<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
March 31, 1999.
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 19,140,098 shares outstanding of the registrant's
common stock, $0.10 par value, as of May 3, 1999.
Page 1 of 13
</PAGE>
<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 Income 4
Consolidated Statements of 5
Stockholders' Equity
Consolidated Statements of 6
Cash Flows
Notes to Consolidated 7-8
Financial Statements
Item 2. Management's Discussion 8-11
and Analysis of
Financial Condition and
Results of Operations
Part II. Other Information
Item 4. Submission of Matters to 12
a Vote of Security Holders
Item 6. Exhibits and Reports on
Form 8-K 12
Signatures 13
EXHIBITS:
10.1. Eighth Amendment to Lease for
Corporate 500 Centre
10.2 MMI Companies, Inc. 1999 Stock
Option Plan
27. Financial Data Schedule.
</TABLE>
</PAGE>
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS
Short-term investments........... $ 55,328 $ 50,819
Fixed maturities................. 1,126,972 1,150,622
Preferred stocks................. 53,208 57,981
1,235,508 1,259,422
OTHER ASSETS
Cash............................. 14,361 13,323
Premium and fees receivable...... 237,987 161,000
Reinsurance receivables.......... 343,309 336,518
Prepaid reinsurance premiums..... 42,097 21,232
Accrued investment income........ 16,842 17,375
Cost in excess of net assets of
purchased subsidiaries,
less accumulated amortization... 44,905 43,018
Furniture and equipment - at cost,
less accumulated depreciation... 11,194 14,702
Deferred income taxes............ 50,768 44,093
Other............................ 62,445 48,726
$2,059,416 $1,959,409
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Policy liabilities:
Loss and loss adjustment expense
reserves:
Medical malpractice liability... $ 672,651 $ 672,647
International................... 466,693 484,170
Other........................... 24,641 19,256
1,163,985 1,176,073
Unearned premium reserves....... 225,384 141,939
Future life policy benefits..... 8,418 8,326
1,397,787 1,326,338
Accrued expenses and other
liabilities..................... 59,535 50,136
Amounts due to reinsurers........ 79,092 51,190
Company-obligated, mandatorily
redeemable preferred capital
securities of subsidiary trust
holding solely junior subordinated
debentures of the Company...... 118,869 118,817
1,655,283 1,546,481
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 per
share:
Authorized shares: - 30,000
Issued and outstanding shares:
1999 - 19,028; 1998 - 19,059...... 1,903 1,906
Additional paid-in capital......... 220,318 221,649
Retained earnings.................. 160,735 160,226
Accumulated other comprehensive
income, net of taxes:
1999 - $11,108; 1998 - $15,091.... 21,177 29,147
404,133 412,928
$2,059,416 $1,959,409
See notes to consolidated financial statements.
</TABLE>
</PGAE>
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
<S> <C> <C>
REVENUES
Insurance premiums earned:
Medical malpractice
liability................... $ 39,261 $ 69,261
International................ 38,148 30,142
Life and health.............. 3,849 3,143
81,258 102,546
Consulting and fee income..... 15,053 11,000
Net investment income......... 18,460 18,772
Net realized gains on
investments................... 189 829
TOTAL REVENUES............. 114,960 133,147
LOSSES AND EXPENSES
Losses and loss adjustment
expenses:
Medical malpractice
liability................... 34,108 62,052
International................ 24,054 18,561
Life and health.............. 3,657 2,488
61,819 83,101
Insurance and administrative
expenses..................... 44,206 36,148
Interest expense.............. 2,536 2,435
TOTAL LOSSES AND EXPENSES.. 108,561 121,684
INCOME BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS... 6,399 11,463
Income taxes.................. 533 2,045
INCOME FROM CONTINUING
OPERATIONS.................... 5,866 9,418
Discontinued operations:
Loss from operations, net of
tax: 1999-$372; 1998-$390 691 723
Loss on sale, net of tax of
$1,590 2,952 --
NET INCOME......................$ 2,223 $ 8,695
Earnings per common and common
equivalent share:
Basic
Income from continuing
operations....................$ .31 $ .50
Loss from discontinued
operations.................... (.19) (.04)
Net income.....................$ .12 $ .46
Diluted
Income from continuing
operations..................$ .31 $ .49
Loss from discontinued
operations.................. (.19) (.04)
Net income....................$ .12 $ .45
Weighted average number of common
and common equivalent shares:
Basic............................ 19,006 18,858
Diluted.......................... 19,270 19,431
</TABLE>
</PAGE>
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
Comprehensive
Common Stock Additional Income, Total
Number Par Paid-In Retained Net Stockholders'
of Shares Value Capital Earnings of Taxes Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 18,857 $1,886 $217,855 $154,929 $24,332 $399,002
Year ended
December 31, 1998:
Net income 11,364 11,364
Change in unrealized
gains (losses) on
investments, net
of taxes of $2,279 and
reclassification
adjustment 4,815 4,815
Comprehensive
income 16,179
Issuance of Common
Stock in connection
with acquisition of
subsidiary 66 6 1,394 1,400
Issuance of Common
Stock in connection
with employee benefit
plans and exercise
of employee stock
options 146 15 2,553 2,568
Common Stock
repurchased (10) (1) (153) (154)
Common cash
dividends ($.32 per
share) (6,067) (6,067)
Balance at
December 31, 1998 19,059 1,906 221,649 160,226 29,147 412,928
Three months ended
March 31, 1999
(unaudited):
Net income 2,223 2,223
Change in unrealized
gains (losses) on
investments, net
of taxes of ($3,983)
and reclassification
adjustment (7,970) (7,970)
Comprehensive loss (5,747)
Issuance of Common
Stock in connection
with employee
benefit plans and
exercise of employee
stock options 104 10 768 778
Common Stock
repurchased (135) (13) (2,099) (2,112)
Common cash
dividends ($.09 per
share) (1,714) (1,714)
Balance at March 31,
1999 (unaudited) 19,028 $ 1,903 $ 220,318 $160,735 $21,177 $404,133
See notes to consolidated financial statements.
</TABLE>
</PAGE>
<PAGE>
MMI Companies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<TABLE>
<CAPTION> Three Months
Ended March 31,
1999 1998
<S>
<C> <C>
OPERATING ACTIVITIES
Net income........................... $ 2,223 $ 8,695
Adjustments to reconcile net income to net
cash used by operating activities:
Increase in policy liabilities..... 71,449 98,899
Change in reinsurance balances..... 246 (5,408)
Increase in premiums and fees
receivable........................ (74,589) (98,382)
Increase in deferred income
taxes............................. (2,693) (758)
Increase in accrued investment
income and other assets........... (10,538) (18,903)
Decrease in accrued expenses and
other liabilities................. (466) (3,741)
Net realized gains on investments.. (189) (829)
Depreciation and amortization on
investments and goodwill.......... 2,568 1,733
Loss on sale of discontinued
operations........................ 4,841 --
Net cash used by operating
activities...................... (7,148) (18,694)
INVESTING ACTIVITIES
Net purchase of short-term
investments......................... (1,996) (454)
Purchase of available-for-sale
investments......................... (106,627) (147,444)
Sale of available-for-sale
investments......................... 101,541 154,074
Maturities of available-for-sale
investments......................... 22,016 13,196
Acquisition of subsidiary............ (6,874) --
Disposition of subsidiary............ 4,000 --
Furniture and equipment additions.... (826) (1,559)
Net cash provided by investing
activities........................ 11,234 17,813
FINANCING ACTIVITIES
Issuance of Common Stock............. 778 550
Repurchase of Common Stock........... (2,112) --
Dividends............................ (1,714) (1,523)
Net cash used by financing
activities......................... (3,048) (973)
Increase (decrease) in cash.......... 1,038 (1,854)
Cash at beginning of period............ 13,323 6,698
Cash at end of period................ $ 14,361 $ 4,844
</TABLE>
See notes to consolidated financial statements.
</PAGE>
<PAGE>
MMI Companies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1999
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 three month period ended
March 31, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For
further information, refer to the consolidated financial
statements and notes thereto included in the Company's 1998
Annual Report.
2. Discontinued Operations
Effective March 31, 1999, MMI sold the net assets of Healthcare
Credentials Management Services, its credentials verification
organization subsidiary. MMI received $4,000,000 in cash
proceeds. There was a loss on this transaction of $3,643,000, net
of taxes of $1,962,000. Revenues for the three months ended March
31, 1999 and 1998 were $889,000 and $1,312,000, respectively.
MMI will continue to service credentialing clients during a
transition period. MMI will incur expenses and receive a service
fee from the purchaser during this period of time. These amounts
have been estimated and are included in the loss calculation.
3. Acquisition of Applied Risk Management, Inc.
In February 1999, MMI acquired Applied Risk Management (ARM),
Inc., a privately held third party administrator and consulting
firm that specializes in workers' compensation. Subsequent to the
acquisition, ARM was integrated into Professional Risk Management
(PRM), Inc., an MMI subsidiary that provides third party
administration and consulting related to professional and general
liability risks and claims primarily for self-insured
organizations. The purchase price for ARM, including expenses, was
$7,724,000 in cash.
