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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): November 1, 1999
MMI Companies, Inc.
(Exact name of registrant as specified in its charter)
Commission file number: 1-11920
Delaware 36-3263253
(State or other jurisdiction (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)
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Item 5. Other Events.
Filed as an exhibit is a press release of the registrant dated November 1,
1999 relating to reserve strengthening and restructuring changes of $105
million during the third quarter of 1999.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99. Press release of the registrant dated
November 1, 1999
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 hereunto duly
authorized.
MMI Companies,Inc.
(Registrant)
Date: November 1, 1999 /s/B. Frederick Becker
B. Frederick Becker
Chairman and Chief Executive
Officer
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Exhibit 99
MMI Companies, Inc.
540 Lake Cook Road, Deerfield, Illinois 60015-5290
847-374-2400
FAX 847-940-2372
INVESTOR CONTACT: Paul Orzech, 847-374-2369
MMI Companies, Inc. to Report Third Quarter Reserve Strengthening
and
Restructuring Charges of $105 million
DEERFIELD, IL, November 1, 1999 - MMI Companies, Inc. (NYSE:
MMI), today reported that its financial results for the third
quarter ended September 30, 1999 will include charges totaling
$105 million for increasing reserves in its insurance operations
and restructuring its consulting and fee businesses. As a result,
operating loss per share, which does not include realized gains
and losses on investments, net of tax, for the quarter ended
September 30, 1999 is expected to range from $3.55 to $3.65, and
net loss per share is expected to range from $3.57 to $3.67.
Actual results are expected to be announced on November 4, 1999.
Of the total charge, $60 million is related to reserve increases
in MMI's domestic insurance operations and $31 million to
increases in MMI's international insurance operations. The
balance of the charge, $14 million, relates to the restructuring
that MMI has undertaken primarily in its consulting and fee
businesses. The net of tax impact of the charges is expected to
be $71 million, or $3.71 per share.
Domestic Reserve Increase
The increase in domestic reserves relates primarily to business
written from 1995 to 1998 and reflects the continuation of a
highly competitive medical malpractice market. Approximately 40%
of this reserve increase pertains to MMI's core book of hospital
and clinic business. Adverse trends reflecting increased
frequency and severity of claims continued during 1999.
As a result of a comprehensive review of its core domestic book
of business during 1998 and 1999, MMI has terminated poor
performing accounts that represent the majority of the recent
unfavorable loss experience. Additionally, in 1999, MMI has been
implementing price increases for its core healthcare business.
The remainder of the domestic reserve increase relates to a block
of Florida long-term care accounts, which were written from 1995
to 1998. MMI experienced an increase in loss severity due to
dramatic adverse changes in the social and litigation environment
in Florida during 1999 for this class of business, which was
manifested in several multi-million dollar damage awards. MMI
exited the long-term care market in 1998.
(more)
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2
International Reserve Increase
Approximately one-half of the reserve increase for MMI's
international insurance segment relates to casualty lines,
including medical malpractice and commercial auto. The remaining
reserve development in the international segment relates to short-
tail lines, primarily property and medical expense business. The
reserve increase applies to business written from 1995 to 1998
and reflects a continuation of competitive market conditions and
increased trends in severity.
Consulting and Fee Restructuring
MMI recorded charges of $14 million during the quarter, primarily
related to the restructuring of its consulting and fee
businesses. Charges relate to the impairment of goodwill for
certain of MMI's consulting and fee businesses reflecting a
decline in profitability, discontinuance of certain product
offerings and disposition of real estate lease obligations in
several locations.
Chairman's remarks
B. Frederick Becker, Chairman and CEO, commented, "Our current
business environment requires these difficult and disappointing
actions that we have communicated today. We have undertaken an
expense reduction program targeted to produce total annual
savings of $15 million, including $9 million in our domestic
insurance operations. We also expect that the re-underwriting and
pricing actions we have taken to date will result in improved
underwriting results. As we have mentioned previously, in the
past year we have re-emphasized the risk management component of
our insurance programs as a means to fundamentally improve our
clients' loss experience."
"With respect to the long-term care business, we are aggressively
managing the runoff of the remaining claims. We are working
closely with highly experienced, expert counsel in the emerging
types of long-term care claims. In addition, we believe that we
will benefit from recent legislative changes in Florida."
Mr. Becker added, "The performance of our international insurance
segment reflects the continuation of competitive market
conditions which have been pervasive in the insurance industry in
recent years. We have been proactive in reducing our
participation in unprofitable lines where pricing is not
available at acceptable levels."
Mr. Becker concluded, "We recently completed a comprehensive
review of our consulting and fee businesses, focusing on growth
and profit potential and operating efficiency. We have taken the
necessary steps in this segment to return it to profitability,
including discontinuing certain products and realigning operating
levels to current revenues. In addition, we have taken
reorganization steps that will result in reduced cost and better
operating coordination among our fee businesses."
(more)
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3
Forward-looking statements
Certain matters referred to herein contain forward-looking
statements that involve risks and uncertainties. Forward-looking
statements include the information concerning possible or assumed
future results of operations and adequacy of reserves. To that
extent, MMI claims the protection of the disclosure liability
safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. MMI assumes no
duty to update such forward-looking statements. Readers are
cautioned that important factors could affect the future results
of MMI and cause those results to differ materially from those
expressed in such forward-looking statements. These factors
include successful execution of the Company's operating plans,
the level of continued demand for its products and services,
actions of competitors with respect to products and pricing,
future reserve development, levels of future expenses, evolution
of the healthcare industry, the Company's principal market,
general equity market conditions, and regulatory and legal
uncertainties.
MMI Companies, Inc. is an international healthcare risk services
company with more than 20 years of experience providing a wide
range of products and services that help the healthcare industry
enhance its performance and manage risks associated with the
delivery of care. Through its operating subsidiaries, MMI
provides strategic consulting services, clinical risk management
and operational consulting services, insurance and reinsurance
throughout the US, particularly to the healthcare industry, and
underwrites insurance and reinsurance in the London market. In
addition to its Deerfield headquarters, MMI has a network of
offices throughout the United States and overseas. For more
information about MMI Companies, please visit the Company's Web
site at www.mmicompanies.com.
( # # # )
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4
MMI Companies, Inc.
Summary of Reserve Increases and Restructuring Charges
In millions, except per share
Domestic insurance segment reserve increases
Long-term care facilities $35
Hospitals and healthcare systems 15
Clinics and other 10
Subtotal 60
International insurance segment reserve increases
Casualty:
Medical malpractice 6
Commercial auto 3
Other 7
16
Short-tail:
Commercial auto 4
Other property 8
Medical expense 3
15
Subtotal 31
Consulting and fee segment restructuring charges
Impairment of goodwill 6
Disposition of real estate
lease obligations 3
Other restructuring charges 5
Subtotal 14
Total reserve increase and
restructuring charges 105
Tax credit 34
Total reserve increase and
restructuring charges, net of taxes $71
Per share impact $3.71
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