance of Common Stock 923 1,118
Repurchase of Common Stock - (2,840)
Dividends (3,041) (1,648)
Net cash used by financing
activities (2,118) (3,370)
Increase (decrease) in cash 8,400 (1,492)
Cash at beginning of period 6,698 4,839
Cash at end of period $ 15,098 $ 3,347
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MMI Companies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1998
1. Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
six month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to
the consolidated financial statements and notes thereto
included in the Company's 1997 Annual Report.
2. Acquisition of Unionamerica Holdings plc
In December 1997, MMI acquired Unionamerica Holdings plc
(Unionamerica) in exchange for 7,100,000 shares of MMI
Common Stock. The acquisition was accounted for as a
pooling of interests and, accordingly, the accompanying
consolidated financial statements were restated to include
the consolidated operations of Unionamerica for all periods
presented.
3. Earnings Per Share
The following table sets forth the computation of net
earnings per common share and net earnings per common and
common equivalent share (in thousands, except per share
data):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net earnings $8,484 $10,815 $17,179 $21,440
Weighted average number of
common shares outstanding 18,927 18,702 18,893 18,721
Dilutive effect of stock
options using the
treasury stock method 504 597 538 674
Weighted average number of
common and common equivalent
shares outstanding.... 19,431 19,299 19,431 19,395
Net earnings per common
share $ .45 $ .58 $ .88 $ 1.15
Net earnings per common and
common equivalent share $ .44 $ .56 $ .88 $ 1.11
</TABLE>
<PAGE>
4. Trust Preferred Capital Securities
In December 1997, the Company issued $125,000,000 30-year,
mandatorily redeemable preferred capital securities (Capital
Securities) of MMI Capital Trust 1 (Trust), a subsidiary of
MMI. Proceeds from the sale of the Capital Securities were
used to purchase $125,000,000 aggregate principal amount of
the Company's 7-5/8 Junior Subordinated Deferrable Interest
Debentures (Debentures), due December 15, 2027. The
Debentures are the sole assets of the Trust. The Capital
Securities will pay a dividend of 7-5/8% semiannually in
arrears beginning June 15, 1998 and have a maturity date of
December 15, 2027. Payments on the Capital Securities are
fully and unconditionally guaranteed by MMI. Total proceeds
were $118,700,000, net of expenses. The effective rate of
the Capital Securities is 8.06%.
5. Effect of New Pronouncements
As of January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income". SFAS 130 established new
rules for the reporting and display of comprehensive income
and its components. The adoption of SFAS 130 had no effect
on the Company's net income or stockholders' equity.
The components of comprehensive income and accumulated
comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $ 8,484 $10,815 $17,179 $21,440
Net change in
unrealized gains on
investments, net
of income taxes 1,874 7,430 1,409 (1,304)
Comprehensive income $10,358 $18,245 $18,588 $20,136
June 30, December 31,
1998 1997
Accumulated other
comprehensive
income at
beginning of year $24,332 $13,456
Net change in
unrealized gains on
investments, net
of income taxes 1,409 10,876
Accumulated other
comprehensive
income at end of
period $25,741 $24,332
</TABLE>
In 1997 the FASB also issued Statement of Financial Accounting
Standards No. 131 (SFAS 131),`'Disclosures about Segments of
an Enterprise and Related Information," which is effective
for years beginning after December 15, 1997. SFAS 131 established
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
MMI Companies has three reportable segments: domestic
insurance, international insurance and consulting and fees. The
domestic insurance segment principally includes professional and
general liability insurance and reinsurance for hospitals,
healthcare systems and healthcare providers. The international
insurance segment, principally located in the United Kingdom,
includes the international insurance and reinsurance business.
The consulting and fee segment includes clinical risk management
consulting, strategic healthcare consulting, employee relations
consulting, professional liability claims administration,
healthcare credentials verification services and billing,
compliance and reimbursement services.
<PAGE>
Intersegment revenues and expenses have been eliminated.