4. 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
Ended March 31,
1999 1998
<S> <C> <C>
Net earnings $ 2,223 $ 8,695
Weighted average number
of common shares
outstanding 19,006 18,858
Dilutive effect of
stock options using the
treasury stock
method 264 573
Weighted average number
of common and common
equivalent shares
outstanding 19,270 19,431
Net earnings per common
share $ .12 $ .46
Net earnings per common
and common equivalent
share $ .12 $ .45
</TABLE>
5. Effect of New Pronouncements
As of January 1, 1999, the Company adopted Statement of
Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1
requires specific accounting treatment for internal use software.
The adoption of SOP 98-1 did not have a material effect on
consolidated operating results or financial position.
In December 1997, the AcSEC issued SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance Related
Assessments." SOP 97-3 provides guidance on when an insurance
enterprise should recognize a liability for guaranty fund or
other assessments and how to measure the liability. SOP 97-3 was
effective January 1, 1999. The adoption of SOP 97-3 did not have
a significant impact on MMI's consolidated operating results or
financial position.
6. Industry Segments
In 1998, MMI adopted SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." Presentation of MMI's
operations has been classified and summarized into three
reportable segments: domestic insurance, international
insurance, and consulting and fees. Reportable segments are
classified by the product lines of insurance and consulting and
fees with insurance segments classified along geographic lines of
domestic and international. Segment revenues and segment income
(loss) exclude realized gains on investments. Intersegment
revenues are not material. There are not individual customers
that account for ten percent or more of MMI's revenues (in
thousands).
<TABLE>
<CAPTION>
Domestic International Consulting
Insurance Insurance And Fees Total
<S> <C> <C> <C> <C>
Three months ended March 31,
1999:
Revenues from external
customers..................... $43,110 $38,148 $15,053 $96,311
Net investment income......... 12,246 6,214 -- 18,460
Total segment revenues........ 55,356 44,362 15,053 114,771
Net realized gains on
investments................... 189
Total revenues................ 114,960
Segment income (loss)......... 2,682 4,056 (528) 6,210
Net realized gains on
investments................... 189
Income from continuing opera-
tions before income taxes..... $ 6,399
Three months ended March 31,
1998:
Revenues from external
customers..................... $72,404 $30,142 $11,000 $113,546
Net investment income......... 11,545 7,227 -- 18,772
Total segment revenues........ 83,949 37,369 11,000 132,318
Net realized gains on
investments................... 829
Total revenues................ 133,147
Segment income (loss)......... 4,448 6,424 (238) 10,634
Net realized gains on
investments................... 829
Income from continuing opera-
tions before income taxes..... $ 11,463
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months Ended March 31, 1999 compared to Three Months Ended
March 31, 1998.
</PAGE>
<PAGE>
Revenues. Gross premiums written decreased by 11.8% to
$185,585,000 for the three months ended March 31, 1999 from
$210,448,000 for the 1998 period. Net premiums written decreased by
16.2% to $143,971,000 from $171,865,000, and net premiums earned
decreased by 20.8% to $81,258,000 from $102,546,000.
Medical malpractice premiums earned decreased by 43.3% to
$39,261,000 for the three months ended March 31, 1999 from
$69,261,000 for the 1998 period. International premiums earned
increased 26.6% to $38,148,000 from $30,142,000 and life and health
premiums earned increased by 22.5%, to $3,849,000 for the three
months ended March 31, 1999 from $3,143,000 for the 1998 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 quarter, 1999,
the Company's medical malpractice premiums earned included $906,000
in such one time premiums, a decrease of $29,613,000 in one-time
premiums from the first quarter 1998 total of $30,519,000. Before
one-time premiums, medical malpractice premiums earned decreased
1.0% to $38,355,000 at March 31, 1999 compared to the first
quarter, 1998 and total net earned premiums increased 11.6% to
$80,352,000 for the three months ended March 31, 1999 from
$72,027,000 for the 1998 period.
Consulting and fee income increased by 36.8% to $15,053,000 for
the three months ended March 31, 1999 from $11,000,000 for the 1998
period. Included in the 1999 period are PRM revenues totaling
$5,000,000 from the date of acquisition of ARM's assets, February
1, 1999.
Net investment income decreased by 1.7% to $18,460,000 for the
three months ended March 31, 1999 from $18,772,000 for the 1998
period. For the three month period, the Company had net realized
gains on investments of $189,000 in 1999 compared to $829,000 in
1998.
Losses and expenses. Losses and loss adjustment expenses
("LAE") decreased by 25.6% to $61,819,000 for the three months
ended March 31, 1999 from $83,101,000 for the 1998 period. Medical
malpractice liability losses and LAE decreased by 45.0% to
$34,108,000 for the three months ended March 31, 1999 from
$62,052,000 for the 1998 period due to the decrease in one-time
premiums in the first quarter, 1999. International losses and LAE
increased 29.6% to $24,054,000 from $18,561,000 in the 1998 period
and other losses and LAE increased to $3,657,000 from $2,488,000 in
the first quarter 1998. The consolidated loss ratio decreased to
76.1% from 81.0% for the respective three month periods due to the
decrease in one-time premiums which are recorded at a higher loss
ratio than the company's core business.
Insurance and administrative expenses increased by 22.3% to
$44,206,000 for the three months ended March 31, 1998 from
$36,148,000 for the 1998 period. The increase in administrative
expense is primarily due to expenses associated with the inclusion
of ARM since its date of acquisition in 1999 as well as an increase
in brokerage expense related to the growth in international net
earned premiums.
Interest expense increased by 4.1% to $2,536,000 for the three
months ended March 31, 1999 from $2,435,000 for the 1998 period.
Debt outstanding totaled $118,869,000 at March 31, 1999 compared to
$118,790,000 at March 31, 1998.
Income taxes. Income taxes were $533,000 for the three months
ended March 31, 1999 compared to $2,045,000 for the 1998 period
due to lower pre-tax income in the current period.
Income from continuing operations. Income from continuing
operations decreased by 37.7% to $5,866,000 for the three months
ended March 31, 1999 from $9,418,000 for the 1998 period due to a
increase in policy acquisition and distribution costs for the
domestic and international insurance segments and a small increase
in the loss from the consulting and fee segment.
Discontinued operations. Loss from discontinued operations, net
of tax decreased by 4.4% to $691,000 for the three months ended
March 31, 1999 from $723,000 for the 1998 period. Loss on
disposal, net of tax was $2,952,000 for the three months ended
March 31, 1999.
Net income. Net income was $2,223,000 for the three months
ended March 31, 1999 compared to $8,695,000 in the 1998 period.
</PAGE>
<PAGE>
Net income per share. Diluted net income per common and common
equivalent share was $.12 for the three months ended March 31, 1999
compared to $.45 for the 1998 period. Included in these amounts
are $.01 in 1999 and $.03 in 1998 related to after-tax net realized
gains on investments as well as a loss of $.19 per share in 1999
and $.04 per share in 1998 from discontinued operations.
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 each of the
three month periods ended March 31, 1999 and March 31, 1998, the
Company received dividends of $1,500,000 from its subsidiaries.
The Company received management fees from its subsidiaries of
$6,200,000 for the three months ended March 31, 1999, compared to
$6,988,000 in 1998.
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 used by operating activities was $7,148,000 for the three
months ended March 31, 1999 compared to $18,694,000 for the three
months ended March 31, 1998. 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 provided by investing activities was $11,234,000 for the
three months ended March 31, 1999 compared to $17,813,000 for the
three months ended March 31, 1998. The decrease in cash provided
by investing activities was primarily due to lower sales of
investments in the first quarter 1999 compared to the same period
in 1998.
Cash used by financing activities was $3,048,000 for the three
months ended March 31, 1999 compared to $973,000 for the three
months ended March 31, 1998.
The Company invests in investment grade fixed income securities
and preferred stocks. The estimated fair value of preferred stocks
was 4.3% of fair value of total invested assets as of March 31,
1999. The estimated fair value of the Company's investment
portfolio was $1,235,508,000 as of March 31, 1999 compared to
$1,259,422,000 as of December 31, 1998. The March 31, 1999 amount
includes net unrealized gains of $32,285,000, which represent the
amount by which the estimated fair value of the investment
portfolio exceeds amortized cost. Net unrealized gains as of
December 31, 1998 were $44,238,000. 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 $55,328,000 or 4.5% of invested assets at March
31, 1999. The Company believes that all of its invested assets are
readily marketable.
Long-term debt consisting of Capital Securities totaled
$118,869,000 at March 31, 1999. 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 $404,133,000 as of March 31, 1999
compared to $412,928,000 as of December 31, 1998. Dividends to
stockholders were $1,714,000 for the three months ended March 31,
1999. During the quarter the unrealized gain, net of taxes on the
Company's investment portfolio declined by $7,970,000 and also
during the quarter the Company repurchased 135,000 shares of its
common stock for $2,112,000.
Year 2000
The Company has implemented an enterprise-wide plan to address Year
2000 ("Y2K") issues across all of its technology platforms as well as
to reasonably assure that its critical business partners are prepared
for business continuity.
The phases of the Company's work plan are assessment, role
definitions, inventory and analysis, coding, testing and
implementation/confirmation. The majority of system modifications and
conversions have been completed. The Company is working closely with
its business partners and suppliers to ensure alignment in addressing
the Y2K issue.
</PAGE>
<PAGE>
MMI has completed the modifications, testing and implementation of
its main insurance and financial systems, making these applications
Y2K compliant. Additionally, system-wide Y2K simulations are
scheduled throughout 1999. The cost to address Y2K issues is
expected to be less than $600,000, and is being expensed as incurred.
Costs associated with Year 2000 have totaled $547,000 through March
31, 1999.
A. State of Readiness:
The Company has thoroughly completed the assessment, role
definition and inventory and analysis phases which
encompass hardware, software (third party and internally
developed), embedded technologies, and non-IT systems.
The majority of identified critical internally developed
information technologies (IT) have been modified, tested
and implemented. The remaining systems are scheduled for
implementation during the first half of 1999.
The Company is addressing Y2K compliance of third party IT
vendors through a combination of written correspondence and
internal testing. All identified critical third party IT
vendors have been contacted and asked to document
compliance. All Y2K compliance by material third party
vendors has been either internally tested by MMI or
documented by the third party. MMI is currently planning
the implementation for any necessary modifications based on
vendor comments.
The Company has contacted related non-IT parties to ensure
Y2K compliance. The Company believes failure of non-IT
systems would not have a material effect on the Company's
operations.
B. Material Third Party Relationships:
The Company relies on continued normal operations of
entities such as brokers, reinsurers, banks, money managers
and benefit plan administrators. Diligent action is
underway to ensure alignment with these business partners,
even though disruption relating to these institutions would
not have a material effect on operations or financial
performance.
C. Contingency Plans:
MMI plans to leverage existing disaster recovery plans
relating to technology and business continuity. Both sets
of plans will be reviewed in 1999 as to their application
to the Y2K issue. In addition, contingency plans are being
developed in conjunction with the scheduled 1999
simulations of critical information technologies.
D. Other:
MMI has conducted a comprehensive review of its
underwriting guidelines and will, where appropriate,
exclude Y2K exposures. MMI believes, as a basic principle
of insurance, that non-fortuitous losses are not covered
under its policies of insurance even without specific
exclusions. With respect to its domestic insurance
operations, if underwriting reveals an acceptable risk, an
endorsement will be attached that affirmatively grants Y2K
coverage under the professional liability coverage part and
excludes Y2K under the general liability coverage part.
With respect to reinsurance contracts, it is unusual to
apply specific Y2K exclusions to these contracts and there
may or may not be such exclusions in the original policies,
depending on exposure, class of service or industry, and
original coverage. For these reasons, MMI believes that
its exposure to Y2K claims is not material. However,
because of lack of legal precedent, it is impossible to
predict what, if any, exposure insurance companies may
ultimately have for Y2K claims whether coverage for the
issue is specifically excluded or included.
</PAGE>
<PAGE>
E. Forward-Looking Information:
Certain matters referred to above regarding Y2K contain
forward-looking statements that involve risks and
uncertainties. In particular, the general business
community's readiness for the Y2K and the Company's
potential underwriting exposure to Y2K claims are difficult
to predict. 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.
</PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual stockholders meeting on April 22,
1999. The following directors were elected at the meeting: B.
Frederick Becker, K. James Ehlen, M.D., Andrew D. Kennedy, Edward
C. Peddie and Joseph D. Sargent. The proposal to approve the 1999
Stock Option Plan was voted upon and approved at the meeting. The
proposal to amend the 1993 Employee Stock Plan was voted upon and
approved at the meeting. The Stockholders' Proposal Concerning
the Shareholder Rights Plan was voted upon and approved at the
meeting. The proposal to ratify the appointment of Ernst & Young
LLP as independent auditors was also voted upon and passed at the
meeting.
The following table sets forth the number of votes cast for,
against or withheld, and number of abstentions and broker non-votes
for each matter voted upon at the meeting (in thousands):
<TABLE>
<CAPTION>
Against Abstentions
Matter For or and Broker
Withheld Non-Votes
<S> <C> <C> <C>
Election of Directors as a
slate....................... 15,749 126
Election of Directors:
B. Frederick Becker......... 15,743 132 -
James Ehlen, M.D............ 15,176 699 -
Andrew D. Kennedy........... 15,716 159 -
Edward C. Peddie............ 15,715 160 -
Joseph D. Sargent........... 15,746 129 -
Approval of the 1999 Stock
Option Plan................. 9,693 4,436 1,746
Approval to Amend the 1993
Stock Option Plan........... 12,900 2,959 16
Stockholder's Proposal
Concerning the Shareholder
Rights Plan................. 10,332 3,709 1,834
Ratification of Ernst &
Young LLP................. 15,799 68 8
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
A.Exhibits
10.1 Eighth Amendment to Lease for Corporate 500 Centre
10.2 MMI Companies, Inc. 1999 Stock Option Plan
27. Financial Data Schedule.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter.
</PAGE>
<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: May 11, 1999
/s/B. Frederick Becker
B. Frederick Becker
Chairman and Chief
Executive Officer
Date: May 11, 1999
/s/Paul M. Orzech
Paul M. Orzech
Executive Vice President and
Chief Financial Officer
</PAGE>
<PAGE>
Exhibit 10.1
EIGHTH AMENDMENT TO LEASE
FOR
CORPORATE 500 CENTRE
This Eighth Amendment to Lease (the "Agreement") is made
and entered as of the 9th day of April, 1999 by and between
CORNERSTONE DEERFIELD, LLC, a Delaware limited liability
company ("Landlord") and MMI COMPANIES, INC., a Delaware
corporation ("Tenant").
Recitals
A. American National Bank and Trust Company of
Chicago, not individually, but solely as Trustee under a
certain Trust Agreement dated the 30th day of July, 1985
("Original Landlord") and Tenant entered into a Lease dated
the 7th day of December, 1990 (the "Original Lease"). The
Original Lease has been amended by:
(1) a First Amendment to Lease dated August, 1992;
(2) a Second Amendment to Lease dated October, 1994;
(3) a Third Amendment to Lease dated January 1996;
(4) a Fourth Amendment to Lease dated June, 1996;
(5) a Fifth Amendment to Lease dated July, 1996;
(6) a Sixth Amendment to Lease dated March, 1997 (the
"Sixth Amendment"); and,
(7) a Seventh Amendment to Lease dated as of June 12,
1997.
The Original Lease, as so amended by the First through
the Seventh Amendments is herein referred to as the "Lease".
In accordance with the provisions of the Lease, Tenant leases
from Landlord 135,590 rentable square feet (the "Premises")
on the First, Third, Fourth, Fifth and Sixth floors of the
office building located at 540 Lake Cook Road, Deerfield,
Illinois (the "Building") in the Corporate 500 Complex
consisting of four (4) office buildings (the "Complex") owned
by Landlord. Capitalized terms not otherwise defined in this
Agreement shall have the meaning given them in the Lease.
B. Landlord has acquired the Building from Original
Landlord and is successor-in-interest to Original Landlord.
C. The Term of the Lease is scheduled to end on June
30, 2006 (the "Termination Date").
D. Landlord and Tenant desire to amend the Lease to
(i) extend the Term of the Lease, (ii) change the Base Rent
payable by Tenant under the Lease, (iii) delete some of the
existing provisions contained in the Lease, (iv) add new
provisions to the Lease, and (v) make certain other changes,
all as hereinafter contained in this Agreement.
NOW THEREFORE, in consideration of the mutual promises
contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
</PAGE>
<PAGE>
1. EXTENSION OF TERM. The Term of the Lease for the entire
Premises is hereby extended to end December 31, 2009 (as so
extended, the "Termination Date").
2. REVISED BASE RENT. The amount of the Base Rent payable
by Tenant as shown on Exhibit A-1 of the Sixth Amendment
amended and is replaced with the amount of Base Rent shown on
Exhibit A-1 attached hereto and made a part of the Lease,
effective (being called either the "Rent Effective Date" or
the "RED") as of (a) April 1, 1999, if this Agreement is
signed by Tenant without change and returned to Landlord on
or before April 9, 1999, or (b) the date Tenant signs and
returns this Agreement to Landlord without change, if this
Agreement is not returned to Landlord signed by Tenant
without change by April 9, 1999.