Information by segment is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Domestic insurance
segment:
Revenues $57,060 $48,785 $141,857 $103,229
Income before
taxes 5,501 5,898 10,797 12,484
Loss ratio 86.5% 82.1% 88.1% 82.2%
Expense ratio 29.3% 36.9% 24.0% 33.7%
Combined ratio 115.8% 119.0% 112.1% 115.9%
International
insurance segment:
Revenue $37,201 $41,806 $74,551 $77,480
Income before
taxes 4,331 6,462 10,736 12,475
Loss ratio 64.4% 62.8% 63.0% 61.1%
Expense ratio 43.1% 37.3% 42.1% 39.7%
Combined ratio 107.5% 100.1% 105.1% 100.8%
Consulting and fee
segment:
Revenues $ 13,061 $ 13,241 $ 25,373 $ 25,308
Income (loss)
before taxes (155) 1,576 (1,506) 2,362
Pretax margin (1.2%) 11.9% (5.9%) 9.3%
Consolidated insurance
ratios:
Loss ratio 77.5% 72.6% 79.6% 72.7%
Expense ratio 34.9% 37.1% 30.2% 36.4%
Combined 112.4% 109.7% 109.8% 109.1%
</TABLE>
In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133 (SFAS 133). "Accounting for
Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 1999. The
Company does not anticipate that the adoption of SFAS 133 will
have a significant effect on the Company's consolidated
operating results or financial position.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Six Months Ended June 30, 1998 compared to Six Months Ended
June 30, 1997.
Revenues. Gross premiums written increased by 13.9% to
$278,998,000 for the six months ended June 30, 1998 from
$244,919,000 for the 1997 period. Net premiums written
increased by 14.2% to $224,430,000 from $196,479,000, and net
premiums earned increased by 24.4% to $177,637,000 from
$142,759,000. For the three months ended June 30, 1998 gross
premiums written increased by 8.9% to $68,551,000 from
$62,929,000, net premiums written increased by 3.8% to
$52,565,000 from $50,638,000 and net premiums earned increased
by 5.3% to $75,091,000 from $71,336,000.
Medical malpractice premiums earned increased by 45.3% to
$110,236,000 for the six months ended June 30, 1998 from
$75,885,000 for the 1997 period and increased by 17.4% to
$40,975,000 from $34,910,000 for the three month period.
International premiums earned decreased 5.8% to $60,715,000
from $64,448,000 for the 1997 period and decreased by 13.4% to
$30,573,000 from $35,301,000 for the three month period. Life
and health premiums earned increased by 175.6%, to $6,686,000
for the six months ended June 30, 1998 from $2,426,000 for the
1997 period and increased by 214.9% to $3,543,000 from
$1,125,000 for the three month period. The Company's written
and earned premiums can vary significantly from quarter to
quarter due to one-time premiums, such as for prior acts
coverage for new insureds. During the first six months of
1998, the Company's medical malpractice premiums earned
included $31,981,000 in such one time premiums, an increase of
$27,252,000 in one-time premiums from the first six months,
1997.
Consulting and fee income was relatively unchanged at
$25,373,000 for the six months ended June 30, 1998 from
$25,308,000 for the 1997 period and decreased by 1.4% to
$13,061,000 from $13,241,000 for the three month period.
Net investment income increased by 2.0% to $37,738,000 for
the six months ended June 30, 1998 from $36,980,000 for the
1997 period and was relatively unchanged at $18,966,000
compared to $18,886,000 for the three month period. For the
three month period, the Company had net realized gains on
investments of $204,000 in 1998 compared to $369,000 in 1997.