3. CONDITION OF PREMISES AND CONSTRUCTION IN PREMISES. On
the date of this Agreement Tenant shall take the Premises in
their existing "AS IS" condition. Tenant shall have the
right to make alterations in the Premises in accordance with
the provisions of Section 9 C of the Original Lease at
Tenant's sole cost and expense.
4. PARKING. In accordance with the provisions of Tenant
leases forty (40) parking spaces in the subterranean garage
in the Building. As of the date of this Agreement the fair
market rental payable by Tenant for such parking spaces is
$40.00 per parking space, which parking rental of $40.00 per
parking space shall remain in effect through the Termination
Date.
5. DELETION OF CERTAIN SECTIONS CONTAINED IN ORIGINAL
LEASE. Effective as of the date of this Agreement the
following Sections are hereby deleted from the Original
Lease:
a.) Section 28. RIGHT TO EXTEND TERM,
b.) Section 29. EXPANSION SPACE, and
c.) Section 30. CANCELLATION OPTION.
6. RIGHT OF FIRST OFFER. The following right of first
offer is added as a new Section 37 in the Lease effective as
of the date of this Agreement:
"37. RIGHT OF FIRST OFFER.
(a) Provided that (a) MMI Companies, Inc. has not assigned
this Lease (it being intended that all rights pursuant to
this Section 37 are and shall be personal to the original
Tenant under this Lease and shall not be transferable or
exercisable for the benefit of any Transferee), (b) MMI
Companies, Inc. at any single time has subleased no more than
25,000 rentable square feet in the Premises, and (c) Tenant
is not in default under the Lease at the time of the exercise
of any such right or at any time thereafter until delivery of
possession of the space to Tenant, subject to any and all
rights granted by Landlord prior to the date hereof with
respect to such space (including renewal and extension rights
and rights of first offer, first negotiation, first refusal
or other expansion rights), and subject to Landlord's right
to extend or renew any then existing lease of the space or
otherwise to lease the space to any tenant, subtenant or
other occupant of the space, then at any time up to, but not
beyond, September 30, 2009, Tenant shall have a continuous
right of first offer to lease the following space in the
respective buildings: Any space as it becomes available in
the two (2) buildings (together, the "Buildings") located at
(x) 520 Lake Cook Road, Deerfield, IL, and (y) 540 Lake Cook
Road, Deerfield, IL.
</PAGE>
<PAGE>
(b) Such right of first offer (i) may only be
exercised with respect to space which becomes vacant
during the Term following expiration or other
termination of the previous lease, and (ii) may only
be exercised with respect to all of the space being
offered by Landlord (each such space, as it becomes
available pursuant to the provisions of this Section
37, being called the "Right of First Offer Space").
If Tenant has not exercised the right of first offer
for any specific Right of First Offer Space by
September 30, 2009, then the right of first offer
contained in this Section 37 shall expire September
30, 2009 for all remaining space in the Buildings.
If any space qualifying for such right of first offer
becomes available, Landlord shall offer to lease such
Right of First Offer Space to Tenant at the Base Rent
contained in subsection (c) of this Section 37.
Tenant shall take the Right of First Offer Space in
it's then existing "AS IS" condition without any work
to be done by Landlord; and Landlord shall not be
obligated to contribute any money towards Tenant
making alterations in the Right of First Offer Space.
The Term of the Right of First Offer Space shall
expire at the Termination Date, subject to extension
as part of the Premises pursuant to the provisions
contained in Section 39 of the Lease (as amended
herein). Tenant shall have ten (10) Business Days
following receipt of Landlord's offer with respect to
any such specific Right of First Offer Space within
which to notify Landlord in writing of its intention
to lease such specific Right of First Offer Space,
and such notice, if given by Tenant, shall constitute
an acceptance of Landlord's terms for the lease of
such Right of First Offer Space. If Tenant exercises
such right of first offer, the Right of First Offer
Space to be leased by Tenant shall be leased on the
same terms and conditions as are contained in the
Lease except for the economic and other terms
contained in subsection (c) of this Section 37, and
the parties shall execute an amendment to the Lease
to include such Right of First Offer Space in the
Premises and otherwise to provide for the leasing of
such Right of First Offer Space on such terms. If
Tenant fails so to exercise Tenant's right of first
offer within such ten (10) Business Day period,
Landlord may thereafter lease such Right of First
Offer Space to other prospective tenants.
(c) Base Rent for Right of First Offer Space:
(i) Base Rent Payable for any Space on
which the Right of First Offer is Exercised
prior to April 1, 2004:
If, with respect to any specific Right of
First Offer Space, Tenant exercises the
right of first offer prior to April 1,
2004, then the Base Rent payable by Tenant
for such specific Right of First Offer
Space shall be determined by multiplying
the rentable area in such Right of First
Offer Space times the monthly rent per
square foot, as such rent from time to time
changes, as Tenant is paying under the
Lease, as amended herein.
(ii) Base Rent Payable for any Space on
which the Right of First Offer is Exercised
on or after April 1, 2004:
If, with respect to any specific Right of
First Offer Space, Tenant exercises the
right of first offer on or after April 1,
2004, then Landlord shall not be obligated
to contribute funds toward the cost of any
remodeling, renovation, alteration or
improvement work in the Premises the Base
Rent payable by Tenant for such specific
Right of First Offer Space shall be the
then Fair Market Base Rental (as defined
below) for the Right of First Offer Space
for the space and term involved, which
shall be determined as set forth below.
</PAGE>
<PAGE>
(1) "Fair Market Base Rental"
shall mean the "fair market" Base Rent at
the time or times in question for the
applicable space, based on the prevailing
rentals then being charged to tenants in
the Buildings and tenants in other office
buildings in the Complex for leases with
terms equal to the term for the Right of
First Offer Space, taking into account the
creditworthiness and financial strength of
the tenant, the financial guaranties
provided by the tenant (if any), the value
of market concessions (including the value
of construction, renovation, moving and
other allowances or rent credits), the
desirability, location in the building,
size and quality of the space, tenant
finish allowance and/or tenant
improvements, included services, operating
expenses and tax and expense stops or other
escalation clauses, and brokerage
commissions, for the space in the Buildings
for which Fair Market Base Rental is being
determined and for comparable space in the
Complex which are being used for
comparison. Fair Market Base Rental shall
also reflect the then prevailing rental
structure for leases being used for
comparison, so that if, for example, at the
time Fair Market Base Rental is being
determined the prevailing rental structure
for comparable space and for comparable
lease terms includes periodic rental
adjustments or escalations, Fair Market
Base Rental shall reflect such rental
structure.
(2) Landlord and Tenant shall
endeavor to agree upon the Fair Market Base
Rental. If they are unable to so agree
within ten (10) days after receipt by
Landlord of Tenant's notice of exercise of
the right of first offer, Landlord and
Tenant shall mutually select a licensed
real estate broker who is active in the
leasing of office space in the general
vicinity of the Buildings. Landlord shall
submit Landlord's determination of Fair
Market Base Rental and Tenant shall submit
Tenant's determination of Fair Market Base
Rental to such broker, at such time or
times and in such manner as Landlord and
Tenant shall agree (or as directed by the
broker if Landlord and Tenant do not
promptly agree). The broker shall select
either Landlord's or Tenant's determination
as the Fair Market Base Rental, and such
determination shall be binding on Landlord
and Tenant. If Tenant's determination is
selected as the Fair Market Base Rental,
then Landlord shall bear all of the
broker's cost and fees. If Landlord's
determination is selected as the Fair
Market Base Rental, then Tenant shall bear
all of the broker's cost and fees.
(3) If the Fair Market Base Rental for any Right of First
Offer Space has not been determined at such time as Tenant
is obligated to pay Base Rent for such Right of First Offer
Space, then pending any such determination Tenant shall pay
the same Base Rent per square foot in the Right of First
Offer Space as Tenant is then paying for the existing
Premises; provided, that upon the determination of the
applicable Fair Market Base Rental, any shortage of Base
Rent paid, together with interest at the rate specified
in the Lease, shall be paid to Landlord by Tenant.
</PAGE>
<PAGE>
(d) If Tenant does not lease the specific Right
of First Offer Space from Landlord when the specific
Right of First Offer Space is first offered to Tenant
by Landlord, then Landlord shall be free to lease
such Right of First Offer Space to other parties, and
Tenant's right of first offer for such specific Right
of First Offer Space shall be reinstated pursuant to
the provisions of this Section 37 only after such
specific Right of First Offer Space becomes available
following Landlord's leasing of such Right of First
Offer Space to a third party. After Landlord has
leased such specific Right of First Offer Space to a
third party Tenant shall have no further right to
lease such specific Right of First Offer Space until
such specific Right of First Offer Space becomes
available pursuant to the provisions of this Section
37."
6. EXPANSION OPTION. The following expansion option is
added as a new Section 38 in the Lease effective as of the
date of this Agreement:
"38. EXPANSION OPTION.
(a) Provided that (a) MMI Companies, Inc. has
not assigned this Lease (it being intended that all
rights pursuant to this Section 38 are and shall be
personal to the original Tenant under this Lease and
shall not be transferable or exercisable for the
benefit of any Transferee), (b) MMI Companies, Inc.
at any single time has subleased no more than 25,000
rentable square feet in the Premises, and (c) Tenant
is not in default under this Lease on the date of
exercise or at any time thereafter until the
commencement of the Term with respect to the
Expansion Space, Tenant shall have the following
option ("Expansion Option") to lease the entire space
currently leased by Deluxe Video (formerly known as
Rank Video & Retail Services, Inc.) containing 30,598
rentable square feet ("Expansion Space") on the
second floor of the Building, by giving Tenant's
Expansion Notice (as hereinafter defined) exercising
such Expansion Option pursuant to the provisions of
subsection (c) of this Section 38.
(b) The Expansion Option is subordinate and is
subject to the Right of First Offer contained in
Section 37 of the Lease, as amended herein. If prior
to July 1, 2004 Landlord offers the Expansion Space
to Tenant pursuant to the provisions of Section 37,
and Tenant elects to not lease the Expansion Space
under the Right of First Offer, then there shall be
no effect on the Expansion Option contained in this
Section 38. If on or after July 1, 2004 Landlord
offers the Expansion Space to Tenant pursuant to the
provisions of Section 37, and Tenant refuses to
lease the Expansion Space pursuant to the provisions
of the Right of First Offer, then the Expansion
Option shall become void. If Tenant leases the
Expansion Space pursuant to the Right of First Offer
(whether before or after July 1, 2004), then Tenant's
leasing of the Expansion Space pursuant to the Right
of First Offer shall supercede the provisions of this
Expansion Option, in which event the Expansion Option
shall become void.
(c) Tenant shall exercise the Expansion Option,
if at all, by giving Landlord written notice
("Tenant's Expansion Option Notice") exercising the
Expansion Option at least eighteen (18) months, but
more than twenty-four (24) months, prior to July 1,
2006.
(d) If Tenant effectively exercises the Expansion Option,
then Landlord agrees to deliver the Expansion Space to Tenant
between July 1, 2006 and September 30, 2006, inclusive; and
Landlord agrees to use commercially reasonable efforts to
deliver to Tenant possession of the Expansion Space on July
1, 2006 or promptly thereafter.
</PAGE>
<PAGE>
(e) The exercise by Tenant of the Expansion
Option shall be irrevocable and shall be for the
entire Expansion Space. If Tenant exercises the
Expansion Option, then effective on the Expansion
Space Commencement Date (as hereinafter defined), the
entire Expansion Space shall be deemed to be leased
under the terms and conditions of the Lease and shall
constitute a portion of the Premises for all purposes
of the Lease. No further instrument shall be
required to make such lease of the Expansion Space
effective; provided that Landlord and Tenant shall,
if requested by either party, execute and acknowledge
an instrument confirming the lease of such Expansion
Space. The Expansion Option shall terminate if not
exercised precisely in the manner provided herein,
and if Tenant fails to exercise the Expansion Option,
then the Expansion Option shall automatically
terminate.
(f) The lease of any Expansion Space shall be
on all the terms and conditions set forth in the
Lease and all Exhibits thereto, except that:
(i) The entire Expansion Space shall be
delivered to Tenant in an "as is" condition;
(ii) Landlord shall provide Tenant an
allowance ("Expansion Allowance") for construction of
alterations in the Expansion Space pursuant to the
provisions of Section 9 C of the Original Lease. The
Expansion Allowance shall be equal to allowances
being then paid to tenants in the Building and
tenants in other office buildings in the Complex, for
leases with terms equal to the term under the
Expansion Option, taking into account the
creditworthiness and financial strength of the
tenant, the financial guaranties provided by the
tenant (if any), the size and quality of the space,
the quality of the tenant improvements, for the space
in the Building for which the Expansion Allowance is
being determined and for comparable space in the
Complex which are being used for comparison.
(iii) The term of the Lease with
respect to any Expansion Space shall commence
("Expansion Space Commencement Date") upon delivery
of the Expansion Space to Tenant and shall expire on
the Expiration Date for the original Premises;
provided, however, that if Tenant is granted any
option to extend the term of the Lease with respect
to the original Premises, such option(s) shall also
apply to any Expansion Space leased by Tenant at the
commencement of the Extension Period, and the options
to extend may only be exercised with respect to the
entire Premises, including the Expansion Space; and
(iv) The Base Rent for the Expansion Space
shall commence on the Expansion Space Commencement
Date and shall be the then Fair Market Base Rental
(as defined below) for the Expansion Space, which
shall be determined as set forth below.
(v) "Fair Market Base Rental" shall mean
the "fair market" Base Rent at the time or times in
question for the Expansion Space, based on the
prevailing rentals then being charged to tenants in
the Building and tenants in other office buildings in
the Complex for leases with terms equal to the term
for the Expansion Space, with a construction
allowance equal to the Expansion Allowance, taking
into account the creditworthiness and financial
strength of the tenant, the financial guaranties
provided by the tenant (if any), the value of market
concessions (including the value of construction,
renovation, moving and other allowances or rent
credits), the desirability, location in the building,
size and quality of the space, tenant finish
allowance and/or
</PAGE>
<PAGE>
escalation clauses, and brokerage commissions, for
the space in the Building for which Fair Market Base
Rental is being determined and for comparable space
in the buildings in the Complex which are being used
for comparison. Fair Market Base Rental shall also
reflect the then prevailing rental structure for
leases being used for comparison, so that if, for
example, at the time Fair Market Base Rental is being
determined the prevailing rental structure for
comparable space and for comparable lease terms
includes periodic rental adjustments or escalations,
Fair Market Base Rental shall reflect such rental
structure.
(vi) Landlord and Tenant shall endeavor to
agree upon the Fair Market Base Rental. If they are
unable to so agree within thirty (30) days after
receipt by Landlord of Tenant's notice of exercise of
the Extension Option, Landlord and Tenant shall
mutually select a licensed real estate broker who is
active in the leasing of office space in the general
vicinity of the Property. Landlord shall submit
Landlord's determination of Fair Market Base Rental
and Tenant shall submit Tenant's determination of
Fair Market Base Rental to such broker, at such time
or times and in such manner as Landlord and Tenant
shall agree (or as directed by the broker if Landlord
and Tenant do not promptly agree). The broker shall
select either Landlord's or Tenant's determination as
the Fair Market Base Rental, and such determination
shall be binding on Landlord and Tenant. If Tenant's
determination is selected as the Fair Market Base
Rental, then Landlord shall bear all of the broker's
cost and fees. If Landlord's determination is
selected as the Fair Market Base Rental, then Tenant
shall bear all of the broker's cost and fees.
6. EXTENSION OPTIONS. The following extension option is
added as a new Section 39 in the Lease effective as of the
date of this Agreement:
"39. EXTENSION OPTION.
Provided that (a) MMI Companies, Inc. has not
assigned this Lease (it being intended that all
rights pursuant to this Section 39 are and shall be
personal to the original Tenant under this Lease and
shall not be transferable or exercisable for the
benefit of any Transferee), (b) MMI Companies, Inc.
at any single time has subleased no more than 25,000
rentable square feet in the Premises, and (c) Tenant
is not in default under this Lease at the time of
exercise or at any time thereafter until the
beginning of any such extension of the Term, Tenant
shall have the option (the "Extension Option") to
extend the Term for two (2) additional consecutive
periods of five (5) years (each an "Extension
Period"), by giving written notice to Landlord of the
exercise of any such Extension Option at least twelve
(12) months, but not more than fifteen (15) months,
prior to the expiration of the initial Term or the
prior Extension Period, as the case may be. The
exercise of any Extension Option by Tenant shall be
irrevocable and shall cover the entire Premises
leased by Tenant pursuant to this Lease. Upon such
exercise, the term of the Lease shall automatically
be extended for the applicable Extension Period
without the execution of any further instrument by
the parties; provided that Landlord and Tenant shall,
if requested by either party, execute and acknowledge
an instrument confirming the exercise of the
Extension Option. Any Extension Option shall
terminate if not exercised precisely in the manner
provided herein. Any extension of the Term shall be
upon all the terms and conditions set forth in this
Lease and all Exhibits thereto, except that:
(i) Tenant shall have no further option to extend the
Term of the Lease, other than as specifically set
forth herein; (ii) Landlord shall not be obligated to
contribute funds toward the cost of any remodeling,
renovation, alteration or improvement work in the
Premises; and (iii) Base Rent for any such Extension
Period shall be ninety-five percent (95%) of the then
Fair Market Base Rental (as defined below) for the
Premises for the space and term involved, which shall
be determined as set forth below.