Losses and expenses. Losses and loss adjustment expenses
("LAE") increased by 36.2% to $141,312,000 for the six months
ended June 30, 1998 from $103,767,000 for the 1997 period and
increased by 12.5% to $58,211,000 from $51,757,000 for the
three month period. Medical malpractice liability losses and
LAE increased by 57.8% to $98,011,000 for the six months ended
June 30, 1998 from $62,094,000 for the 1997 period, due to the
increase in one-time premiums in the first quarter 1998 and
increased by 26.1% to $35,959,000 from $28,517,000 for the
three month period. International losses and LAE decreased
2.9% to $38,265,000 from $39,409,000 in the 1997 period and
decreased by 11.2% to $19,704,000 from $22,182,000 for the
three month period. Other losses and LAE increased to
$5,036,000 from $2,264,000 in the second quarter 1997. The
consolidated loss ratio increased to 79.6% from 72.7% for the
respective six month periods due to an increase in the core
medical malpractice loss ratio as well as a higher loss ratio
associated with the one-time premiums.
Insurance and administrative expenses increased by 4.9% to
$75,545,000 for the six months ended June 30, 1998 from
$72,013,000 for the 1997 period and increased by 0.8% to
$36,972,000 from $36,673,000 for the three month period.
Interest expense increased by 67.9% to $4,897,000 for the six
months ended June 30, 1998 from $2,916,000 for the 1997 period
and increased by 67.9% to $2,462,000 from $1,466,000 for the
three month period, due to an increase in debt outstanding as
well as an increase in the interest rate on the debt. Debt
outstanding totaled $118,825,000 at June 30, 1998 compared to
$93,000,000 at June 30, 1997.
Income taxes. Income taxes were $2,848,000 for the six
months ended June 30, 1998 compared to $5,614,000 for the 1997
period and for the three month period were $1,193,000 in 1998
compared to $2,854,000 in the prior year. Income taxes
decreased for the three and six months due to lower pre-tax
income in 1998.
<PAGE>
Net income. Net income decreased by 19.9% to $17,179,000
for the six months ended June 30, 1998 from $21,440,000 for the
1997 period and decreased 21.6% to $8,484,000 from $10,815,000
for the three month period.
Net income per share. Diluted net income per common and
common equivalent share decreased to $.88 for the six months
ended June 30, 1998 from $1.11 for the 1997 period. For the
three months ended June 30, diluted net income per share was
$.44 per share in 1998 and $.56 per share in 1997.
Liquidity And Capital Resources
As a holding company, the Company's assets consist primarily
of the stock of its subsidiaries. The principal sources of
funds are management fees and dividends from subsidiaries. In
the six month periods ended June 30, 1998 and June 30, 1997,
the Company received dividends of $3,000,000 and $5,500,000,
respectively, from its subsidiaries. The Company received
management fees from its subsidiaries of $11,975,000 for the
six months ended June 30 1998, compared to $13,025,000 in 1997.
On a consolidated basis, the Company's principal sources of
operating funds are premiums, net investment income, fees and
recoveries from reinsurers. Funds are used to pay claims,
operating expenses, reinsurance premiums, acquisition related
expenses, debt service requirements, taxes and dividends to
stockholders.
Cash provided by operating activities was $26,790,000 for
the six months ended June 30, 1998 compared with cash used of
$19,497,000 for the six months ended June 30, 1997. Because of
variability related to the timing of payment of claims, cash
from operations for a casualty insurance company can vary
substantially from quarter to quarter.
Cash used by investing activities was $16,272,000 for the
six months ended June 30, 1998 compared to cash provided of
$21,375,000 for the six months ended June 30, 1997.
Cash used by financing activities was $2,118,000 for the
six months ended June 30, 1998 compared to $3,370,000 for the
six months ended June 30, 1997.
The Company invests in investment grade fixed income
securities and preferred stocks. The estimated fair value of
preferred stocks was 4.7% of fair value of total invested
assets as of June 30 1998. The estimated fair value of the
Company's investment portfolio was $1,247,752,000 as of June
30, 1998 compared to $1,230,800,000 as of December 31, 1997.
The June 30, 1998 amount includes net unrealized gains of
$39,304,000 which represent the amount by which the estimated
fair value of the investment portfolio exceeds amortized cost.
Net unrealized gains as of December 31, 1997 were $37,144,000.