</PAGE>
<PAGE>
(a) "Fair Market Base Rental" shall mean the
"fair market" Base Rent at the time or times in
question for the applicable space, based on the
prevailing rentals then being charged to tenants in
the Building and tenants in other office buildings in
the Complex for leases with terms equal to the
Extension Period, taking into account the
creditworthiness and financial strength of the
tenant, the financial guaranties provided by the
tenant (if any), the value of market concessions
(including the value of construction, renovation,
moving and other allowances or rent credits), the
desirability, location in the building, size and
quality of the space, tenant finish allowance and/or
tenant improvements, included services, operating
expenses and tax and expense stops or other
escalation clauses, and brokerage commissions, for
the space in the Building for which Fair Market Base
Rental is being determined and for comparable space
in the buildings in the Complex which are being used
for comparison. Fair Market Base Rental shall also
reflect the then prevailing rental structure for
leases being used for comparison, so that if, for
example, at the time Fair Market Base Rental is being
determined the prevailing rental structure for
comparable space and for comparable lease terms
includes periodic rental adjustments or escalations,
Fair Market Base Rental shall reflect such rental
structure.
(b) Landlord and Tenant shall endeavor to agree
upon the Fair Market Base Rental. If they are unable
to so agree within thirty (30) days after receipt by
Landlord of Tenant's notice of exercise of the
Extension Option, Landlord and Tenant shall mutually
select a licensed real estate broker who is active in
the leasing of office space in the general vicinity
of the Property. Landlord shall submit Landlord's
determination of Fair Market Base Rental and Tenant
shall submit Tenant's determination of Fair Market
Base Rental to such broker, at such time or times and
in such manner as Landlord and Tenant shall agree (or
as directed by the broker if Landlord and Tenant do
not promptly agree). The broker shall select either
Landlord's or Tenant's determination as the Fair
Market Base Rental, and such determination shall be
binding on Landlord and Tenant. If Tenant's
determination is selected as the Fair Market Base
Rental, then Landlord shall bear all of the broker's
cost and fees. If Landlord's determination is
selected as the Fair Market Base Rental, then Tenant
shall bear all of the broker's cost and fees.
(c) In the event the Fair Market Base Rental
for any Extension Period has not been determined at
such time as Tenant is obligated to pay Base Rent for
such Extension Period, Tenant shall pay as Base Rent
pending such determination, the Base Rent in effect
for such space immediately prior to the Extension
Period; provided, that upon the determination of the
applicable Fair Market Base Rental, any shortage of
Base Rent paid, together with interest at the rate
specified in the Lease, shall be paid to Landlord by
Tenant.
(d) The term of this Lease, whether consisting
of the Initial Term alone or the Initial Term as
extended by any Extension Period (if any Extension
Option is exercised), is referred to in this Lease as
the "Term.""
7. LANDLORD'S LIABILITY. Effective as of the date of this
Agreement Sections 35 (including all references thereto in
the amendments to the Original Lease) and 36 of the Original
Lease are deleted in their entirety, and the following new
Section 35 is added to the Lease:
</PAGE>
<PAGE>
"35. LANDLORD'S LIABILITY. The term "Landlord," as
used in this Lease, shall mean only the owner or
owners of the Building at the time in question. In
the event of any conveyance of title to the Building,
then from and after the date of such conveyance, the
transferor Landlord shall be relieved of all
liability with respect to Landlord's obligations to
be performed under this
Lease after the date of such conveyance.
Notwithstanding any other term or provision of this
Lease, the liability of Landlord for its obligations
under this Lease is limited solely to Landlord's
interest in the Building as the same may from time to
time be encumbered, and no personal liability shall
at any time be asserted or enforceable against any
other assets of Landlord or against Landlord's
partners or members or its or their respective
partners, shareholders, members, directors, officers
or managers on account of any of Landlord's
obligations or actions under this Lease."
8. BROKER. Landlord shall pay the fee or commission of the
broker, CB Richard Ellis (the "Broker") in accordance with
Landlord's separate written agreement with the Broker, if
any. Tenant warrants and represents to Landlord that in the
negotiating or making of this Agreement neither Tenant nor
anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this
Agreement other than the Broker. Tenant shall indemnify and
hold Landlord harmless from any claim or claims, including
costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or
commission based upon any dealings with or statements made by
Tenant or Tenant's Representatives.
9. RATIFICATION OF LEASE. The Lease, as modified by this
Agreement, remains in full force and effect, and Landlord and
Tenant ratify the same. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
successors and assigns.
If Tenant is a corporation or a partnership, each of the
persons executing this Agreement on behalf of Tenant warrants
and represents that Tenant is a duly authorized and existing
entity that Tenant has full right and authority to enter into
this Agreement and that the persons signing on behalf of
Tenant are authorized to do so and have the power to bind
Tenant to this Agreement. Tenant shall provide Landlord,
upon request, with evidence reasonably satisfactory to
Landlord confirming the foregoing representations.
Except as herein amended, the Lease remains unchanged
and is in full force and effect in accordance with the terms
and provisions contained therein.
This Eighth Amendment is hereby executed and delivered
in multiple counterparts, each of which shall have the force
and effect of an original.
</PAGE>
<PAGE>
LANDLORD:
CORNERSTONE DEERFIELD LLC,
a Delaware limited liability company
By: CORNERSTONE PROPERTIES LIMITED PARTNERSHIP,
its sole member
By: CORNERSTONE
PROPERTIES, INC.,
its general partner
By: /s/ Robert Paratte
Name: Robert Paratte
Title: Manager
TENANT:
MMI COMPANIES, INC.,
a Delaware corporation
By: /s/ Paul M. Orzech
Name: Paul M. Orzech
Title: Executive Vice President and Chief Financial
Officer
</PAGE>
7
<PAGE>
MMI COMPANIES, INC.
1999 STOCK OPTION PLAN
1. Purpose. The purpose of this 1999 Stock Option Plan (the
"Plan") is to benefit MMI Companies, Inc. (the "Company") by
offering certain present and future employees and officers of the
Company and its subsidiaries, as well as non-employee directors,
a favorable opportunity to become holders of the common stock,
$.10 per share par value, of the Company ("Common Stock") over a
period of years, thereby giving them a long-term stake in the
growth and prosperity of the Company and encouraging the
continuance of their involvement with the Company.
2. Administration. The Plan shall be administered under the
supervision of a committee (the "Committee"), which shall consist
of a committee or subcommittee of the Board of Directors of the
Company (the "Board") appointed by the Board and consisting of
two or more members of the Board, each of whom is an "outside
director" as defined in Treasury Regulations 1.162-27 issued
under 162(m) of the Internal Revenue Code (the "Code"). The
Committee shall have the exclusive right to determine
eligibility, grant options, determine the terms of options and
issue restricted stock, all as provided herein. The appropriate
officers of the Company shall have the right to make all
determinations necessary for the routine administration of the
Plan, subject to the supervision of the Committee.
3. Eligibility. Options may be granted to employees, officers,
directors, consultants or advisors of the Company or its
subsidiaries, whose contributions are key to the success of the
Company or its subsidiaries (collectively, the "Companies") as
determined by the Committee in its sole discretion; provided that
options may be granted to directors who are not also employees or
consultants solely in accordance with Section 4(a) and (b). For
purposes of this Plan, the term "subsidiaries" means any entity
in which the Company owns, directly or through a chain of
subsidiaries, a substantial voting interest, as determined by the
Committee; provided, however, that such term shall mean any
corporation in which the Company owns, directly or through a
chain of subsidiaries, 50% of the total combined voting power of
all classes of stock, as determined under 424(f) of the Code,
where such alternative definition must be used to comply with any
Code provision relating to ISOs (as defined below). Eligible
individuals may be selected individually or by groups or
categories, as determined by the Committee in its discretion.
Any person who is granted an option under this Plan shall be
referred to herein as a "Participant." In the case of a
Participant who is not an employee, all references in this Plan
to "employment" or "termination of employment" shall be deemed to
refer to the relationship between such Participant and the
Company or its subsidiaries which was the basis for such
Participant's eligibility to receive an option.
4. Granting of Options.
(a) Beginning in 1999, each non-employee director shall be
granted an option for 1,375 shares of Common Stock at each Annual
Meeting of Stockholders of the Company provided that such
director was serving as a non-employee director since the
preceding Annual Meeting and on the grant date, and that the Plan
is approved by the Company's stockholders. Upon approval of the
Plan by the Company's stockholders, each person who thereafter
becomes a non-employee director shall, at the time he or she
becomes a director, also receive a grant of 4,125 shares of
Common Stock.
(b) Each director who is not an employee of the Company or
any of its subsidiaries shall be granted a nonqualified
Performance Option on January 1 of each year commencing January
1, 2000 to purchase 2,500 shares of the Company's common stock at
fair market value on such grant date. Notwithstanding the
foregoing, (i) if the minimum Earnings Per Share goal
incorporated into the Chief Executive Officer's objective for the
target performance year is not achieved, or (ii) if the director
is not also serving as a director on December 31 of the target
performance year, the Performance Options for that year will be
forfeited.
</PAGE>
<PAGE>
(c) Options may be granted to any eligible person other
than a nonemployee director described in Section 4(a) at such
times and in such amounts and with such terms as the Committee
shall determine in its sole discretion, subject to the remaining
provisions of this Plan.
(d) The total of shares of Common Stock for which options
may be granted pursuant to this Plan shall be 1,500,000 shares,
subject to adjustment as provided in Section 10. In the event
that an option expires or is terminated or canceled unexercised
as to any shares, such released shares may again be optioned
(including a grant in substitution for a canceled option).
Shares subject to options may be made available from unissued or
reacquired shares of Common Stock. No option shall be granted
after the expiration of the term of the Plan pursuant to Section
15.
(e) The maximum number of shares subject to all options
granted to a Participant in any calendar year shall in no event
exceed 400,000 (the "Individual Cap"), subject to adjustment as
provided in Section 10. For purposes of this subparagraph (e),
an option that is canceled shall continue to restrict the number
of shares for which options may be granted in the same year, and
any modification to the purchase price of an option shall be
treated as the cancellation of the old option and the grant of a
new option.
(f) Options granted under the Plan to employees may either
be incentive stock options as defined in 422 of the Code
("ISOs"), or options that are not ISOs ("nonqualified options"),
as determined by the Committee at the time of grant; provided
that the total value of shares of Common Stock with respect to
which ISOs may be granted to any Participant in any calendar year
(or, in the case of options that are not vested at the time of
grant, the value, determined at the date of grant, of shares of
Common Stock with respect to which ISOs first become exercisable
in any calendar year), under this Plan and all other plans
maintained by the Company, its subsidiaries, and any parents (as
defined in 424(e) of the Code) shall not exceed $100,000. A
single option may constitute an ISO with respect to some shares
and a nonqualified option with regard to the remaining shares.
An option that meets the requirements of an ISO, in whole or in
part, shall constitute an ISO to the extent that it meets such
requirements, unless otherwise provided by the Committee.
Options granted to directors or consultants who are not employees
shall be nonqualified options. An option granted to an employee
who owns more than 10% of the stock of the Company shall not
constitute an ISO unless the purchase price is at least 110% of
the fair market value of the stock and the term of the option
does not exceed five years.
(g) Each option shall be evidenced by a written option
agreement, in the form as the Company may provide (subject to the
Committee's approval). All terms and conditions of this Plan
shall be deemed incorporated into each such option agreement,
except as otherwise specifically provided therein.
5. Option Price. The options shall be granted at an exercise
price determined by the Committee which shall only be equal to or
greater than the fair market value at the time the option is
granted, of the shares of Common Stock subject to the option. If
not otherwise specified by the Committee, the exercise price
shall be the fair market value. The exercise price for all
options granted to nonemployee directors pursuant to Section 4(a)
and (b) shall only be the fair market value. The fair market
value of the Common Stock shall be determined by the price at
which the Common Stock trades on the principal exchange or over-
the-counter market in which the Common Stock is traded, using a
method determined by the Committee, and without regard to any
restriction that may be imposed on the sale of stock by a
Participant under the securities laws or otherwise. After the
date of grant, the option price of an option shall not be
decreased except as may be permitted by the adjustment provisions
of Section 10.
</PAGE>
<PAGE>
6. Duration of Options and Vesting. Subject to the provisions
of Section 8 hereof, each option shall be for a term of ten
years, or such shorter duration as the Committee may determine at
the time of grant. Unless otherwise determined by the Committee
as provided in the following sentence, all options shall be fully
vested one year after the date of grant and may be exercised in
whole or in part at any time during their term after the first
year. The Committee may, at the time of grant of any option
(other than an option granted to a nonemployee director pursuant
to Section 4(a) and (b)) provide that the Participant's right to
exercise such option in whole or in part is subject to
conditions precedent, which may be based upon the Participant's
continued employment for a specified period of time, the
achievement of specified performance goals by the Company, the
Participant, or both, or such other conditions as the Committee
may determine. For all purposes of this Plan, an option which is
subject to such conditions shall be referred to as "vested",
either in whole or with respect to certain shares, and shall be
exercisable, only when the conditions have been satisfied, and
until vested shall be considered forfeitable. Performance
options granted to a non-employee director pursuant to Section
4(b) shall be vested only when the conditions described in
Section 4(b) have been satisfied.
7. Exercise of Option. An option that is vested may be
exercised by giving written notice to the Company, specifying the
number of shares to be purchased, accompanied by the full
purchase price for the shares to be purchased which may be paid
in any combination of the following methods, provided that
payment in any form other than cash or check shall only be as
permitted by the Committee in its sole discretion: in cash, by
check, by surrendering other shares of Common Stock owned by the
Participant equal in fair market value (as of the exercise date)
to the purchase price (which surrender of shares shall comply
with 16(b) of the Exchange Act), by withholding such number of
shares of Common Stock from the number purchased (which withheld
shares shall be treated as having been purchased by the
Participant and sold back to the Company) or by a promissory note
in a form and on terms specified by the Committee. A Participant
may also arrange for a "cashless exercise", subject to such
restrictions as the Company may determine. The Participant shall
pay at the time of exercise, by any combination of the same
methods, an amount equal to any tax that the Company is required
to withhold from the Participant upon exercise (less any amount
withheld from the Participant's regular compensation in
connection with such exercise). The Participant shall be solely
responsible for any tax which is due as a result of the grant,
exercise or expiration of an option. The Participant also shall
execute such agreements or documents as the Company may determine
to be necessary or appropriate to comply with any securities or
other applicable laws or regulations.
8. Termination of Relationship -- Exercise Thereafter.
(a) In the event a Participant's employment with any of the
Companies is terminated for any reason other than death,
permanent disability, or retirement and such Participant no
longer is employed by any of the other Companies, such
Participant's option shall expire and all rights to purchase
shares pursuant thereto shall terminate on the date of
termination of employment, except that, unless the termination is
for cause, such option, to the extent vested and exercisable on
the date of termination, may be exercised for a period of thirty
days after termination of employment (or until the scheduled
termination of the option, if earlier); provided, however, that
with respect to all or any portion of any option held by such
Participant, the Committee may, in its sole discretion,
accelerate exercisability or permit such option to remain
exercisable for a term after the thirty-day period specified
above (but in no event beyond its specified term), subject to
such terms and conditions, if any, as determined by the Committee
in its sole discretion. The Committee may also accelerate
exercisability or permit such option to remain exercisable in the
event of a change of control or other material corporate
transaction, as determined by the Committee in its sole
discretion. A person receiving an option as a nonemployee
director pursuant to Section 4(a) or (b) shall not be subject to
the termination provisions of this Section 8(a).
</PAGE>
<PAGE>
(b) In the event the employment of a Participant with any
of the Companies is terminated for cause, or that the Company
determines that grounds for termination for cause exist but
permits the Participant to resign, or discovers after termination
but before an option is exercised that such grounds existed at
the time of termination, all unexercised options shall be
forfeited, regardless of whether they were otherwise considered
vested and exercisable at the time of termination, and any notice
of exercise that has been given, but as to which the Common Stock
has not been issued, shall be rescinded. For purposes of this
paragraph (b), "cause" shall include theft or misappropriation of
property (including intellectual and intangible property) of any
of the Companies, commission of any crime involving any of the
Companies, violation of (or manifestation of a clear intent to
violate) the terms of any noncompetition or confidentiality
agreement to which the Participant is a party, or gross
insubordination or dereliction of the Participant's duties.
"Cause" shall be determined by the Committee, whose decision
shall be final, and in the case of cause that involves commission
of a crime shall not require arrest or conviction. Temporary
absence from employment because of illness, vacation, and
approved leaves of absence and transfer among the Companies shall
not be considered to terminate employment or to interrupt
continuous employment.
(c) In the event of termination of employment because of
death or permanent disability (as that term is defined in the
Company's long term disability plan for which the Participant is
eligible, if any, and otherwise as defined in 22(e)(3) of the
Code), the option may be exercised in full (to the extent not
previously exercised) without regard to the vesting of the
option, by the Participant or, if he or she is not living, by his
or her heirs, legatees, or legal representative, as the case may
be, during its specified term prior to one year after the date of
death or permanent disability.
(d) In the event of termination of employment because of
early, normal or deferred retirement under the retirement program
of the Company for which the Participant is eligible, if any (or
such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose), the option may
be exercised by the Participant (or, if he or she dies after such
retirement, by his or her heirs, legatees, or legal
representative, as the case may be), to the extent that any
portion thereof would be exercisable on the date of such
retirement (or with respect to such greater portion as determined
by the Committee), at any time during its specified term prior to
one year after the date of such retirement.
(e) The Committee will have authority to determine the
circumstances under which options will be forfeited upon
termination of employment of the Participant. Such provisions
will be contained in the Participant's option agreement or will
otherwise be communicated in writing to the Participant.