The Company maintains a portion of its investment portfolio in
high quality, short-term securities to meet its short-term
operating liquidity requirements, including the payment of
claims and expenses. Short-term investments totaled
$56,638,000 or 4.5% of invested assets at June 30, 1998. The
Company believes that all of its invested assets are readily
marketable.
Long-term debt consisting of Capital Securities totaled
$118,825,000 at June 30, 1998. This amount relates to the
Company's issuance of $125,000,000 of 30-year, non-callable
Capital Securities in December, 1997.
Stockholders' equity was $416,871,000 as of June 30, 1998
compared to $399,002,000 as of December 31, 1997. Dividends to
stockholders were $3,041,000 for the six months ended June 30,
1998.
Year 2000
The Company has developed a workplan to address year 2000
issues across all MMI technology platforms. A company-wide
assessment of year 2000 exposures has been completed and
workplan priorities and schedules are in place and are expected
to be completed by the end of 1998. Additionally, system-wide
year 2000 simulations are scheduled throughout 1999. The
workplan includes system modification and conversion as well as
alignment with vendors and third parties. The cost to address
year 2000 issues is not expected to be material and is being
expensed as incurred.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A.Exhibits
10.11 First Amendment to Employment Agreement
27. Financial Data Schedule.
B. Reports on Form 8-K. No reports on Form 8-K were
filed during the quarter.
<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.
MMI Companies, Inc.
(Registrant)
Date: August 13, 1998
/s/B. Frederick Becker
B. Frederick Becker
Chairman and Chief
Executive Officer
Date: August 13, 1998
/s/Paul M. Orzech
Paul M. Orzech
Executive Vice President and
Chief Financial Officer
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment")
made as of April 15, 1998 by and between MMI Companies, Inc. (the
"Company") and B. Frederick Becker (the "Employee").
W I T N E S S E T H
WHEREAS, the parties have entered into that certain
Employment Agreement dated as of May 1, 1997 (the "Employment
Agreement"); and
WHEREAS, the Personnel and Compensation Committee of the
Board of Directors of the Company desires to provide additional
incentives to Employee to further the best interests of the
Company and has approved an increase in Employee's Maximum Bonus
(as such term is defined in the Employment Agreement);
NOW, THEREFORE, the parties hereby agree as follows:
1. The second paragraph of Paragraph 4 of the Employment
Agreement is hereby amended in its entirety to read as follows:
"Upon successful achievement of the
agreed upon goals, such annual bonus will
equal up to 65% of the Employee's annual
salary or such higher amount as the Board
of Directors or Compensation Committee
may determine if circumstances warrant
(`Maximum Bonus')."
2. Except as amended hereby, the Employment Agreement is
ratified and affirmed in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
MMI COMPANIES, INC.
By: _________________________
___________________________ B. Frederick Becker
Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information
extracted from the consolidated financial statements of MMI
Companies, Inc. and subsidiaries for the six month period ended
June 30, 1998, and is qualified in its entirety by reference to
such financial statements.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 1,132,016
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 59,098
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,247,752
<CASH> 15,098
<RECOVER-REINSURE> 26,940
<DEFERRED-ACQUISITION> 39,625
<TOTAL-ASSETS> 1,994,821
<POLICY-LOSSES> 1,152,082
<UNEARNED-PREMIUMS> 195,646
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 118,825
<COMMON> 1,896
0
0
<OTHER-SE> 414,975
<TOTAL-LIABILITY-AND-EQUITY> 1,994,821
177,637
<INVESTMENT-INCOME> 37,738
<INVESTMENT-GAINS> 1,033
<OTHER-INCOME> 25,373
<BENEFITS> 141,312
<UNDERWRITING-AMORTIZATION> 24,909
<UNDERWRITING-OTHER> 50,636
<INCOME-PRETAX> 20,027
<INCOME-TAX> 2,848
<INCOME-CONTINUING> 17,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,179
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.88
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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<CUMULATIVE-DEFICIENCY> 0
</TABLE>