9. Non-Transferability of Options. During the lifetime of a
Participant, options shall be exercisable only by the
Participant, and options shall not be assignable or transferable
by the Participant otherwise than by will or by the laws of
descent and distribution. The Committee, in its discretion, may
permit the assignment or transfer of a nonqualified option to
members of the Participant's family, to a trust for family
members, to a nonprofit organization, or to such other transferee
as the Committee may approve, on such terms and subject to such
conditions as the Committee may deem necessary or appropriate.
10. Adjustment. The number of shares subject to the Plan and to
options granted under the Plan (and the Individual Cap) shall be
adjusted as follows: (a) in the event that the outstanding
shares of Common Stock of the Company are changed by any stock
dividend, stock split or combination of shares, the number of
shares subject to the Plan and to options granted thereunder and
the Individual Cap shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, there shall
be substituted, on an equitable basis as determined by the
Committee, for each share of Common Stock then subject to the
Plan, whether or not at the time subject to outstanding options,
and for each share of Common Stock included in the Individual Cap
the number and kind of shares of stock or other securities to
which the holders of shares of Common Stock of the Company will
be entitled pursuant to the transaction; and (c) in the event of
any other relevant change in the capitalization of the Company,
the Board shall provide for an equitable adjustment in the number
of shares of Common Stock then subject to the Plan, whether or
not then subject to outstanding options, and in the Individual
Cap. In the event of any such adjustment the purchase price per
share shall be proportionately adjusted. </PAGE>
<PAGE>
11. Amendment or Termination of Plan. The Board may amend or
discontinue the Plan at any time, except, that:
(a) no amendment or discontinuance shall change or impair
any options previously granted without the consent of the
Participant;
(b) no amendment shall cause Options to be repriced at a
price lower than their original exercise price unless otherwise
permitted by Section 10; and
(c) no amendment shall, without the affirmative vote of the
holders of a majority of the outstanding shares of all of the
classes of stock of the Company present and voting in person or
by proxy, and entitled to vote at a duly held stockholders
meeting, or without the written consent of the holders of a
majority of the outstanding shares of all of the classes of stock
present and entitled to vote, (i) increase the number of
securities which may be issued under the Plan, (ii) modify the
requirements as to eligibility for participation in the Plan,
(iii) extend the term of the Plan beyond the latest date
specified in Section 15, or (iv) cause any option that would
otherwise have qualified for an exception under Rule 16b-3 under
the Exchange Act or that would otherwise have qualified as
incentive compensation under 162(m) of the Code to fail to so
qualify.
12. Stock Appreciation Rights. At the time of granting any
option (other than an option to a nonemployee director pursuant
to Section 4(a) or (b)), the Committee may also grant stock
appreciation rights in tandem with such options, which shall
provide that the Participant has the right, in lieu of purchasing
Common Stock pursuant to such option, to require the Company to
pay an amount equal to the difference between the fair market
value of the number of shares of Common Stock with respect to
which such right is exercised and the exercise price therefor,
subject to such terms and conditions as the Committee may
determine.
13. Restricted Stock. Subject to the limitations of the Plan,
the Committee may grant awards of Restricted Stock to employees,
shall determine the time when each such awards shall be granted
and whether shares of Common Stock covered by awards of
Restricted Stock will be issued at the beginning or the end of
the Restriction Period, and shall designate (or set forth the
basis for determining) the vesting date or vesting dates for each
award of Restricted Stock and may prescribe other restrictions,
terms and conditions applicable to such Restricted Stock in
addition to those provided in the Plan. The Committee shall
determine the price, if any, to be paid by the holder for the
Restricted Stock. All determinations made by the Committee
pursuant to this Section 13 shall be specified in the Agreement
relating to such Restricted Stock. Notwithstanding the
foregoing, in no event shall more than 500,000 shares of
Restricted Stock be issued under the Plan and all Restricted
Stock shall be issued with a minimum vesting period of i) not
less than one year, if performance-based, and ii) not less than
three years, which may be either cliff vesting or equal annual
installments, if not performance-based.
The vesting of any award of Restricted Stock may, in the
Committee's discretion, be conditioned in whole or in part upon
the attainment, or the extent of attainment, by the Company, a
division or unit of the Company, or the Participant of objective
performance goals pre-established by the Committee, based on one
or more of the following criteria: (a) return on total
shareholder equity; (b) earnings per share of Common Stock; (c)
net income (before or after taxes); (d) earnings before interest,
taxes, depreciation and amortization; (e) revenues; (f) return on
assets; (g) market share; (h) cost reduction goals; (i) cash
flow; (j) stock price; (k) margins; (l) increase in revenues and
(m) any combination of, or a specified increase in, any of the
foregoing; in each case, as determined in accordance with
generally accepted accounting principles. Such performance goals
shall be established by the Committee prior to the expiration of
25% of the time period to which the performance goal relates, and
the vesting of any award of Restricted Stock subject to such
performance goals shall be conditioned upon certification by the
Committee that the performance goals have been attained. Awards
that are made subject to performance goals described in this
Section are intended to qualify as performance based compensation
under 162(m) of the Code, and the provisions of this Section
shall be so interpreted and applied.
</PAGE>
<PAGE>
14. Employment and Consulting Agreements. Anything contained in
the Plan to the contrary notwithstanding, in the event that an
employment agreement entered into by the Company or a subsidiary
of the Company provides that options shall be granted under the
Plan to an employee on terms and conditions that differ from the
terms and conditions set forth herein, the terms and conditions
set forth in such employment agreement shall control.
15. Approval and Term. The Plan was adopted by the Board on
February 25, 1999, and shall be effective as of such date,
subject to the following. The Plan shall be submitted to the
stockholders for approval at the first annual meeting of the
stockholders held subsequent to its effective date, and no option
may be exercised until the Plan has been so approved. If the
Plan for any reason is not approved by the stockholders by the
first anniversary of its effective date, the Plan, and all
options granted pursuant to the Plan, shall be null and void and
neither the Company nor any Participant shall have any rights or
obligations with respect thereto. The Plan, if not previously
terminated by the Board pursuant to Section 11, shall terminate
on February 24, 2009, and no options shall be granted after such
date.
16. Miscellaneous Provisions.
(a) Nothing contained in the Plan or in any option granted
pursuant thereto shall confer upon any Participant any right to
be continued in the employment of the Company, or interfere in
any way with the right of the Company to terminate his or her
employment at any time.
(b) No employee or other person shall have any claim or
right to be granted an option under the Plan. Determinations
made by the Committee under the Plan need not be uniform and may
be made selectively among eligible individuals under the Plan,
whether or not such eligible individuals are similarly situated.
(c) No Participant or other person shall have any right
with respect to the Plan, the Common Stock reserved for issuance
under the Plan or any option, contingent or otherwise, until all
the terms, conditions and provisions of the Plan and the option
applicable to such recipient (and each person claiming under or
through him) have been met.
(d) No shares of Common Stock shall be issued hereunder
with respect to any option unless counsel for the Company shall
be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign legal, securities
exchange and other applicable requirements.
(e) It is the intent of the Company that options granted
under the Plan to Participants who are subject to 16(b) of the
Exchange Act comply in all respects with Rule 16b-3 under the
Exchange Act, and that options granted to persons who may be
subject to 162(m) of the Code comply in all respects with the
restrictions on payments of incentive compensation in Treasury
Regulations 1.162-27, and that any ambiguities or
inconsistencies in construction of the Plan be interpreted to
give effect to such intention and that if any provision of the
Plan is found not to be in compliance with such requirements,
such provision shall be deemed null and void to the extent
required to permit the Plan to comply with such requirement.
(f) The expenses of the Plan shall be borne by the Company.
(g) By accepting any option or other benefit under the Plan,
each Participant and each person claiming under or through such
person shall be conclusively deemed to have indicated his
acceptance and ratification of, and consent to, any action taken
under the Plan by the Company or the Committee.
Adopted: February 25, 1999 (Board of Directors); April 22, 1999
(Stockholders)
Amended: April 22, 1999
</PAGE>
<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 three month period ended
March 31, 1999, and is qualified in its entirety by reference to
such financial statements.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 1,126,972
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 53,208
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,235,508
<CASH> 14,361
<RECOVER-REINSURE> 26,415
<DEFERRED-ACQUISITION> 41,761
<TOTAL-ASSETS> 2,059,416
<POLICY-LOSSES> 1,172,403
<UNEARNED-PREMIUMS> 225,384
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 118,869
<COMMON> 1,903
0
0
<OTHER-SE> 402,230
<TOTAL-LIABILITY-AND-EQUITY> 2,059,416
81,258
<INVESTMENT-INCOME> 18,460
<INVESTMENT-GAINS> 189
<OTHER-INCOME> 15,053
<BENEFITS> 61,819
<UNDERWRITING-AMORTIZATION> 15,463
<UNDERWRITING-OTHER> 28,743
<INCOME-PRETAX> 6,399
<INCOME-TAX> 533
<INCOME-CONTINUING> 5,866
<DISCONTINUED> (3,643)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,223
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
